A bipartisan U.S. Senate bill would expand the use of Health Savings Accounts (HSAs) to payments for Direct Primary Care (DPC).
DPC offers primary care services for a flat monthly fee. The Internal Revenue Service (IRS) currently views DPC payments as insurance premiums, which are not an allowable expense for tax-advantaged HSA accounts. The bill makes a small change to the federal tax code to clarify that a DPC agreement between a physician and patient does not make the individual ineligible to contribute to an HSA, and that pre-tax HSA funds may be used to pay DPC fees.
As of July 2022, there were 1,762 DPC practices in the United States, in 48 states and the District of Columbia, according to elationhealth.com. The number of DPC practices tripled during the pandemic emergency, according to DPC groups.
The Primary Care Enhancement Act (S. 628) was introduced by Sens. Bill Cassidy (R-LA), Jeanne Shaheen (D-NH), Tim Scott (R-SC), and Mark Kelly (D-AZ) on March 2. Similar legislation is expected to be introduced in the U.S. House of Representatives by Rep. Pete Sessions (R-TX).
Expands Primary Care Access
HSAs were designed to allow health care consumers to choose their providers, and save money in the process, says Cassidy, a medical doctor, in a press release on the bill.
“With direct primary care, patients have control over their families’ health care decisions,” said Cassidy. “That was the intent when creating health saving accounts. This bill empowers patients to see the doctor they trust.”
The bill is a practical step to improving medical care, says Kelly.
“This is the kind of commonsense change we have to push if we want to make our health system work better for families,” said Kelly.
The bill, especially one with broad political support, is welcome and needed, says Phil Eskew, D.O., J.D., a family medicine physician and found of DPC Frontier.
“I am encouraged that the Primary Care Enhancement Act has bipartisan support,” said Eskew. “Earlier versions of the Act have received bipartisan support in prior legislative sessions. In fact, direct primary care is one item on a short list of health care topics that routinely does receive bipartisan support.”
Lack of legislative clarity over what DPC is has impacted care, says Eskew.
“Direct Primary Care physicians would like to be able to spend time practicing medicine, ” said Eskew. “At present many DPC practices have made adjustments to our model of care that make no clinical sense merely to reduce an IRS audit risk. Updating an outdated tax code so that DPC patients with health savings accounts do not face discrimination will allow all of us to spend more time talking about medicine.”
‘Level the Playing Field’
The bill would increase competition in medical markets by giving cash payments by patients the same tax advantages as health insurance, says Chad Savage, M.D., founder of Your Choice Direct Care, president of DPC Action, and a policy advisor to The Heartland Institute, which co-publishes Health Care News.
“S. 628 is a major leap forward for direct primary care,” said Savage. “DPC is already thriving despite a massively skewed playing field under which traditional insurance-based practices enjoy the advantage of indirect subsidy through insurance companies. The bill looks to level the playing field regarding the use of tax-advantaged saving modalities, such as HSAs, FSAs (Flexible Spending Accounts), and MSAs (Medical Savings Accounts), and could further accelerate the growth of high-quality, accessible DPC practices.”
States Have Acted
More than 30 states have passed laws and regulations to clarify that DPC is not insurance, but a medical service, and that shows this clarification is needed, says Mark B. Blocher, president, and CEO of Christian Healthcare Centers.
“The IRS interpretation of the HSA rule which treats a DPC agreement as ‘insurance’ is refuted by the number of states whose legislative bodies expressly say DPC is not insurance,” said Blocher. “The IRS has not treated the DPC option in good faith, choosing rather to retain rules in the tax code that prevent patients with HSAs from accessing the exceptional quality of care provided by DPC practices (that is) one reason DPCs grew by 300 percent last year.”
The bill clarifies that individuals with HSAs can use those funds to pay DPC fees, says Blocher.
“The HSA/DPC dilemma can easily be resolved by passing the Primary Care Enhancement Act to treat a DPC agreement as a ‘qualified medical expense,’ thereby directing the IRS to cease describing a DPC arrangement as a ‘second health plan,’” said Blocher. “The goal of an HSA is to incentivize individuals to seek timely preventative and acute medical care by allowing patients to use pre-tax dollars. DPC is a perfect way to achieve that goal.”
‘I’ll Drop Everything’
Republicans hold a narrow margin in the House, where the bill is likely to pass, but bipartisan support is essential to pass it in the Senate, where Democrats are in the majority.
In the Senate, where Cassidy’s measure has two Democrat co-sponsors, prospects for obtaining a majority also look promising, as Shaheen says the bill is a priority.
“I’m glad to join this bipartisan bill that would break down barriers that patients face when seeking care, …” said Shaheen. “I’ll drop everything I can to reform health policies that best support patients and families.”
Bonner Russell Cohen, Ph.D. (bcohen@nationalcenter.org) is a senior fellow at the National Center for Public Policy Research.
