Heads up: another threat to Medicare!

Medicare is a successful and treasured government program that provides health care for seniors, for those with disabilities and for those with end-stage renal disease. The Traditional Medicare (TM) approach provides quality and necessary health care with administrative costs that are far lower than that of private health care insurance such as Medicare Advantage (MA). However, this highly valued public program is now at risk of being turned into just another cash cow for Wall Street investors and the private health insurance industry at the public’s expense.


How is this happening? Well, the 2010 Affordable Care Act established the Center for Medicare and Medicaid Innovation (CMMI). This Center’s goal was identifying “ways to improve healthcare quality and reduce costs in the Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) programs.”

Importantly, this Innovation Center was granted the authority to test alternative payment and service delivery models on a national scale without congressional approval. Being able to avoid Congressional politics makes sense as long as there is assurance that these public programs won’t be undercut.

CMMI’s record

Initially the CMMI focused on relatively small pilot projects. In a December 2021 article, Ryan Grim of The Intercept addressed the CMMI and its projects. Grim quoted from a February 2021 article by Brad Smith, who became the CMMI director in January 2020. Smith wrote: “the vast majority of the Center’s models have not saved money, with several on pace to lose billions of dollars. Similarly, the majority of models do not show significant improvements in quality.” Smith identified “inflated benchmarks” — in which providers wildly overestimate what they expect a patient will cost — and providers’ ability to “game” the payment models as key drivers of losses for the government. Smith’s concern about inflated benchmarks and gaming the system likely also apply to the private MA plans that cost more than the TM approach.

Direct Contracting

Former President Trump’s appointees to lead the CMMI greatly extended the scope of the pilot project idea and focused on a direct contracting entities (DCEs) model. According to Physicians for a National Health Program (PNHP), these DCEs are essentially third-party middlemen that receive a capitated monthly payment from the Centers for Medicare & Medicaid Services (CMS) for covering some defined portion of each enrollees’ medical expenses — and may keep what they don’t pay for in care. PNHP added: “Virtually any company can apply to be a DCE, including investor-backed startups that include primary care physicians, [Medicare Advantage] plans and other commercial insurers, accountable care organizations (ACOs) or ACO-like organizations, and for-profit hospital systems.”

This profit-based incentive model could threaten the health of enrollees as well as quickly lead to the privatization of this vitally important public program. This privatization has been a long-held dream of many conservative ideologues as well as Wall Street.

The Biden Administration and DCEs

I had hoped that President Biden’s administration would have stopped the implementation of the DCE models. However, according to PNHP, the CMS Innovation Center’s chief strategy officer said in late October 2021 that the agency “envisions a future where every Medicare beneficiary and most Medicaid beneficiaries are in an accountable care relationship by 2030,” signaling their intention to rapidly expand the DCE program to cover all TM beneficiaries in the next 8 years. Note that this change would likely be without the understanding or consent of TM beneficiaries. However, the Biden administration did delay the worst type of the proposed DCE models, but two other types are going forward.

PNHP added: “Currently, the pilot involves 53 DCEs in 38 states, D.C., and Puerto Rico, covering 30 million of the 36 million TM beneficiaries. … A majority of DCEs (28 of 53 total) are controlled by investors — not providers — and most have ties to MA commercial insurers.” This is hardly a pilot project.

What you can do

PNHP asks that you call your member of Congress at (202) 224-3121 and request that they demand Health and Human Services end this Medicare DCE program; hold hearings on DCEs; establish Congressional oversight of the Center for Medicare and Medicaid Innovation; and sign its petition at pnhp.org.

Ron Forthofer is a retired professor of biostatistics from the University of Texas School of Public Health in Houston and was a Green Party candidate for Congress and also for governor of Colorado. Read other articles by Ron.