Three-Year ‘Pilot Program’ Allows Wall Street Huge Profits While Health Care for Millions Weakens
Why is President Joe Biden stalling when he could immediately halt the controversial Medicare direct contracting program put in place by Donald Trump?
The Trump administration had the Center for Medicare and Medicaid Innovation, an offshoot of the Center for Medicare and Medicaid Services, run a congressionally approved pilot program that essentially established a roadmap to privatize all of Medicare.
We ran a comprehensive story about this in January by Diane Archer, president of Just Carefully USA, an independent digital hub covering health and financial issues affecting Baby Boomers and their families.
Consider that nearly 50% of Medicare beneficiaries – 26 million seniors – are already enrolled in private Medicare Advantage plans. In those cases, the federal government provides a fixed monthly fee for each beneficiary under the plan’s care to a middleman, regardless of what medical services they actually receive. That gives them private companies an incentive to spend less on patient care to drive up their profits.
So far, 53 companies have signed contracts to work as fiscal intermediaries between patients and their healthcare providers.
Under the new pilot program, key aspects of this model extend to seniors in 38 states; Washington, D.C.; and Puerto Rico. The plan could grow to cover 30 million of the 36 million currently in traditional Medicare fee-for-service programs. This move is not a choice for people enrolled in traditional Medicare. Beneficiaries are not even told they have been switched to a direct contracting plan. At least the seniors on Medicare Advantage chose that program.
Congress can no longer intervene on the issue; only three people have that power: Biden, Health and Human Services Secretary Xavier Becerra and Center for Medicaid and Medicare Services Administrator Chiquita Brooks-LaSure. Still, a group of 50 lawmakers led by Rep. Pramila Jayapal (D-Wash.) sent a letter to Biden in the first week of January asking him to stop the measure. And several activist groups are issuing petitions.
The letter states that Direct Contracting Entities already cost the government $10.6 billion per year because “Medicare Advantage plans currently use upcoding, or adding extra diagnosis codes to patient charts, to receive more money from the Medicare Trust fund to increase their profits.” The congressional members are asking the Biden administration to permanently end direct contracting and return the beneficiaries back to their traditional Medicare plans by July 1, 2022.
So why hasn’t Biden killed the plan? He stopped aspects of it in March 2021 when there was great outcry over a component of the program which would have auto-enrolled beneficiaries in certain geographic locations into direct contracting. Maybe the right question is why the president installed Elizabeth Fowler in the top spot at the Center for Medicare and Medicaid Innovation, given her history as a top executive at Johnson & Johnson and her practices serving under the George W. Bush and Barack Obama administrations.
Fowler has said Trump’s Direct Contracting Entities program will stay in place for three years and then it will be reevaluated.
Worked Over Obamacare
Fowler was one of the architects behind the Affordable Care Act (Obamacare). She helped write one version of the act as an aide to former Sen. Max Baucus (D-Mont.) that eliminated the public option, thereby boosting profits for the healthcare industry. Baucus banned single-payer advocates from the Obamacare deliberations leading to an insurance-dominated version.
Even more troubling, Fowler is said to have held closed-door meetings at the White House with Wall Street firms hoping to learn how the act would affect stock prices while serving as one of Obama’s advisers on healthcare policy.
She has a long history with Medicare policy, having served George W. Bush by helping to draft the Medicare Modernization Act of 2003 (Medicare Part D) – that blocked the ability of Medicare to negotiate prescription drug prices and instead outsourced cost-control responsibility to the insurance companies.
Given her profit-driven track record, there’s nothing in there that shows she has healthcare beneficiaries in mind.
You can imagine the salivating private investor-owned entities cozying up to Fowler and Medicare Advantage commercial insurers to share a piece of that pie. So far, 53 Direct Contracting Entities have signed contracts to work as fiscal intermediaries between patients and their providers.
There’s risk, but Wall Street knows how to manage that. In fact, many of these private investment firms thrive on “risk-score gaming,” which is already prevalent in Medicare Advantage.
Wall Street types know how to drive profits, and it doesn’t involve offering better care for patients. What they’ll do is cherry-pick the healthy beneficiaries and then “upcode” them – telling the Center for Medicare and Medicaid Services that patients are sicker thanked they are, and that they received more expensive and more medical services than were actually provided. They will also drop the truly sick patients from the plan. That’s risk-score gaming, and it’s perfectly legal here.
Spend Less on Patients
These Direct Contracting Entities also make more profit by spending less on patient care and funneling more of the government payments back into their profits.
For example, traditional Medicare spends 98% of its budget on patient care. The Affordable Care Act requires insurance companies to spend at least 80 to 85% of premium dollars on medical care. Now compare that to Direct Contracting Entities, which spend roughly 60% of taxpayer money on patient care while using the remaining 40% for overhead and pocketing the rest as profit.
Medicare spending is expected to rise from $800 billion in 2019 to $1.6 trillion in 2026, as Baby Boomers live longer. And Wall Street loves direct contracting. It considers direct contractors eight times more valuable per patient than Medicare Advantage firms.
But they’re both for-profit plays. In fact, from early April 2010 through the end of August 2021, the average stock price for five Medicare Advantage-focused insurers increased a staggering 825%, compared with 280% for the entire S&P 500. Those insurers were United Health, Humana, Cigna, Anthem, and CVS/Aetna. Medicare and Medicaid grew Anthem’s and Humana’s growth by two-thirds since 2010. And these top five insurers made up 52% of the Medicare Advantage market in 2016.
As more private investors enter the scene, get ready for continuous turmoil as they sell off the programs once they have made their profit to invest in something else.
There’s no doubt something must be done to shore up funds as the Medicare trust fund is expected to become insolvent by 2024, according to a 2020 annual report to Congress by the Medicare Board of Trustees. But surely there’s a better idea than handing the healthcare coverage of our seniors over to the wolves of Wall Street.
Meanwhile, medical coding, in general, remains a mess with outdated systems and general confusion across the country. For example, in Rochester, N.Y., veterans were being charged high copays from their insurance providers for services that should have been covered for free through the Veterans Administration (VA) at the University of Rochester Medical Center, according to a story by Berkeley Brean with News 10NBC, who helped uncover the issue.
The medical center director said the problem stemmed from a coding glitch; if veterans scheduled the appointment before the VA was contacted, a bill was generated for their insurer, and they would be billed a copay. If the medical center got prior authorization before the medical visit, no payment was charged. There are 45,000 veterans in New York on community care and 2.3 million nationwide.