S3298

This bill explicitly states that nothing in Title XIX of the Social Security Act prohibits states from providing primary care services through direct primary care arrangements under Medicaid, including via Medicaid managed care organizations (MCOs). This legislative clarity removes a potential regulatory barrier, enabling states to more readily implement these models. The bill defines a direct primary care arrangement as one where primary care services are provided by primary care practitioners, with compensation being a fixed periodic fee. This mechanism streamlines payment and incentivizes preventative care. The money trail for this bill involves existing Medicaid funding. The bill does not appropriate new funds but clarifies how current Medicaid funds can be utilized. States will direct payments to primary care providers, either directly or through MCOs, for these fixed-fee arrangements. This shifts a portion of the existing Medicaid primary care spend towards direct primary care models. Medicaid MCOs, such as UnitedHealth Group ($UNH), Centene Corporation ($CNC), Molina Healthcare ($MOH), and Humana ($HUM), stand to gain as they can now more confidently integrate direct primary care into their offerings, potentially improving care coordination and reducing overall costs. Companies providing direct primary care services, though many are private, will see an expanded market for their models. Historically, legislative actions clarifying payment models within government healthcare programs have led to increased adoption and market expansion. For instance, the expansion of Medicare Advantage plans through various legislative acts over the years, such as the Balanced Budget Act of 1997 and the Medicare Modernization Act of 2003, led to significant growth in enrollment and profitability for MCOs. While not a direct parallel, the regulatory certainty provided by this bill for direct primary care within Medicaid is expected to drive similar, albeit smaller, growth for participating entities. When the Affordable Care Act (ACA) was upheld in 2012, Medicaid expansion led to a surge in MCO enrollment, with companies like Centene ($CNC) seeing significant stock appreciation in the following years as their Medicaid business grew. Specific winners include Medicaid managed care organizations: UnitedHealth Group ($UNH), Centene Corporation ($CNC), Molina Healthcare ($MOH), and Humana ($HUM). These companies will have new avenues to contract with primary care providers and offer innovative care models. CVS Health ($CVS), through its Aetna subsidiary, also stands to benefit. Evolent Health ($EHTH), which provides value-based care solutions to health plans, will see increased demand for its services as MCOs and states implement these new arrangements. The bill does not create direct losers, but traditional fee-for-service primary care providers who do not adapt to direct primary care models may see a shift in patient volume. The timeline involves the Secretary of Health and Human Services convening stakeholders and issuing guidance within one year of enactment, followed by a report to Congress within two years. This means implementation and market impact will begin within 12-24 months of the bill becoming law. The bill's sponsor, Senator Blackburn, a Republican from Tennessee, is a senior member of the Senate Finance Committee, which increases the bill's legislative momentum and likelihood of passage.