Official Position of the Physicians of DPC Action
While we appreciate efforts to pass meaningful legislation clarifying the tax treatment of Direct Primary Care periodic medical service fees, the recently introduced HR 3708 contains critical flaws identical to those in Section 3 of HR 6199 (2018) which failed during the 2018 legislative session. HR 3708 is a drastic departure from the original Primary Care Enhancement Act of 2017 (HR 365) that had broad bipartisan support and backing of the DPC community.
DPC Action was opposed to HR 6199 (Sec. 3) due to critical flaws that disproportionately harmed independent Direct Primary Care practices. HR 3708 contains the same critical flaws, which are discussed below.
MEDICATION EXCLUSION – HR 3708, SEC. 2(a), creating IRC § 223(c)(1)(D)(iii)(II):
This vaguely worded section establishes unreasonable bias against practices that offer in-house dispensing of medications. Physicians dispense prescription medications from their offices in 45 of the 50 states. Recent data suggest direct-to-consumer dispensing of generic medication could save billions of dollars annually. While Congress seeks affordable medication solutions, placing ANY restrictions on the most affordable medication solution available is a move in the wrong direction. DPC Action vigorously opposes this provision that limits access to affordable medications for Americans with Health Savings Accounts.
CAP ON PATIENT USE OF HSA – HR 3708, SEC. 2(a), creating IRC § 223(c)(1)(D)(ii)(II):
This provision proposes a $150 cap on an individual’s aggregate monthly DPC fees. DPC is one of the few working models of healthcare innovation in the country. It offers affordable care for patients, while exemplifying Congressional priorities of price transparency and elimination of surprise medical bills.
This provision creates the first federally legislated limitation on a patient’s use of HSA dollars for medical care in U.S. history. This is harmful to patient choice and an affront to the transparency that Congress seeks. There is absolutely no reason to cap one of the only medical models that is actively lowering costs. This innovation should be fostered, not stifled by federal price controls of the most affordable healthcare solution in the country. DPC Action vigorously opposes this provision.
DEFINITION IN TAX CODE – HR 3708,SEC. 2(b), creating IRC § 223(d)(2)(C)(v):
We believe this bill proposes to fix the wrong section of tax code. Instead of simply defining DPC memberships as an eligible medical expense under §213(d) of the Internal Revenue Code (IRC), it erroneously categorizes DPC as one of the exempt forms of health insurance, listed under IRC § 223(d)(2)(C), that can be purchased with HSA funds. This provision sets up conflicts with half the states in the nation that have passed laws declaring that DPC is NOT health insurance. Additionally, it provides a legal foundation for hostile state insurance commissioners to regulate DPC as insurance in states without DPC protection. During a time where Congress is trying to put forth meaningful healthcare reform policy, contradicting state laws intended to improve healthcare access will not serve the best interests of states, patients and constituents.
EXCLUSION OF SPECIALTIES – HR 3708, SEC. 2(a), creating IRC § 223(c)(1)(D)(ii)(I):
This provision appears to limit DPC agreements to practitioners who listed one of four primary specialty designations when they enrolled with Medicare: family medicine, internal medicine, geriatric medicine, or pediatric medicine.The vast majority of independent DPC physicians have opted out of Medicare, so it is unclear how they could comply with this requirement. Additionally, there are specialists now opening “direct care” offices. In particular, the State of Florida has passed legislation expanding their definition of DPC to all specialties. DPC Action opposes using a Medicare-based definition of primary care practitioner as the basis for tax treatment.
CONTRADICTORY TREATMENT OF DPC AS NOT INSURANCE – HR 3708, SEC. 2(a), creating IRC § 223(c)(1)(D)(i):
DPC Action has extensive legal basis to support our position that DPC is not a health plan under existing law. The provision in HR 3708, Sec. 2(a), that creates IRC § 223(c)(1)(D)(i), codifies this position, removing any question of whether DPC is a disqualifying “second health plan” when combined with a qualified High Deductible Health Plan. It is contradictory then for the bill to later, at HR 3708, Sec. 2(b),define DPC, in IRC § 223(d)(2)(C), as a type of plan that can be purchased with HSA dollars. We reiterate our position that DPC is properly defined as medical care for which HSA dollars can be used, not a type of plan. Combined with the President’s recent Executive Order directing the IRS to clarify DPC as an HSA eligible IRC § 213(d) medical expense, this single provision at HR 3708, Sec. 2(a), creating IRC §223(c)(1)(D)(i), which states that DPC is not a plan, could serve as a simple stand-alone solution.
In summary, DPC Action opposes the critically flawed HR 3708 for the enumerated reasons. Moreover, it is important to ask whether any legislation is necessary whatsoever. The IRS has NEVER issued any regulatory guidance on DPC other than a letter from a former commissioner, which has been superseded by an Executive Order from the sitting President. The IRS has NEVER attempted to take any action against patients that have used an HSA with DPC.
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