The United States spends more per capita on healthcare than any other nation, yet tens of millions of Americans are uninsured, and many more are underinsured. Families with deductibles of $5,000, $10,000 or more often find that their coverage provides little practical help until significant out-of-pocket spending has already occurred. Medical debt is widespread, and a substantial share of adults report delaying or forgoing care because of cost. The care most often deferred, including primary care, urgent care and preventive screening, is the care most likely to keep minor problems from becoming serious ones.
Providers face pressure from the other direction. Physicians and urgent care operators devote considerable resources to billing, claims submission and collections, and they are frequently paid weeks or months after delivering care. Traditional insurance was designed to finance rare, large losses. Over time it has been extended to cover routine, predictable expenses as well, a role for which its claims-based structure is poorly suited and costly to administer.
A related problem is fragmentation. Much care now begins in emergency departments, urgent care clinics and specialists’ offices, often without a primary care physician coordinating the patient’s path. Uncoordinated care is associated with duplicated testing, delayed diagnoses and higher overall costs.
A different structure: Direct payment plus catastrophic coverage
One emerging approach separates healthcare spending into two distinct layers. Routine and predictable care is paid for directly at the point of service, using a funded account, such as a healthcare debit card, at prices negotiated in advance with participating providers. Catastrophic coverage sits above that layer, protecting families against large, unpredictable medical events.
The funds can come from an individual, an employer or a sponsoring organization, and participating providers are paid at the point of care rather than through a claims process. Because providers avoid billing overhead and payment delays, they may be able to offer rates well below the chargemaster prices common in fee-for-service billing.
The role of direct primary care
Direct primary care is a natural foundation for this structure. DPC practices charge patients a periodic fee for primary care services and generally do not bill insurance, allowing longer visits, easier access and an ongoing physician-patient relationship.
In a combined model, the DPC physician serves as the coordinator of the patient’s care, seeing patients promptly and directing them to appropriate specialists and facilities when needed. The funded account covers episodic needs such as urgent care, labs, imaging and prescriptions, while catastrophic coverage addresses major events. Proponents argue that coordinated care of this kind can shorten recovery times, reduce unnecessary utilization and lower total costs, and that the combined structure may cost less than a traditional high-deductible plan that leaves families exposed to large out-of-pocket expenses.
Why the model is emerging now
Several developments make this approach more feasible than it was a decade ago. First, employers have shifted increasing costs to employees through higher deductibles, and there is limited room to continue doing so; benefits leaders are looking for structures that improve access rather than simply reallocating cost.
Second, the delivery network has grown. The expansion of direct primary care, independent urgent care, and price-transparent cash-pay providers means a direct-pay model now has a meaningful base of providers to draw on.
Open questions
Direct-pay models face real constraints. Provider networks vary widely by region, and participants in areas with few participating practices may see limited benefit. The regulatory treatment of these arrangements — including how they interact with health savings accounts, ACA requirements and state insurance rules — continues to evolve.
Catastrophic coverage must be structured carefully so that the gap between routine spending and the catastrophic threshold does not leave families exposed. And while early results from DPC and direct-contracting arrangements are encouraging, larger and longer-term studies of cost and outcomes are still needed.
What a new model could change
A direct-pay structure does not address every problem in American healthcare. It does, however, apply a principle the current system has drifted away from: Routine care should be simple, transparently priced and paid for directly, while insurance should be reserved for protecting against catastrophic loss.
When patients pay providers directly, prices become visible. When providers are paid at the point of care, administrative costs can fall. When insurance is focused on large, unpredictable risks, premiums can more closely reflect actual risk. And when a primary care physician coordinates a patient’s care, that care is more likely to be timely and efficient.
Jeffrey Adler is president of Integrated Urgent Care, LLC, which offers a healthcare debit card program, and president of Executive Capital Resources, an insurance advisory firm.
