By Matthew Cunningham-Cook
The Lever, March 24, 2022
A new Medicare privatization scheme developed under President Donald Trump and now being expanded under President Joe Biden is forcing hundreds of thousands of seniors onto new private Medicare plans without their consent.
The development represents a troubling new dimension in the fight by corporate interests to privatize Medicare, the federal health insurance program for people 65 or older. Medicare Advantage, which allows for-profit health insurers to offer privatized benefits through Medicare, already results in unexpected costs for routine procedures and wrongful denials of care. Private plans have cost Medicare an astonishing $143 billion since 2008, and are now driving some health insurers’ record profits.
The new Direct Contracting Entity (DCE) program similarly adds a private-sector third party between patients and Medicare services. Medicare allows these intermediary companies to offer unique benefits, like gym membership coverage. But as for-profit operations ranging from private insurers to publicly traded companies to private equity firms, these intermediaries are incentivized to limit the care that patients receive, especially when they are very sick.
While Medicare Advantage patients choose to sign up for private insurance plans, patients are being enrolled in these DCE health care plans without their informed consent. As Rep. Pramila Jayapal (D-Wash.) noted in a January op-ed, “Seniors in traditional Medicare may be ‘auto-aligned’ to a DCE if any primary care physician they’ve visited in the past two years is affiliated with that DCE. That means Medicare automatically searches two years of seniors’ claims history without their full consent to find any visits with a participating DCE provider as the basis for enrollment.”
Among those who unexpectedly found themselves caught up in one of these new DCE plans is Suzanne Gordon, a policy analyst based in Richmond, California. Gordon spent her entire professional career studying the U.S. health care system and advocating for Medicare for All. As a firm opponent of privatization in Medicare, she has never signed up for a for-profit Medicare Advantage plan.
That’s why she was so surprised when she got an email in January from her doctor at One Medical, a for-profit primary care practice on the West Coast backed by the private equity giant Carlyle Group. While the email message wasn’t particularly clear, she eventually realized that she was being enrolled without her informed consent in a new private DCE plan run by Iora Health, a primary care provider One Medical purchased last year.
“I got the email, I clicked on it and began a signing process that didn’t tell me what I was signing,” said Gordon. “You sign, you click in, and they tell you that they want you to sign up for a DCE with Iora Health. I wrote back to my doc and said I won’t do this… I felt that a line had been crossed.”
Gordon, a health policy expert, was able to get out of the plan — but others have not been so lucky. Rep. Pramila Jayapal’s (D-Wash.) office told The Lever that 350,000 seniors were in DCE plans as of January 2022 — none of whom elected to sign up voluntarily.
This latest Medicare privatization scheme was started under the leadership of a Trump official who has since launched his own “entrepreneurial firm focused on building and growing transformational health care companies,” with support from private equity firms. Now, the effort is quietly being expanded by the Biden administration through its new ACO REACH program, under the direction of two former Obama administration officials who have revolved between jobs in government and the corporate health care industry.
The development means that even more of the country’s most vulnerable will be at the mercy of corporate arbiters that they know little or nothing about.
“Seniors and people with disabilities are, without their consent or full knowledge, being put into a program that has as its center the profit of the investment community rather than the health of Medicare members,” said Ed Weisbart, a physician who chairs the Missouri chapter of Physicians for a National Health Program (PNHP), a doctors organization that advocates for single-payer health care. “The investment community has proven that they know how to work around the guardrails of any program that has been set up. They know how to do it.”
The DCE program was originally launched in April 2019 by Trump’s Centers for Medicare and Medicaid Services (CMS), under the auspices of the CMS Innovation Center, known as CMMI.
CMMI was created under President Barack Obama’s signature health care law, the Affordable Care Act (ACA), to pilot new payment models in Medicare and Medicaid without going through the formal rulemaking process that requires public comment. As a result, the new DCE program, which assigns seniors to a privatized model without their consent, has never been subject to any public scrutiny whatsoever.
“All that DCEs do is privatize traditional Medicare,” said Diane Archer, the CEO of Just Care USA, which works to fight Medicare privatization.
Meanwhile, Adam Boehler, who Trump tapped to run CMS’ Innovation Center, has since formed his own firm, Rubicon Founders. The firm’s website claims it will “architect transformational companies and are deliberate in creating the foundation necessary to lead an industry,” but provides few details on how it will do so. Rubicon did not respond to a request for comment.
Boehler’s firm launched with the backing of longtime private equity executive Annie Lamont, who is married to Connecticut Gov. Ned Lamont (D), as well as support from the health care-focused private equity firm Welsh, Carson, Anderson & Stowe (WCAS). WCAS is developing a series of primary care centers for Medicare Advantage patients with the help of Humana, a private health insurer that has also launched a DCE program.
For Archer, the evidence is clear: “Adam Boehler… launched this [DCE] program to enrich his friends in the private equity world.”
“We Needed To Make Sure That CMS Continues This Journey”
Late last month, critics of DCEs say the Biden administration effectively expanded the DCE effort under a new name — the “ACO REACH” program.
The new program — which stands for Accountable Care Organization (ACO) Realizing Equity, Access, and Community Health (REACH) Model — allows hospital-led managed care organizations to access the new Medicare privatization scheme, too. ACO REACH similarly assigns patients with little informed consent to for-profit plans that benefit health care profiteers and creates incentives to deny care.
The DCE and ACO REACH programs are being spearheaded in part by CMMI head Liz Fowler, a former Obama administration official who helped write Obama’s signature health care act as the chief health counsel to former U.S. Senate Finance Committee Chairman Max Baucus (D-Mont.). Earlier, she helped write the 2003 Medicare Prescription Drug, Improvement, and Modernization Act, legislation that barred the government from negotiating lower prescription drug prices.
Fowler served as vice president of public policy for the health insurer Wellpoint, now part of Anthem, before moving to Baucus’ office. She later became a health care aide in the Obama administration, before spending nearly seven years as a vice president for pharmaceutical giant Johnson & Johnson.
Neither Anthem nor Johnson & Johnson are currently active in the DCE market. But considering other major insurers like Humana are pursuing DCE contracts, and that Anthem already offers Medicare Advantage plans, it is conceivable that these insurance giants could get into the business at some point in the future.
In a February 24 press call announcing ACO REACH, CMS Administrator Jonathan Blum said that the Biden administration had always been committed to continuing with the DCE program.
“We want to make sure that we see these programs as continuing to grow… we have had many conversations with the public and with stakeholders that started with the new CMS team coming on board,” said Blum. “We have felt from the start that we needed to make sure that CMS continues this journey.”
Blum served as the deputy administrator and later principal deputy administrator of CMS under Obama, before joining CareFirst BlueCross BlueShield as an executive vice president, according to Legistorm.
Fowler and Blum’s boss, CMS administrator Chiquita Brooks-Lasure, is a former health care partner at Manatt, Phelps & Phillips, a lobbying firm that worked to launch Medicare Advantage plans as recently as 2020.
Manatt, Phelps & Phillips also played an integral role in reducing fines for nursing home violations in California by as much as 99.9 percent in the middle of the COVID-19 pandemic.
The agency declined requests for comment.
A Dangerous New Stage Of Medicare Privatization
Kip Sullivan, an attorney who is active with Physicians for a National Healthcare Program, said that the DCE program relies on ensuring that elderly or disabled patients don’t have an informed choice about enrolling in the private health care plans.
“Seniors have been swept into DCEs without their knowledge,” he said. “Many — probably most — beneficiaries are in traditional Medicare as opposed to Medicare Advantage because they did not want to be in a plan run by an insurer.”
Sullivan pointed out that the publicly traded DCEs, like Oak Street Health, brag in investor filings that between 13 and 30 percent of the money they get from Medicare goes into profits. By comparison, according to Sullivan, traditional Medicare plans have overhead of just 2 percent.
“When Medicare passed in 1965, there was never an intention to enrich the insurance industry,” he said. “But that’s exactly what’s happening.”
Weisbart, from the Missouri chapter of PNHP, is especially concerned that the Medicare and Medicaid agency “does not need to get congressional consent, discussion or approval for any of these programs. They’re able to do it on their own.”
Under Trump, the agency even issued a waiver that exempts DCE programs from anti-kickback rules that normally prohibit doctors from entering their patients into such for-profit plans. As a result, doctors can be compensated for involuntarily entering their patients into DCE programs.
In recent months, advocates have been waging a full-court campaign against the DCE scheme. In January, 54 members of the House submitted a letter voicing similar concerns to Health and Human Services Secretary Xavier Becerra and CMS Administrator Brooks-Lasure.
What then, explains the Biden administration’s recent decision to expand the program?
As always in our campaign finance system, money could play a role. In 2020, the leadership of DCE contractor Clover Health donated $500,000 to the main super PAC for Senate Democrats, while the company’s financier Chamath Palihapitiya donated $750,000 to the same super PAC plus $250,000 to the Biden Victory Fund.
One Medical — which employed Suzanne Gordon’s doctor and owns Iora Health, the company that tried to enroll her in a DCE -— is backed by the Carlyle Group, a prodigious donor to both parties. Biden enjoyed Thanksgiving dinner last year at the $30 million Nantucket home of Carlyle co-founder David Rubenstein.
Bill Kadereit, the President of the National Retiree Legislative Network, said that the DCE program could usher in a dangerous new stage of Medicare privatization.
“Medicare Advantage plans have failed,” he said. “Privatization has failed. The cost of Medicare is doubling every ten years because of the health care sector campaign contributions. We’re seeing the disassembly and destruction of our precious public health system. Every place where the profiteers have stepped in costs have gone up and health outcomes have gone down.”