Physicians Praise New Rule Clarifying Patient Payments For Direct Primary Care Are Tax-Deductible

Proposed Rule Would End Discrimination Against Patients Who Pay Fixed Monthly Fees Directly to Doctors

Leading DPC physicians welcome ‘needed relief for primary care practices and businesses across the nation.’

[Washington, DC] [June 9, 2020] – Today the Treasury Department proposed a rule that would grant tax advantages to patients who pay fixed fees directly to doctors, following years of advocacy by the Docs4PatientCare Foundation, the only health care organization composed of practicing physicians with hands-on, practical knowledge of the American health care system.

If finalized, the rule would clarify that fixed-fee direct primary care (DPC) arrangements are 213(d) qualified medical expenses that can be paid out of tax-deferred medical accounts— including FSAs, HRAs and in certain situations HSAs.*

Dr. Lee Gross, president of the Docs4PatientCare Foundation (D4PCF), says the rule promises relief for patients and doctors fighting for survival.

“In a time where DPC practices have led the nation by example of how primary care can be efficiently delivered during a pandemic, the Trump administration has recognized that this is needed relief for primary care practices and businesses across the nation,” Gross said. “This change will allow better and more affordable access to primary care services, particularly in rural areas where critically needed.”

D4PCF has long battled tax discrimination introduced by Obama-era IRS officials against patients who pay low monthly fees directly to DPC practices for steeply discounted office visits, labs, tests, imaging, and specialist referrals.

Dr. Chad Savage, president of the affiliate organization DPC Action, says the long-overdue clarification will help DPC practices attract patients to a low-cost, high-value model quietly revolutionizing American health care.

“Today’s rule from the Treasury Department formalizes the executive order signed by President Trump regarding HSAs,” Savage said. “This vital rule will help to level the playing field by creating tax parity between insurance-based practices and the innovative model of primary care known as Direct Primary Care.”

By expanding the appeal of these high quality, cost-effective practices, the rule will also create an opportunity for insurance-based practices ravaged by COVID-19 to start anew in the DPC format.

“By providing a high-quality, cost-effective health care option, it will free up limited resources that can be used to facilitate economic recovery from the pandemic,” Savage said. “On behalf of DPC Action, I would like to earnestly thank President Trump and the Trump administration for their tireless work in support of America’s patients, businesses and physicians.”

Gross thanked several Trump administration members whom D4PCF has spoken with for months about the proposed rule.

“The Trump administration has taken a huge step forward in clarifying a decade-long uncertainty around the tax treatment of direct primary care memberships,” Gross said. “We wish to thank the President and the administration, particularly the National Economic Council. We would like to acknowledge the efforts of the Treasury Department, especially Secretary Mnuchin, Assistant Secretary Kautter, and the Internal Revenue Service. We greatly appreciate the steadfast support of the Health and Human Services Department, especially Secretary Azar and Deputy Secretary Hargan.”

D4PCF has urged the Trump administration to issue the clarification for years, including via an eight-page letter critiquing inconsistent guidance from the IRS on the tax treatment of DPC practices.

The proposed rule could have gone further towards tax parity of DPC, a matter D4PCF and DPC Action will address with the administration during the comment period.

* Flexible spending accounts, health reimbursement arrangements, and health savings accounts

1 Comment

  1. Peter Lehmann MD

    I read the proposed rule and all I saw mentioned were HRA’s, not HSA’s

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