Seattle City Council, Arizona Medical Association demand end to Medicare Direct Contracting and REACH

Media contacts:
Clare Fauke, communications specialist at Physicians for a National Health Program, clare@pnhp.org
Mike Andrew, Executive Director at Puget Sound Advocates for Retirement Action (PSARA), organizer@psara.org
Seattle Councilmember Teresa Mosqueda, Teresa.Mosqueda@seattle.gov

May 5, 2022: Opposition to the privatization of Medicare through the controversial Direct Contracting program (recently renamed “ACO REACH”) is growing across the nation, as evidenced by two recent resolutions passed by the Arizona Medical Association and the Seattle City Council. Both resolutions call on the U.S. Department of Health and Human Services (HHS) and President Biden to immediately end Direct Contracting and “REACH,” and protect Medicare from profiteering. 

Arizona Medical Association 

The 4,000-member Arizona Medical Association (ArMA) passed the anti-privatization resolution at its annual meeting on April 23. Among concerns cited by the resolution is that “Direct Contracting Entities (DCEs) are allowed to keep as profit and overhead what they don’t pay for in health services, therefore giving them a dangerous financial incentive to restrict seniors’ care.” According to HHS, there are 25 DCEs currently operating in Arizona. 

The resolution was introduced by Dr. Michael Hamant and Dr. Eve Shapiro. Dr. Shapiro, a Tuscon-based pediatrician and board member of Physicians for a National Health Program, noted that since most physicians are now employed by large groups or health systems, they may find themselves practicing in DCEs without their knowledge or consent. “Medicare is a lifeline for seniors and those with disabilities, not a cash cow for Wall Street,” said Dr. Shapiro. “Physicians must take a stand against profiteering in Medicare.”

Seattle City Council 

In Seattle, the city council unanimously passed a similar anti-DC/REACH resolution on April 26, led by Councilmember Teresa Mosqueda. According to the resolution, “The Trump administration opened the door to the complete privatization of Medicare through a Direct Contracting pilot program allowing private equity firms, insurance companies, and corporate health businesses to directly contract to provide Medicare services.” The resolution then calls for the termination of Direct Contracting and REACH, and “favors closing the door on third party entities in the Medicare system.” There are 12 DCEs currently operating in the state of Washington. 

The effort to pass a Seattle resolution was led by the Puget Sound Advocates for Retirement Action (PSARA). “The DC/ACO REACH pilot programs provide Wall Street firms and large insurers the opportunity to profit off of the health care needs of seniors and the disabled in Traditional Medicare,” said PSARA co-presidents Jeff Johnson and Karen Richter. “Skimming profits from Traditional Medicare will result in a diminution of the quality and quantity of services, an extreme draw down in the Medicare Trust Fund, and further cuts in Medicare benefits or increases in Medicare taxes, premiums, and costs for workers and seniors.”

Campaign against Direct Contracting and REACH

Direct Contracting is a pilot program launched during the Trump Administration to change the way that Traditional (fee-for-service) Medicare pays for care. Instead of paying providers directly, DC pays profit-seeking middlemen called Direct Contracting Entities (DCEs) a monthly fee to “coordinate” seniors’ care, allowing the DCEs to keep up to 40% of their Medicare payments as profit and overhead. Seniors are enrolled into DCEs without their understanding or consent, and must change primary care physicians in order to opt out. Today, 99 DCEs have enrolled approximately 1.8 million Medicare beneficiaries. 

After more than 250 organizations and Congressional leaders called on HHS to end the Direct Contracting program, HHS announced that in 2023 it would replace DC with “ACO REACH.” The rebranded program would be nearly identical to DC, and allow all of the 99 DCEs — many owned by commercial insurers and private-equity firms — to participate. 

In response, a coalition of seniors, community groups and physicians plan to expand the campaign against DC/REACH over the summer. The campaign will hold a national launch event on Monday, May 23. The event is free and open to the public; registration is HERE.