In 2014, the Affordable Care Act was passed, ostensibly as an attempt to lower health-care costs. In reality, premiums have more than doubled since its inception,1 quality of care has consistently declined, and Americans now are beginning to realize that affordable and effective health care is even more difficult to find than it was before.
Even in the wake of the most egregious examples of government overstepping its proper functions, a silver lining often can be found. As a result of Obamacare’s passage, an ever-growing number of American physicians are realizing that our already broken health-care system is now, in many respects, simply intolerable.
From calamity springs opportunity—opportunity for rational, productive individuals willing to get creative and work hard to uncover it. Millions of Americans are stuck holding insurance policies that do little for them other than drain their bank accounts, under threat of hefty government fines if they drop their policies altogether. Innovative family practice physicians such as Dr. Josh Umbehr of Atlas M.D. may not be able to dismantle intrusive health-care regulations, but they are finding ways to sidestep them and provide excellent care to their patients at surprisingly affordable prices. I spoke with Dr. Umbehr about how direct primary care has grown in recent years and how it’s shaping the future of medicine in America.
Tim White: Thanks so much for joining me, Dr. Umbehr. When you were last interviewed for The Objective Standard in 2013,2 you gave us a great introduction to concierge medicine, also known as direct primary care. For those who aren’t familiar, can you recap what this model of medicine is and how it differs from traditional care?
Josh Umbehr: Direct primary care is the free market applied to health care. It’s medicine finally taking the best elements of other business models such as Amazon Prime, Netflix, and Hulu and applying them to an industry that’s ten or fifteen years behind the rest of the world in terms of business structure. It brings a very high-value, low-cost model to the masses. We use a membership-based model because health care is challenging to shop for. In a way, direct primary care is structured a little bit like entertainment. I don’t know how many movies I’m going to watch in a month, so I use Netflix to lock in a price, and then I have the flexibility to stream as much content as I want. When you’re not sick, you don’t know how much health care you’ll need or when, but you know you will need it at some point. You’ll want it from a provider you trust, but you also don’t want to be worried about the price.
A membership model streamlines all of those considerations. It’s not that insurance is bad; people often assume that because we don’t take insurance, we think insurance is bad. Insurance is a tool, and it should be used for the right type of job. Direct primary care makes insuring the routine 80 percent of your health care unnecessary. We charge $10 per month for kids, or $50 to $100 per month for adults, based on age. That fee covers a broad range of services: unlimited home, work, or office visits; phone calls; texting; email; and video chat. We have no co-pays, either. Co-pays are a tool devised by insurance companies to get you to spend your money wisely so you spend their money wisely, but we don’t need that mechanism in order to make a profit. We want people to have access to as much health care as they need.
We do a lot of other things to add value to our memberships. We can do any minor procedure in-house for no additional charge. We can do that because there’s a giant disconnect between what insurance companies are billed for most services and what they actually cost. My best example is an EKG—it costs thirty-six cents, so we do it for free. The coffee in the waiting room costs more than that; that’s the power of a better business model. Doctors can also bring a lot more value to the table for their patients by being better shoppers. We can get deeper into the rabbit hole of health-care products than patients can. Just as Amazon can use its size, technology, and resources to find the best prices for me, we can do the same for patients when it comes to medications and labs. We can get those things wholesale at giant savings, sometimes up to 95 percent off.
If Target and Walmart carried the same products, but Target had them for 95 percent less, Walmart wouldn’t exist for long. We have a very irrational health-care system in which we’re the outlier, at least for now. We can get some medications for a penny a pill. We outcompete Walmart’s pharmacy by a factor of thirteen ($4 for thirty pills vs $0.30 for thirty pills). Using this model for your routine needs, you can go back to your insurance company and work with it to get cheaper health insurance, because now you don’t need coverage for nearly as many things. We can decrease insurance premiums by 30 to 60 percent for a small business purchasing group coverage. People ask how they can afford insurance on top of paying their own primary care bills—this is how. We can save you a lot of money on your premiums. Even the insurance companies say their profit margins are four times higher with this model than with the standard model because we’re just so much more competitive. We’re more efficient, we’re leaner, and we provide an objectively better value.
White: That’s fantastic. Thanks for that explanation. You alluded to an 80–20 rule in regard to insurance and health care. Can you go into a little more detail about what that is and how it relates to direct primary care?
Umbehr: In this context, the 80–20 rule is the idea that in a given year, 80 percent of a population will require only primary care services (services that can be provided in a primary care physician’s office).3 Insurance companies report that less than 5 percent of people will spend more than $5,000 out of pocket per year on health care. That’s in the current broken and bloated system. Most people don’t realize that their family physician could provide an MRI or dispense medicines or run pathology. Patients are always being sent somewhere else for these services. In the direct primary care model, all of those things are a big part of what we do. We either do them in-house or outsource them for large savings.
The majority of our time is spent doing things that help our patients get the care they need for a fraction of the cost. We may not have in-house the orthopedic surgeon who does the surgery, but we can certainly do the MRI that the surgeon will need. Instead of $3,000, we do it for $300. Even when accessing care that doesn’t typically fall under family medicine, the direct-care model saves the average person enough money to access the specialized care he might need.
White: Broadly speaking, what’s new in direct primary care in the past five years?
Umbehr: Direct primary care is really picking up momentum and getting attention from a lot of national outlets. As health care continues to get more expensive, everyone is becoming increasingly flexible in looking for solutions. The current system isn’t working for patients, physicians, employers, or insurance companies. A lot of legislation is being proposed at the state and federal levels to try to strengthen direct primary care and to clarify that it can be used with health savings accounts.
Some states have started pilot programs and are beginning to see that this model maximizes the effectiveness of tax dollars spent on health care. Our state [Kansas] pays $50 for a blood test that we get for $1.65. When we looked at this years ago, the state was paying $400 a month per patient for a pediatric seizure medicine that we get for $40 a month per patient. Putting this in terms of what the political left and right claim to want: one side says we should take care of more people more often, and the other wants to be fiscally responsible. With direct primary care, we can do both.
Politicians are taking notice. Michigan is starting a pilot program that’s being mentioned frequently in a number of gubernatorial races. I know our state’s candidate said he wants to encourage small businesses to offer direct primary care to their employees, because, again, it’s decreasing insurance premiums by 30 to 60 percent. Lower health-care costs mean more jobs and more revenue for the state. It’s also a viable part of the solution for dealing with the ballooning expenses of health-care entitlement programs.
The insurance companies are looking at this as well. We’ve been to a number of insurance conferences over the past few years where insurance companies are saying, “All right, this is coming. The only way for us to rein in costs is to insure less, but the only way we can insure less and still make insurance palatable to patients is if we can point to another solution that makes everything we don’t cover affordable.” At first, many insurance companies thought that direct primary care was antagonistic to their business model, but now they see an opportunity to work with us.
Partly because of all these things, the direct primary care movement is continuing to grow. We now have several large conferences each year hosted by the American Academy of Family Physicians and the Association of American Physicians and Surgeons. Doctors are continuing to adopt this model at an ever-increasing pace.
White: You mentioned the cost savings of direct primary care, but what about quality of care? Do patients actually get comparable or—dare I say—even better care by paying less?
Umbehr: It’s an interesting question. I’d say so. What is quality health care? There’s “cost-effective” health care, which would say, “Don’t do mammograms until you’re forty-five or fifty,” depending on what guideline you use. Well, if you have a family history of breast cancer and you’re worried about it, you might start doing mammograms at forty. Some people will say you’re not cost effective, but I say, “That’s what the patient wanted, and it’s $75 for a mammogram through a direct primary care provider. She can comfortably afford it, and it buys her peace of mind—that’s quality care.”
A diabetic patient may have trouble getting his A1c testing covered because it’s expensive. We can do that test for $2.25. It’s $150 at most other places. A diabetic can get a thousand pills of Metformin—more than a year’s supply—for $11. The more affordable health care is, the more accessible it is, so the better the care is going to be. Lots of research shows this, or at least hints at it.
Statistically, a person can decrease his overall mortality risk by maintaining the same physician for a long time,4 and a membership model incentivizes people to do so. Some studies show that the more time your doctor spends with you, the less likely you are to have health complications, because the doctor can spend more time educating you, getting to know you, and diving deeper into your needs. On this model, a doctor is likely to refer you to specialists less often, because once he knows you, he can do most of what you need.
There’s also a big question around how one measures quality in health care. A lot of government programs for measuring it have, at one point or another, shown worse outcomes associated with higher costs. Paying for performance sounds like a really good idea until you discover that it rarely works. David Pink has a great book on this called Drive; it shows that there’s little data to support the idea that paying more for complex skill sets leads to better outcomes.
Do direct primary care physicians have better patient outcomes? Well, there’s no good standard for measuring that yet. There’s a very odd cat-and-mouse game implicit in the insurance model as it exists today. I’ve read a number of articles about virtual quality metrics describing doctors who are checking all the right boxes,5 but their patients are having worse outcomes—because checking the boxes is how you get paid, but it doesn’t necessarily reflect time spent treating patients. It’s called “buffing the charts.” As long as the numbers look good, things are supposedly great, even if patients are doing worse instead of getting better. Doctors working within the traditional, insurance-based system often discharge their patients to protect their own numbers. Well, because we direct primary care physicians aren’t paid based on our numbers, we have no incentive to do that.
This reminds me of a joke I once told that fell flat. It was when I was talking to a bunch of senators and they asked, “How would we measure patient outcomes under this model?” I said, “Oh, super easy—the same way we measure outcomes for senators.” Surprisingly, none of them laughed. They think it’s hard to measure their outcomes because they are only one vote out of one hundred. Well, we were talking about Medicare patients—the sickest, poorest, least-educated patients of all. Many of them have hepatitis or HIV, they smoke, they drink, it goes on and on. How is it any easier to measure these outcomes? I say let’s do it the same way we measure outcomes for food stamps—we don’t. We give people money for food and let them decide how and where to spend it.
There’s this pervasive idea that we need to track health-care outcomes. In reality, no one can even tell you what that means. The current system is gameable. To fix that, doctors need to step up and say, “I’m valuable. This is my fee, and I don’t participate in gimmicks.” Milton Friedman said that the problem with poor people is that they don’t have money, not that they’re lacking a government program for everything they need to buy. Although government should not be involved in health care, if it is going to be involved at all, the least wasteful option is giving handout recipients a fixed amount of money to spend on health care and letting them determine the best value for their priorities.
White: We’ve talked a lot about direct primary care being an effective frontline solution and the family doctor being able to address many more of the patient’s needs than people realize. What about specialty care? Do you see this model or something similar being viable for specialists, or do you know of any specialists who already are using this model?
Umbehr: Yes to all of that. I think most outpatient specialties can find a space in this model. There are already pediatricians using it. Their practice falls under the general primary care guidelines. In their context, it works a little differently because their value propositions and price structures are different, but the goal is still to provide high-quality, accessible, affordable care. They might charge a little more per patient, because they can’t spread out their costs over a broad age range. Pediatricians don’t order a lot of meds or labs, because kids are generally healthy, so they look for other ways to add value.
One example: Doctors can order brand-name newborn diapers wholesale for $0.02 per diaper. We can get a case of 240 diapers for even less at $3.77—it sells for $38 on Amazon. Direct care pediatricians are incentivized to go out and find value for the particular age group they deal with in order to justify their membership fees.
All of this goes for OB doctors too—the blood tests for a new mom to check for HIV, hepatitis, and all the other things that you look for at the start of a pregnancy would normally cost a little more than $600. Our cash price is $40. The nausea medicine Zofran, prescribed to pregnant women for morning sickness, is around $120 for thirty pills. We get it wholesale for $2.65.
Regardless of specialty, a direct care provider asks, “What can we do better for our patients in terms of visits, co-pays, procedures, meds, labs, etcetera?” There are endocrinologists, neurologists, and psychologists using this model. Almost any doctor can find wholesale meds and labs for the majority of their patients.
On a related note, there’s a cash-only surgery center in Oklahoma. It doesn’t use a membership model, but it’s usually 75 percent cheaper than most local options. It has seen a large upsurge in patients who are uninsured or have high deductibles. And many employers have turned to it because it’s cheaper than using their group insurance. There are also a few insurance companies that say, “Your prices are better than ours; we’ll pay your cash price up front if you’ll take our insured patient.” The surgery center got started by serving patients traveling down from Canada to pay cash for surgeries that they can’t get at home.
This model doesn’t always work for every particular need, but it often does. I recently did a skin biopsy for a patient of mine. I took a cancerous spot off his cheek and sent it to a Mayo-trained pathologist in Idaho for $60. I think it was $40 for the pathology work and $20 for overnight shipping. The results said, yes, it was cancer and yes, you got all of it. (A pathologist can be confident that all cancerous tissue was removed if the border of healthy tissue around it is wide enough.) The patient was cured of cancer for $60, plus his $50 monthly membership fee. Now, had the cancer been an inch over, on his nostril, that would have required a plastic surgeon performing a complicated procedure to get a good cosmetic result. The cost for that would have been higher, but in this case it worked out nicely.
In some cases using insurance properly can still get expensive, but statistically these aren’t very common. We still want patients to have insurance for major things, and complex specialty care would generally qualify. Even in cases where a direct care model may not make sense for a given specialist, the patient can still save enough money on his primary care to be able to afford the specialist. For example, we had a patient paying $1,200 or $1,300 per month for a family of four on a group plan. We were able to lower that premium to $500 by having them change the plan to one less comprehensive and letting us handle their primary care. For another $120 a month paid to us, that patient gets unlimited primary care for the whole family and still saves $500 or more every month. They can now max out their yearly HSA contributions and use that pretax money for specialty care if they need to. They still have the insurance for major events: car wrecks, cancers, heart attacks.
We’re moving from a one-part approach to a two- or three-part system. Your direct primary care, your health savings account, and your insurance do cover everything—sometimes at half the price of what the insurance alone would cost.
White: We’ve heard a lot about how this new model helps people get the health care they need at prices they can afford. Let’s discuss the political considerations. To what extent have Obama-era or subsequent regulations affected direct primary care? How do you foresee some of the major political problems in health care being solved?
Umbehr: I’m probably one of the few Republicans or libertarians who loved Obamacare, in the sense that the system was already broken, and Obamacare broke it more. Neither party has exclusive bragging rights when it comes to damaging the health-care system. As Obamacare made everything more expensive, it drove people to look for more cost-effective solutions. It was a poorly designed attempt to insure everything. That goal isn’t exclusive to Obama or Democrats. If you ask one hundred doctors what the solution to our ailing health-care system is, ninety-nine of them will say more insurance, because that’s the way doctors have always been paid. But, “That’s just the way we’ve always done it” are the most expensive words you can say in any business.
Nonetheless, the status quo in this industry is a very predictable and very irrational purchasing habit. If you try to sell people car insurance that’s built like health insurance, they will laugh you out of the room. Yet we keep buying the same health insurance year after year. You can’t even really be mad at insurance companies. Sure, they could do many things a lot better, but they’re doing exactly what we ask them to do, which is what the government forces them to do. We want them to take our money and insure us for every routine expense, but also keep premiums down. It’s impossible to do both of these things. We need to come at this in a better way. Less insurance overall is part of the solution. Obamacare and other regulations have created an opportunity for direct primary care to show people another part of the solution.
One big step forward is to convince politicians to let us insure only the big stuff and not all the little things. That frees up a ton of time and resources and adds transparency to the market. When I went to Best Buy to buy a TV, the guy said, “We’ll price match. If you find a cheaper price on this TV, I’ll match it.” When has that ever happened in health care? The standard argument is, “Health care is not a business. It’s too important to be a business,” to which I say, “No, it’s so important that it needs to be a business.”
I think the future is still pretty bright for direct care, but with some of the legislation before the House and the Senate right now, we’re watching the sausage get made—and it’s not pretty. They don’t understand direct care. They don’t understand health care in general. We are actively working with the Senate on H.R. 6199 and doing the best we can with it. Cronies have gotten involved. Add that to the general confusion of legislators, and it’s a far from perfect bill.
The first version of the bill was very simple—it was literally two sentences long. It clarified that direct primary care is not insurance and is an HSA-eligible expense. However, before it could be passed, it quickly devolved into a hundred-page word salad of contradictory terms and definitions. We’re doing our best to push the Senate to return to (and pass) the first version.
Assuming we get that done, then yes, the future’s pretty bright. The Pandora’s box of affordable care has been opened, and enough people have seen it that I don’t think it’s going to go backwards. States are broke; they need a solution. As one or two states experiment with this and see huge gains, other states will follow.
We’ve presented the facts about direct primary care to a dozen or so state legislative bodies as they’ve worked on legislation related to it. Usually we say something to the effect of, “This is not insurance. We’re not asking for funding or favors—just leave us alone.” Some legislators misunderstand it, or they worry that it’s only going to be good for the rich. I tell them, “Rich, healthy people don’t need affordable health care.” They respond with, “How does this help poor people?” Well, meds that cost a penny a pill are much better for poor people than meds that cost ten or one hundred times that much. And health-care plans that cost a fraction of what most of them do today are better for poor people as well. When health care is the single largest budget line item for employers (next to salaries), job creation is diminished, which reduces the opportunities open to everyone—including poor people.
I tell these politicians that I have a twenty-one-year-old patient with brain cancer. She has two neurosurgeons, a neuro-oncologist, and a social worker. But it was me—her family doctor—who got her medicine for $22,000 less than they could. It’s not that I’m special. I’m just getting the meds for what they actually cost. Her medicine was billed to insurance at $24,000, but it costs me $1,900 to buy it wholesale.
Everyone knows that we have a broken system. Everyone knows that we have an economic cartel in health care, as Milton Friedman would put it. It’s largely because there’s a lack of competition. In many cases, people in health care are legally forbidden from innovating, or from doing anything at all outside of very strict rules.
The Silicon Valley levels of exponential improvement that we’ve come to expect for everything else—well, many people are suspicious when they hear about that level of innovation in the health-care industry. People think it couldn’t work.
Big companies, such as Amazon, Apple, and Walmart, realize that insurance premiums are pulling income out of people’s pockets, and they can compete for that money if it’s freed up again. I think maybe Jeff Bezos or one of his peers will get into this in a big way, because the current health-care system is hampering their industries. I think you’ll see big players such as Amazon and Warren Buffett combining forces, because they can say, “Look, if we help fix this system, expendable income will increase. Then we can grow our own revenues.”
White: That’s interesting, because among people who favor a free market in medicine, there seem to be two distinct camps. One side is saying, “The current system can’t continue much longer. Therefore, at some point even the politicians have to realize that a freer market is the way to go.” But then you have the other side saying, “Politicians will point to the state of the current system and argue that it shows that profit in medicine is always bad.” Completely socializing it then becomes the “obvious” solution. From what you’ve seen, are you optimistic that the former position is more widespread?
Umbehr: Yes. I think Obamacare was the left’s last, best chance at pushing for a universal health-care system. The goal there—with risk corridors, mandatory coverage, and everything else—was probably to inflate the cost of care until people just begged the government to come and take over fully. Government can’t provide education properly either; that was the feature story in the last issue of The Objective Standard.6 I think that if the government took full control of health care, the result would be so disastrous that people would be in the streets with torches and pitchforks before long. Europeans are used to socialized health care, but Americans only think they know what it’s like.
Canadians have a lot of trouble getting their medications, even though they’re supposedly cheaper than meds in America. Medications aren’t part of their universal care. England’s NHS doesn’t even pay for certain types of chemotherapy simply because they’re expensive.7 Unfortunately, a lot of med students have very left-leaning views—many of whom had med school professors with very left-leaning views—and they say, “We should be like socialist country X.” Well, there are 180 of those countries, and socialized medicine isn’t working in a single one of them.
However, Obamacare has demonstrated to many Americans—including some politicians—that socialized medicine can’t work. For one, it stalls innovation. Salim Ismail has a great book, Exponential Organizations, in which he polled Fortune 500 CEOs. He asked them, “Was the technology that’s changing your industry today around two to five years ago?” Predominantly, it wasn’t. That’s amazing: innovation moving that fast. The government can’t move that fast.
Adding more regulation, more paperwork, and more bureaucracy to health care when the real cost of medicine is a penny per pill is simply unjustifiable. I can get one thousand blood pressure pills for $8, and our markup (blessed capitalism) is 10 percent. So we charge $8.80 for a thousand pills. There’s literally nothing that government can do to beat that price. Just the paperwork it would take to give people “free” meds would cost more.
White: What about health-care professionals? Do you still get much pushback from other doctors on direct primary care, or are they mostly receptive to it?
Umbehr: Many doctors are embracing direct primary care with open arms. Doctors in the traditional system are making less money, working more hours, and seeing more patients per day than ever before. The burnout level is high; the most popular articles every year for family docs are about how to avoid burnout. They’re trying to teach us yoga and all this other stuff, which is, of course, a Band-Aid at best. It’s a broken model, and it’s unsustainable. You’re seeing forty people a day and spending 50 percent of your time doing paperwork instead of interacting with patients. The majority of office visits are thirteen minutes long (or less),8 and you’re trying to check all these boxes on a form about quality improvement metrics instead of listening to your patient.
How do you get quality care in thirteen minutes? We checked all the boxes; why aren’t things getting better? An article years ago berated Google for being a brain sink—for taking the most talented minds around and tasking them with figuring out how to get people to click more ads. The government has taken the best minds in health care and is making them spend all day checking boxes on insurance forms instead of treating their patients.
People say there’s a physician shortage—something like 50,000 to 130,000 doctors shy of what we need by 2025.9 But a shortage of doctors isn’t really the problem. The American Academy of Family Physicians did a study a few years ago, and their most conservative estimate was that 22 percent of a doctor’s day is wasted doing nonclinical paperwork.10 Multiply that across the primary care workforce, and you get this figure saying 165,000 full-time physicians need to be added to the system. We don’t have a shortage issue; we have an efficiency issue. Doctors don’t go to medical school to do paperwork. We want to take care of patients. Yet, I’ll talk to doctors who say, “I was on hold with an insurance company for thirty minutes to get a prior authorization for Flexeril (cyclobenzaprine).”
When I hear that, I point out that I can get one thousand pills for $13. At 1.3 cents a pill, the insurance company you’re on hold with values thirty minutes of your time at 39 cents—so as an MD you’re working for 78 cents an hour. That’s a problem. They can waste your time all day long if it saves them a $4 payment at the pharmacy. It’s an absolute bizarro world.
I’ve got my own clinic, and we’ve helped more than five hundred doctors convert their own practices to this model in the past few years. My doctors—before I hired them—were salaried at their hospitals, making about $140,000 a year to see thirty patients a day. They came on with me, and now they’re salaried at $200,000 a year to see six people a day. They’re simply asked to provide great care through 24/7 text and email support to patients in all income brackets.
Doctors feel happier when they’re taking good care of their patients. They will spend however much time it takes. If you’re a physician with a complex patient and you need an extra hour, take it. It’s not more expensive to the patient, and the doctor’s time is very flexible. We’re in much better moods when we’re not doing insurance paperwork all day. I saw four people today. I was able to chart on all of them in a few minutes at the end of the day, and I was done. This is a model that doctors are increasingly adopting, and they’re crediting it for keeping them in medicine.
White: Where can readers learn more about direct primary care and locate providers in their area?
Umbehr: I recommend our Atlas.md blog or our podcast, which you can find on iTunes. The Direct Primary Care Podcast is another great resource. You can find local direct primary care providers at DPC Frontier,11 which is the most comprehensive directory I know of.
White: I hope TOS readers will find this information as enriching as I have. Thanks again for joining me, and long live direct primary care.
Umbehr: Thank you. It’s been a pleasure.