Privatizing Medicare through "Medicare Advantage" and REACH: The Wrong Way to Go!

The things to remember about “Medicare Advantage” plans is that 1) they are not Medicare, and 2) they may offer little or no advantage. They are a form of private insurance, cost Medicare a lot of money, and in some situations (especially when you are sick) can indeed hurt you.

Let’s get to the first. Medicare was created in 1965 to provide universal health care to senior and disabled people. It was a tremendous victory for those who had fought for decades to have a universal health insurance system in the US. It was also strongly opposed by those who thought their pocketbooks might be hurt, specifically the AMA, as well as other right-wing forces that just opposed everything that might actually help most people (and thus most Great Society, and even New Deal, programs). The supporters never envisioned that Medicare would be the end of the road, especially when, in the same year, Congress passed Medicaid, a federal-state collaborative program that was aimed at helping the poor access health care. They assumed that it would be expanded to finally include all Americans.

Of course, many of the opponents of Medicare didn’t give up either. The AMA, while never contrite, shut up about it after it became clear that rather than hurting physicians’ incomes, Medicare was a bonanza for them, ensuring payment for services had often previously been unable to collect for. Those who hate programs that benefit people, of course, are still around. But the most insidious and dangerous threat is from those who see any government program as a way to make lots of money, especially if it can be privatized without much risk to the private sector investors. This is really how Medicare (and many other public programs) have been most insidiously and effectively attacked -- by privatizing its programs to guarantee lots of money for the profit of the private companies, and largely insulate them from risk.

Enter Medicare Advantage (MA).  MA plans are largely run by insurance companies (and sometimes by venture capital groups) and are called “Part C” of the Medicare program, but they essentially take people out of Medicare and put them in a private managed care program. These companies then get the money that would have gone to the Medicare program (we’ll call it Traditional Medicare, or TM) for you. Plus they get extra money. Why do private companies caring for you under MA get more money than TM allocates for you? Because they do, right. Because the pro-for-profit “caucus” (PFPC) of the Congress, from both parties, wanted to increase the portion of people in Medicare entering MA. So these companies could make more money. And contribute more to the members of the PFPC.

Remember the old phrase “feeding at the government trough”? That is what these companies do, very well. Virtually no public function that is privatized becomes more effective at delivering service, since the amount of profit generated is increased by providing less service. To the extent that it sometimes seems to look better, it is almost always because of 2 things: that the public services were starved for funding in the first place, making them look bad and justifying the call to privatize them, and that private companies’ inefficiency, corruption, and overall bad acting is harder to ferret out than government agencies’.

How do MA plans make more money? In the traditional HMO manner, they limit access to a “panel” of doctors and hospitals. These are not necessarily the worst ones in your area, but they are the ones that the plans have negotiated the best deals with, for which they pay the least. They attract members with some perks like vision care, hearing care, etc., which can be useful if one is generally healthy. And of course, MA plans vary in quality and in performance; some of those covering state employees by contract have performed better possibly because of having a more educated, informed, and influential client base. But this is not always the case; see the example of city workers’ resistance to Mayor Eric Adams of NYC trying to push retirees into MA.  

And do not consider for a moment that the goal of any of these programs is to provide excellent health care: it is to make money. And that they make money is demonstrated by the aggressive marketing that Medicare-eligible people get from these companies, not to mention television advertising. The Commonwealth Fund recently published a piece called “The Role of Marketing in Medicare Beneficiaries’ Coverage Choices”, which describes this in detail. ‘Soaring private plan enrollment has led to a sharp increase in marketing and sales efforts, some misleading and inaccurate.’ It goes on to explain in how MA works and how they market. It also notes that about 1/3 of Medicare beneficiaries used an insurance broker; a boon to that private sector industry as well. MA plans can keep 15% of the money they get for profit and overhead, having to spend only 85% on actually delivering care (which they call the “medical loss ratio”!)

The way that MA plans make money is enrolling lots of people, many of whom are healthy (Wow! Free gym membership!) and don’t cost them much, and then submitting bills that make their patients look like they are as sick as possible thus inflating their bills (called “upcoding”). At best this an effort to maximize revenue from Medicare, which there is no incentive to do in TM. Plus, if they can get certain poor people enrolled, they can collect an additional $350 for each one regardless of whether they actually provide any care! This was implemented with the theoretical idea of increasing equity by incenting the enrollment of poor people, but really has the opposite effect since those folks now have their care restricted when they are sick by the private insurance company, while under TM it would not be. And, of course, they make money by fraudulently overbilling Medicare for billions of dollars, winning the Lown Institute’s 2022 “Shkreli Award” for bad behavior by corporations!

 

MA is not the only way Medicare is being privatized. As I have written before ("Private Equity": Profiteers in nursing homes, Medicare Advantage, DCEs, and all of healthcare, Sept 16, 2022; Direct Contracting Entities: Scamming Medicare and you and bad for your health!, Feb 7, 2022), the Center for Medicare and Medicaid Services Innovation Center (CMMI) implemented Direct-Contracting Entities (DCE), which was renamed REACH as of January 2023 (without any other significant change). REACH has allowed the creation of mostly investor-owned companies that contract with primary care practices (often already owned by corporations, not owned by the doctors) and voilà, all of those doctors' patients are in their REACH group, which then gets the money that Medicare would have paid for you. What is really tricky is that, unlike MA, you didn’t have to choose it; they choose for you by contracting with the group (often corporate) that owns your primary care practice! And your doctor may not even know that s/he is in one! You can only get out if you can find another doctor who is not in one – particularly difficult in rural or urban underserved areas where even finding a doctor is hard. Not to mention that REACH is even more lucrative than MA, as it allows the private company to keep 40% of its take as profit and overhead, spending only 60% on patient care!

The effort to privatize Medicare is absolutely the wrong way to go. The way to go is to keep the structure of Traditional Medicare, where anyone can use any doctor or hospital, where there is no profit taken out, and overhead is about 2%. And then increasing its benefits so that it covers 100% (not 80%) of approved charges so people don’t have to get a Supplement Plan, as well as cover dental, vision, hearing, etc. This is affordable, since it could be funded by money now used to generate huge profits for private investors, but could actually be used to improve our healthcare. While we still need to address access in terms of geography and specialty distribution, eliminating the profit motive will make major steps toward access and improved quality.

Then we can have Healthcare for All.

 

"Private Equity": Profiteers in nursing homes, Medicare Advantage, DCEs, and all of healthcare

What happens “When private equity takes over a nursing home” is the subject of a recent New Yorker article. What happens is not pretty, at least not if you are concerned about the care of the people housed in it. Presumably it is good for the private equity investors, if all they care about is making money (probably). Compared to the days when the particular home examined in the article was run by the Catholic order of Little Sisters of the Poor, it is more crowded, more poorly staffed, dirtier, and the people living there are sicker, get less care, and are more likely to die. Good thing it is making money for the investors!

Private equity, a bland-sounding term for ‘rapacious profit-seeking capitalist investors’, is taking over a lot of things these days, in healthcare and in other areas formerly run by non-profits or government, as well as traditional businesses. Sometimes this is occasioned by circumstances largely outside “the market” or government policy, which is true (to a degree) in this case -- fewer women are becoming nuns, and the “10 sisters to a home” ratio that they aimed for became impossible to keep up. Sometimes it is “the market”, without outside interference (hard to come up with these examples). Sometimes it is a result of government policy, driven by people (largely but not only Republicans) who believe anything run by the government is bad and should be run privately, and probably anything run by a non-profit would be run better by a profit-seeking company. They are starry-eyed idealists who actually believe this despite all the evidence to the contrary. Much or most of the time it is a combination of the last two, that is market forces created by government policies that give tremendous advantage to profit-seekers, including direct subsidies of public funds and freedom from the restrictions placed on non-profits and government agencies themselves. The most common form of the latter in government, of course, is to starve the budgets, underfunding public agencies so that the public gets legitimately upset by the lack of service, and “private equity” rides in like a “white knight” to save the day.

Of course, it almost never works. That is, if “works” means “performs the ostensible functions of the company or agency better”. That they almost never do, and they also almost never save money, and almost always end up costing more – paid either the taxpayer or ratepayer or public that purchases their product. If by “works”, however, we mean “makes money for the investors”, it frequently does. This scenario plays out across many industries and formerly public functions, but it has a particularly bad smell when the “product” that is being invested in and turned over to profiteers is people, and people’s health.

People in nursing homes are very vulnerable. That is why they are in nursing homes. Even the best ones face problems with staffing, a big issue in any industry owned by profiteers since the best way to fix this is to hire more staff and pay them better and the prescription for “success” by investors is to have fewer staff and pay them less. Such problems, however, are generally even greater for those nursing homes that care for patients on Medicaid, who include the always-poor and the even larger number of “never-were-poor-before-but-are-now-after-trying-to-pay-for-long-term-care”. While the large majority of people on Medicaid are young women and their children (Medicaid, a federal/state partnership, makes it exceedingly difficult for single adults or men to receive benefits in most states), the large majority of its spending is on the aged and disabled requiring long-term care including in nursing homes. (Medicare, the federal program for aged and disabled people, does not generally pay for nursing home care, except a few days after some hospitalizations.) The Kaiser Family Foundation notes that although only 5.5% of Medicaid recipients are in nursing homes, they account for 34% of its spending.

This lesson is a key one to keep in mind: everyone does not (and should not) use an equal share of health care, or account for an equal share of healthcare costs. Sick people cost more. Sicker people cost even more. Most people are not sick or costly in any one year. The aged, disabled, and those who have multiple chronic diseases are the sickest and among the costliest, and that is not most of us. The rest of us are not in that group until we are, either from gradually entering it as we age or suddenly falling into it from an accident or developing cancer. In general, not just nursing homes, about 3% of people account for 50% of health care costs and about 50% of the people account for 5% of costs. (see my post “Red, Blue, and Purple: The Math of Healthcare Spending”, Oct 20, 2009. It hasn’t changed much.)

Nursing homes are not the only healthcare institutions being turned over to “private equity”. Medicare, the most important health care funding advance of the last century, has been especially under attack. Traditional Medicare (TM) has two components; Part A, which pays for hospitalizations, is paid for by the Medicare Trust fund (your paycheck deductions), and Part B, which pays for outpatient care, by monthly premiums paid by recipients. Part C, now known as Medicare Advantage, is a privatized version of Medicare which, if you choose it, puts you essentially in an HMO, for good and bad. The good, the “advantage” is that it usually pays for all your hospitalization (TM only pays 80% of its approved charges, requiring most TM recipients to have a “Medicare supplement” insurance plan), and gives other services, including (sometimes) hearing and vision care, and even gym memberships! The bad is that, as in an HMO, you have a limited choice of doctors and hospitals, and except in an emergency they are usually in a limited geographic area. The worse is that these plans, mostly owned by insurance companies and increasingly by private equity, are only required to spend 80% of their premiums on actually delivering health care (and they pad even this with non-healthcare expenses, including executive salaries). The worst is that they don’t want you if you are sick (and thus will cost them money); those gym memberships cost little but hospitalizations cost a lot! They have many ways of encouraging healthy seniors to sign up (“cherry picking”) including lots of TV commercials, and even more inventive ways of discouraging sick people from staying in (“lemon dropping”). The money from this and other policies that funnel your taxpayer dollars to private companies is addressed in detail by former CIGNA executive Wendell Potter in his Substack where he documents how 72% of United Health’s income is from public funds!

The newest wrinkle, particularly good for private equity (and bad for Medicare recipients) is called Direct Contracting Entities (DCEs). These were created to address the problem investors had with Medicare Advantage identified above, that is, the ‘if you choose it’ part. Because with DCE you don’t have to! The DCE contracts with your primary care physician (or usually the company or health system that employs them; the physician often doesn’t even know about it!) and then all those physician’s patients are enrolled in the DCE even though they may not know it! This allows the private equity company to collect your Medicare $$ without your permission! And they have even addressed another ‘problem’: the DCE can keep 40% of your Medicare money as profit! What a deal! (BTW, this program will be renamed REACH in 2023, so don’t be confused. And Accountable Care Organizations, ACOs, have many of the same characteristics.)

So, look at how good this is! We get the government out of providing efficient cost-effective care by both starving the agencies for funds and encouraging (by $$) private investments. It works great! Well, for the investors. For you, probably not so much. But there is also a good chance it is working for your senators and representatives who may not only be getting campaign contributions, but even have stock in these companies.

We NEED a single-payer program that covers EVERYONE, such as an improved (covers every necessary service 100%, no 20% copay). We do NOT need scams such as Medicare Advantage and DCE/REACH that move us in the wrong direction!

More important than our circadian rhythm: Creating a society that is safe and has health care for all

The New York Times, in addition to covering world and local news, has a lot of “feature” type news, generally appealing to educated, urban, and often higher income people, especially in New York, who are a large percent of its readers. Obviously its Arts coverage reflects the enormous NY arts scene, but also frequently seems to be more in-depth, designed to appeal to an even smaller group. Similarly, while its health coverage often includes news and opinion pieces on the social inequities in health care, on community risks (such as gun violence), and on policy issues, it also includes pieces aimed at what might be called “individual health self improvement”, sometimes involving new(ish) research.

An example is the recent front-page piece on “Circadian Medicine”, that reports on research about following our “body clocks” to get the greatest health benefits from how we do things like eat, exercise, etc. It starts with a look at the effort to move toward permanent daylight savings time and how this affects our personal and work lives.  Of course, this is ultimately a sociocultural issue; the amount of light and dark each day is unchanged, but the question is when our particular area decides to do things. Farmers and ranchers, for example, do not work based upon the time it says on the clock. If we wanted to, we could work from 9 to 6 instead of 8 to 5 rather than changing the clocks.

What is actually more important about this piece, to me, is that it goes on to emphasize how individuals can (possibly) improve their health by choosing the correct time of day to do their health-inducing activities. It is thus yet another effort to look at what each of us can (provided we have the education, autonomy, money, and time) do to make our individual selves healthier. Maybe. Such emphasis is not wrong per se (except, of course, when it is wrong, as has been, for example, our obsession with taking vitamin supplements when we are not vitamin deficient, as see F. Perry Wilson on Medscape, “It’s official: vitamins don’t do much for health”). The real issue is that it is a distractor, in that it focuses upon something that is perhaps slightly beneficial for some people (or not) but will not have a major impact upon the health of the public or the populace, taking our attention away from focusing on the very many major serious things that do have a significant effect upon the health of the public, and that we, as a people, could do something about.

 Like what? Let’s start with some data that should be scary: Among wealthy countries, the US is the only one that has seen a leveling-off and decrease in life expectancy, as reported by “Our world in data”. I have reported on this trend several times previously (Lower life expectancy in the US: A reflection of racism, classism, and social inequity April 29, 2022, Decreasing life expectancy in the US: A result of policies fostering increasing inequity, November 29, 2019) and examined some of the various proposed explanations. Case and Deaton, among others, suggest that the increase in the death rate (particularly among less affluent whites) are “deaths of despair”, mediated through the use of substances (alcohol, tobacco, opioids and other drugs). No doubt these are major contributors, but there are also others. One that has many people very concerned, as it should, is the ubiquity of gun violence in the US. This is a major contributor to death rates in populations such as young males, where suicide and homicide are very important causes of mortality. Most of us can reel off the names associated with major episodes of mass shootings, especially school shootings like Columbine, Sandy Hook, and Uvalde, but these are the tip of the iceberg. An interactive story in the Times documents the 63 “mass shootings” (four or more people shot) in May 2022 alone, and there were 65 in June, and 25 in July -- and as of only July 8 when this was published! And this does not count the many more deaths where “only” one to three people were killed! In the wake of Buffalo and Uvalde, Congress finally passed a very weak gun law. It did break an impasse, but in the minimal amount of restriction it places on gun ownership and carrying, it reinforces the idea that “America is a gun”, as in Brian Bilston’s poem. Any other country with only one major mass shooting has reacted much more dramatically and effectively. While articles continue to appear, such as the Op-Ed of Patti Davis describing the reaction (in her) and lack of reaction (in the nation) to the shooting of her father, Ronald Reagan, 41 years ago, we still are in thrall to the gun lobby and to folks who truly believe that they are at risk if they don’t have and carry guns that they make it easy for those who are going to create major violence and death.

And what about when we get sick? We – Americans – are as a group less able to access care than people in those other countries because we don’t have universal health insurance or access. Dr. Aaron Carroll, in an Op-Ed on July 7, emphasizes the impact of health insurance deductibles, noting that it is not just the uninsured but the underinsured, for whom deductibles are a major obstacle (along with other inappropriately-designed out-of-pocket payments) who suffer from not being able to access medical care, especially in time. The numbers that he cites for deductibles, and for co-payments and co-insurance, are amazingly high, as is the impact that it has on the health of those affected. For example, “The good news is that the A.C.A. limits these [out-of-pocket expenses] in plans sold in the exchanges. The bad news is that they’re astronomical: $8,700 for an individual and $17,400 for a family,” and for people in Medicare drug plans “a simple $10 increase in cost-sharing, which many would consider a small amount of money, led to about a 23% decrease in drug consumption.”

The fact that it is the Medicare drug plan (Part D) that is cited here is not coincidental; it, along with both Medicare Advantage (Part C) and the newer REACH (formerly DCE) program implemented by CMS (the Center for Medicare and Medicaid Services) are the portions of the Medicare program focused on providing profit to investor-owned companies rather than health care to American seniors. A recent report by the Urban Institute on Geographic Predictors of Medical Debt, in Health Justice Monitor, shows, unsurprisingly, that those areas with the highest concentration of poor, uninsured and underinsured people, and people with chronic diseases have the highest level of debt. And the lowest level? Those areas with the highest concentrations of people over 65. This, of course, is the only part of the general US civilian population that has essentially universal health insurance, despite the efforts of the programs above to decrease or dilute it. Although this seems worth mentioning, the Urban Institute did not; maybe they thought it was obvious.

But in this country nothing is obvious to most people and needs to be pointed out.  This includes our legislators, federal and state, to whom often the only thing that seems obvious is who is contributing to them. With all respect, we need to be focusing less upon our body clocks and circadian rhythm and more on the things that made a real difference in our nation’s health.

We need to decrease the availability of semi-automatic guns with high-capacity magazines. We need government policy focused upon creating well-paid, good-benefit jobs that will decrease “deaths of despair” rather than maximizing corporate profit. And we need high-quality universal coverage and access to health care for all our people. What we do not need are more programs like Medicare Advantage, Medicare Part D, and REACH that channel public tax dollars to private enterprises as profit.

What we do need, we needed long ago, and we need it now.