By Justin Leventhal, American Consumer Institute
A routine doctor’s visit should not require the same payment system as a heart transplant. Yet that is how health insurance often works, managing predictable care that patients should be able to buy directly. The result is hidden prices, prior authorization, and higher insurance premiums. The problem is not that better models do not exist. It is that federal and state rules still make those models harder for doctors to offer through narrow HSA rules, Affordable Care Act benefit mandates, state insurance laws and Medicare opt-out requirements.
Many patients already buy routine care directly from providers while reserving insurance for major expenses. Direct primary care, health savings accounts (HSAs), catastrophic insurance, and cash-pay specialty clinics offer that alternative. They do not eliminate insurance. Instead, insurance is reserved for major events while patients pay their doctor directly for primary care. But these alternatives are still forced to operate around regulations designed for traditional insurance, not direct patient-provider payment, protecting insurance from competition.
Direct primary care shows how the system could be different. Patients pay a flat monthly fee, typically ranging from $600 to $1,200 per year, for core primary care services such as office visits, preventive care, and sometimes basic labs. For patients, that means a simpler experience with clearer costs, easier access, and a more direct relationship with their doctor.
The same principle applies beyond primary care. Many routine specialty services can also be bought directly. Cash-pay specialty clinics make shoppable, standardized care such as ambulatory surgery, imaging, and other routine procedures easy for patients to buy. They offer guaranteed prices, transparency, efficiency, and avoid insurer overhead. Instead of waiting to learn what insurance will allow or pay, patients can compare real prices upfront creating competition in the healthcare market.
HSAs and catastrophic insurance are the backbone of the model. HSAs let patients use tax-advantaged dollars for routine care, while high-deductible or catastrophic coverage with low premiums protects against expenses no household can reasonably budget for. The point is not to leave patients uninsured. It is to stop using expensive and inefficient insurance which raises the costs of simple healthcare services and procedures.
But federal rules make it more difficult for doctors to offer direct primary care. HSAs may can now be used to pay for it, but they are capped at $150 per month for an individual and $300 for a family. That is progress compared to when HSAs could not be used at all for this model, but the carveout is narrow. It applies only to fixed-fee primary care arrangements and excludes most prescription drugs and many labs. Those limits on HSA use also limit innovation in broader cash-pay primary care models that could potentially bundle more routine services at lower prices.
The Affordable Care Act creates another problem. It requires insurance plans to cover much of what direct primary care already provides, including routine checkups, preventive care, labs, and outpatient physician services. Patients who want direct primary care often must still buy insurance. In effect, they pay twice. Once for the insurance benefit and again for the direct-care model they actually prefer.
Medicare creates yet another barrier for both direct primary care and cash-pay specialty clinics. A doctor who wants to charge Medicare patients directly for Medicare-covered services generally must opt out of Medicare, use a private contract, forgo Medicare payment, and tell the patient they are fully responsible for the bill. That rigid structure forces providers to risk Medicare revenue—21 percent of all healthcare spending—if they want to offer transparent cash prices. Medicare patients who would prefer a simple cash price are pushed back into a slower, more expensive billing system.
Federal and state lawmakers should make direct-pay care easier to use. Congress should broaden HSA eligibility beyond caps and narrow direct primary care arrangements, allow truly catastrophic insurance that does not overlap direct-pay routine care, and modernize Medicare rules so seniors can also choose transparent cash prices without forcing physicians out of the program. States should define direct primary care as medical care rather than insurance and remove rules that prevent patients from directly purchasing routine labs, imaging, and other shoppable services.
The goal is simple: let patients use their insurance for major medical risk while buying routine care in a competitive market. Traditional insurance makes ordinary care slower, more opaque, and more bureaucratic than it needs to be. Direct primary care and cash-pay clinics show that routine healthcare can be simpler, cheaper, and more patient-centered when patients buy it directly.
Justin Leventhal is a senior policy analyst for the American Consumer Institute, a nonprofit education and research organization.