Medicare Privatization - Biden
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Photograph Source: Molly Adams – CC BY 2.0
It is easy and appropriate to target the private health insurance companies who earn excessive profits from the Medicare Trust Fund through Medicare Advantage plans, especially given the well-documented evidence of overcharging and fraud.
But it is essential that we remember that it has been the U.S. Congress and the Executive Office that promoted the privatization of Medicare, to varying degrees, since it was first signed into law by President Johnson in 1965 and enacted the following year.
In 2017 The Commonwealth Fund published “The Evolution of Private Plans in Medicare,” which detailed the increasing role in healthcare granted to private companies since 1966 through Acts of Congress and the Office of the President. Privatization was boosted significantly by the Medicare Modernization Act of 2003, which–in addition to providing private drug coverage (with non-negotiable prices) through Medicare Part D–provided an alternative payment structure to private health insurers as a way to incentivize and increase their participation in the Medicare program. And it worked; more health insurance companies decided to enter the Medicare “market” and labeled their plans “Medicare Advantage.” Almost 50% of Medicare beneficiaries are now enrolled in private plans, compared to those in traditional Medicare.
There are many reasons why seniors and those with disabilities continue to enroll in traditional Medicare. Traditional Medicare does not have restrictive provider networks and individuals can seek care from any provider in the country who takes Medicare. Further, prior authorizations are not required, as they are in Medicare Advantage plans. Delay and denial of care are hallmarks of Medicare Advantage plans–not traditional Medicare–as a way of increasing the profit margin of private companies. However, delay and denial of treatment also mean worse health outcomes and an increase in premature death. The Mayo Clinic has stopped accepting patients with Medicare Advantage plans and is encouraging patients to enroll in traditional Medicare instead.
Traditional Medicare has no profit; its administrative overhead is less than 2%, compared to 15% overhead and profit for Medicare Advantage plans. As a result, traditional Medicare is less costly, while payments to Medicare Advantage plans are draining the Medicare Trust Fund, a fund workers pay into, as they do for Social Security.
Advocates for a national single-payer healthcare system in this country, often referred to as Improved Medicare for All, acknowledge the weaknesses in the current version of traditional Medicare. While the federal government has allowed for perks to beneficiaries in Medicare Advantage plans, including free gym memberships and some (limited) dental and vision care, these benefits are not available to those choosing traditional Medicare. Why not? They are a clever way for private companies to increase enrollment in their plans, in addition to lowering their premiums, made possible through excessive payments received from the Medicare Trust Fund to private insurers. So far, Congress has not expanded those benefits to beneficiaries in traditional Medicare, thus favoring for-profit companies.
The money is there to improve traditional Medicare and expand it to cover all residents of the United States, as substantiated by the Congressional Budget Office. But many elected officials on both sides of the aisle will say otherwise and are compensated by private health insurers with handsome campaign contributions.
Meanwhile, the Center for Medicare and Medicaid Innovation (CMMI), under the Center for Medicare and Medicaid Services (CMS) within the Department of Health and Human Services (HHS), was established as part of the 2010 Affordable Care Act (ACA). According to its website,
“the CMS Innovation Center, through its models, initiatives and Congressionally-mandated demonstrations, has accelerated the shift from a health care system that pays for volume to one that pays for value.”
The ACA also allowed CMMI to make changes without Congressional oversight. And CMMI is determined to reframe privatization as value-based care.
CMMI has been quietly contracting with for-profit companies to engage in “pilot programs” that insert middlemen into traditional Medicare without the beneficiary’s consent and often without their knowledge. The Trump Administration, which launched the program, contracted with 53 for-profit middlemen called Direct Contracting Entities (DCEs). The Biden Administration re-branded the program ACO-REACH (Accountable Care Organizations Realizing Equity, Access, and Community Health) and increased the number of corporate participants to 99.
These participants include private health insurance companies as well as private equity/venture capital firms, which can keep up to 40% of Medicare dollars in administrative costs and profits by “managing” patients’ healthcare. The supposed goal is to lower costs through “value-based care.” We already know that lowering costs in Medicare Advantage means delaying and denying care by requiring prior authorizations, as well as restricting provider networks. Furthermore, an excellent analysis by healthcare policy experts Kip Sullivan, J.D. and James G. Khan, M.D., refutes the premise of CMS that Accountable Care Organizations will save money, given evidence of past performance.
The intended goal is the complete privatization of Medicare by 2030, as posted on the CMS website: “All Medicare fee-for-service beneficiaries will be in a care relationship with accountability for quality and total cost of care by 2030.” Starting January 2023, the number of ACO-REACH programs managing the care of traditional Medicare beneficiaries is slated to increase dramatically, from 99 to over 200.
The appointment of Elizabeth Fowler, Director of CMMI, whose past work in the private healthcare sector as Vice President for Global Health Policy at Johnson & Johnson and as Vice President of insurer Wellpoint (now Anthem), not only poses a huge conflict of interest. It reflects the intention of many within the federal government to privatize healthcare. During the Obama administration, Fowler assisted in the development and implementation of the ACA, which created the CMMI, the office she now directs.
Since Congress does not have oversight of CMMI, it will take an Executive Action by the President to eliminate the ACO-REACH program. President Biden could do this with a stroke of his pen.
Healthcare advocates must recognize that the instruments of privatization are in the government’s hands and that CMMI, CMS, the Secretary of Health and Human Services, Members of Congress, and the President of the United States have been complicit for years in the privatization of a beloved public program, Medicare, and must all be held accountable.
What constitutes government accountability in healthcare?
There are those in Congress, as well as some healthcare advocates, who ascribe to a “bad actors” paradigm; i.e., if we can issue new rules, fine, and/or weed out the private companies that engage in Medicare fraud we will be doing our job in protecting the public. Diane Archer, a long-time healthcare advocate and President of Just Care, writes on 12/21/22 that the current fines are grossly insufficient to de-incentivize corporations from committing fraud. And she is right.
However, as Archer concedes in a March 2022 interview, private corporations in healthcare are following their profit-driven mission to maximize profits and satisfy their shareholders, not the public, and that an improved system of Medicare for All is the solution.
Don McCanne, M.D., another long-time healthcare advocate, writing for Health Justice Monitor on 12/22/22, comments that CMS’s new proposed regulations for Medicare Advantage programs are “camouflage for perpetuating” a “wealth-creating business model” and calls for the end of privatization in Medicare and Improved Medicare for All.
The majority of Americans favor a “single government program to provide healthcare coverage.”
Even in a county that voted overwhelmingly for former President Trump–rural Dunn County, Wisconsin–a referendum asking “Shall Congress and the President of the United States enact into law the creation of a publicly financed, non-profit, national health insurance program that would fully cover medical care costs for all Americans?” passed.
Whether it’s tax incentives for polluters, with EPA issuing fines for environmental degradation and health risks, or the federal government designing a system for the privatization of Medicare and CMS issuing fines to the profiteers, we need to reckon with our government’s history of working hand in glove with corporate interests, often at odds with the best interests of the people and the planet, and not compromise our own expectations and the demands we make of elected officials. As McCanne wrote, the proposed regulations are indeed a means of perpetuating the status quo. We need to get the middlemen out of healthcare, improve traditional Medicare, and expand it to cover everyone.
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