How Medicare is Being Slowly and Quietly Put to Death

By Lee Russ
The Progressive, March 28, 2022

For some time now, the agency tasked with overseeing Medicare has been rather quietly killing the program. So quietly that you probably didn’t even know about it.

Many people consider Medicare to be politically untouchable, and that any attempt to kill it would end the career of anyone who tried. But there are many ways to gut Medicare. The sneakiest is to simply change the program into something else and still call it “Medicare.”

Liz Fowler, deputy administrator and director of the Centers for Medicare & Medicaid Services (CMS) Innovation Center, recently expressed support for an idea advanced by the Trump Administration to promote the privatization of Medicare, telling a group of doctors that the nation needs to get away from the “financial incentives in the U.S. health care system.”

Medicare is designed to give senior citizens direct access to medical care. That means no middlemen deciding whether you can see a doctor, which doctor you can see, or which service the doctor can provide (as long as it’s within Medicare’s broad coverage). That’s why Medicare has remained so popular and successful, and why it operates with far lower administrative costs than commercial insurance.

Fowler and others claim that this public model, which compensates doctors through a “fee-for-service” model, is so expensive because doctors often perform unnecessary services  to receive a greater payout. In its place, Fowler and CMS want a system where Medicare pays a lump sum per patient to an intermediary or gatekeeper. If the gatekeeper spends less than that amount, it gets to keep some or all of the “savings.” This system, known as direct contracting, gives doctors a financial incentive to limit the care that patients receive.

In essence, Fowler is advocating that we must give for-profit companies a financial incentive to restrict care, as a way of getting rid of financial incentives to perform unnecessary procedures. While there is some evidence that unnecessary services do occur, there’s scant evidence to support the belief that this is due to any widespread malintentions by doctors, nor that fee-for-service is a major culprit in the high cost of U.S. health care. But there’s considerable evidence that the alternatives are far worse.

In fact, replacing an incentive to provide care with an incentive to reduce care would mean the death of Medicare. Once you put a for-profit gatekeeper between the patient and the doctor, that’s no longer Medicare—that’s a version of commercial insurance.

Direct contracting is simply the latest in a string of CMS “innovations,” which impose gatekeepers to supposedly reduce costs. None of these innovations have actually lowered costs. Any for-profit gatekeeper will require some compensation for its gatekeeping, and the process of getting medical care becomes more complicated, increasing the amount of time and effort spent by both doctors and patients in communicating and negotiating with the gatekeeper.

Take the example of Medicare Advantage (MA). The commercial insurers that offer MA plans advertise heavily and participate only to make a profit. So how could these companies spend all that money on advertising, take out a profit, and somehow spend less per patient than traditional Medicare does? They can’t, of course. The evidence is that Medicare actually pays more per MA patient than it does per traditional Medicare patient. On top of which, there’s also evidence that MA insurers save money by restricting care.

Direct contracting is actually far worse than MA for two reasons: the gatekeepers get to keep a larger share of the supposed savings that they generate than they could under MA, and Medicare recipients are placed into the direct contracting program without their consent, unlike the MA program.

However, not even killing both the direct contracting and Medicare Advantage programs would save Medicare as long as CMS is committed to using gatekeepers to create the incentive to deny care. CMS would simply come up with another “innovation” to keep key care decisions in the hands of commercial intermediaries.

In fact, CMS just announced that it was killing part of the direct contracting program and renaming the rest to “Realizing Equity, Access and Community Health” (REACH), a new kind of middleman.

As long as decisions on care are in the hands of people who profit by denying care, Medicare will be dead—killed under the erroneous assumption that an incentive to provide care is the problem, and an incentive to deny care is the solution.

Can a program that affects so many Americans really die such a quiet death?

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