Direct-Paid Medical Services
by Fred E. Foldvary, Senior Editor, 24 June 2013Direct-paid doctors provide medical services to customers in exchange for payments by the patients rather than by insurance companies or governments. Various forms of direct payments include a fee per visit or treatment, a periodic payment, and a retainer. An example of a direct-paid medical service that has shrugged off the middle-man is “Atlas MD” in Wichita, Kansas.
Physicians and dentists who provide full patient-paid services are also called “concierge doctors.” Some such doctors also accept insurance payments, providing services beyond those covered. Americans also go abroad to in effect import direct-care that is quicker or better than restricted domestic services.
Since direct-paid doctors avoid time-consuming insurance forms and government requirements, they are less costly than conventional medical care while providing a more thorough service, as the directly paid doctors spend more time with the patients and engage in “whole patient” health services including preventive care such as advice on nutrition and exercise. Many direct-care medical services provide continuous “health care” rather than just treating instances of disease and injury.
The fact that more doctors are switching to direct payments shows that the current government-imposed medical care system is wasteful and unnecessarily expensive. Critics of direct care say that these private-sector doctors cater to the wealthy, but actually many are well affordable, and there are some private services that are provided to the poor. Providing more to the wealthy does not itself deprive services to the poor.
The interventionist medical payments system the USA has now began during World War II, when maximum-wage controls induced firms to provide medical insurance, which was not included in the wage controls. After the war, the income tax cemented the system in place, as medical insurance is exempt from the tax. Since insurance is regulated by the States, the governmental restrictions and mandates, along with the employer costs of processing multiple insurance systems, prevent the rise of a national market for insurance, and the limited choices faced by employees prevent them from choosing policies best suited to them. Employer-based coverage then creates the problem of previous conditions when someone changes jobs.
Previous to the Great Depression, many Americans joined mutual-aid groups, or “friendly societies,” which provided direct-care for the members. The fraternal society would contract with physicians and hospitals for medical services. This cooperative insurance was affordable and provided the best of worlds for both personal service and low costs.
Higher income taxes, stricter regulations, and governmental transfer payments, including Social Security, Medicare, and Medicaid, have wiped out the mutual aid societies. A good explanation is provided by the book From Mutual Aid to the Welfare State: Fraternal Societies and Social Services, 1890-1967 by David Beito. Friendly societies can combine medical insurance with unemployment insurance, so that members who fall into hard times continue to obtain medical services.
Direct medical payments, whether individually based or contracted with a mutual-aid society, offers the benefits of market-based supply and demand. The third-party payments by insurance firms and governments remove the financial connection between the patient and the doctor. The patient does not care what a service or medicine costs if the insurance company is paying the bill.
Now, with the great expansion of governmentally required medical coverage, employers are facing even greater medical costs and mandates. Many small businesses are avoiding these higher costs by limiting employment and switching employees to part time. The expanded government medical system makes medical care even more expensive by taxing medical devices. The combination of taxes and subsidies removes medical care even further from market-based efficiency.
The optimal economic use of insurance is to pay for unplanned high costs. For example, people obtain automobile insurance to pay for the costs of accidents rather than for routine expenses such as new tires. Homeowners get insurance to over catastrophes rather than repainting or fixing leaks. But much of medical insurance now pays for expected routine.
The fact that more patients and doctors are turning to direct-paid services shows that the escalating costs of the tangled American system are avoidable. The high expenses of the current system are due to several interventions:
1) Income taxes that exempt medical services and limit medical tax deductions.
2) Excessive malpractice litigation caused by winners of lawsuits paying their own legal costs.
3) Restrictive state regulations that prevent national competition.
4) The restrictions of the FDA, the Federal Drug Administration.
5) Licensing laws that limit medical competition.
6) The lack of sufficient measures to prevent Medicare and Medicaid fraud.
Direct-paid primary care such as Atlas MD to some degree restores the old fraternal medical societies with affordable monthly concierge fees. Patients get quick access to medical services, and the doctors avoid costly insurance claim processing. Patients still have insurance for emergencies and high-cost illness.
Unfortunately the “Affordable Care” act has kept the fundamental flaw in the American system: employer-based insurance. While the expanded governmental system corrects some of the flaws of the system, such as reducing the previous-condition problem in 2014, the overall costs of medical care will continue to escalate. Medicare is not affordable for the country. Medicare has created unfunded liabilities, promises that cannot possibly be kept, which will contribute to the boom-bust crisis that will develop a decade from now.
Thus while a good development for the members, direct-paid medical services will not solve the long-term problems of the US system. Open enrollment in the Affordable Care Act’s “Health Insurance Marketplace” begins on October 1, 2013. This will be the last hurrah of the medical welfare state of America before fiscal reality sets in.
-- Fred Foldvary
Copyright 2010 by Fred E. Foldvary. All rights reserved. No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, which includes but is not limited to facsimile transmission, photocopying, recording, rekeying, or using any information storage or retrieval system, without giving full credit to Fred Foldvary and The Progress Report.
Common Sense Vs. Food & Health
Health -- Sleep & Performance, Aging & Attitude
Salt, CO, & Jobs Harm While MJ Can Help
Email this article Sign up for free Progress Report updates via email
What are your views? Share your opinions with The Progress Report:
Page One Page Two Archive Discussion Room Letters What's Geoism?