NCPA - National Center for Policy Analysis

Physicians Abandon Insurance in Favor of Direct Payments

March 21, 2013

Because of the Affordable Care Act (ACA) and the increased cost of doing business, many physicians are closing down their private practices to work in hospitals where they will have less control over how they practice medicine. Other physicians have eagerly shed insurance all together, instead adopting an insurance-free model that charges patients a lower price. The new model allows patients and doctors to avoid the hassle of dealing with insurance while reducing health care costs, says Jim Epstein, a producer at Reason TV.

  • In the absence of insurance, doctors charge for services based on a predetermined price list.
  • Without insurance, doctors are able to charge less for services because they do not have to incur the costs of paying wages to people to code, bill and collect on patients.
  • Venture capitalists and celebrities are among the supporters of this new model, which is spreading quickly around the country through a few health care companies.

For doctors with private practices, eliminating insurance will reduce the number of patients they care for but allow them to make more money and provide better care. For patients following the 2014 implementation of the ACA, eliminating insurance will keep costs and quality constant while the health care system as a whole experiences dramatic changes.

  • A bag of intravenous fluid may cost $128 through insurance but one doctor doesn't even bother to charge for the $1.50 in cost.
  • An ingrown toenail may cost $200 through the traditional insurance system but one doctor charges $50.

High-threshold plans, like a Health Savings Account or a Health Reimbursement Arrangement, are growing in popularity because they shift most routine costs out of pocket. About 31 percent of firms offer these health plans and 19 percent of covered workers have one of these plans.

  • More doctors are agreeing to list prices openly and many are signing up with services that price the care they provide for them because they are unsure how to price their services for direct-paying clients.
  • An unintended effect of the ACA is that there may actually be more uninsured as people willfully opt out of an insurance system for routine expenses and opt only for catastrophic coverage.
  • A provision of the ACA allows direct primary care practitioners to marry their services with a catastrophic plan and enter the health exchanges set up by the mandate.

Source: Jim Epstein, "The ObamaCare Revolt: Physicians Fight Back Against the Bureaucratization of Health Care," Reason Magazine, March 13, 2013.


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