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.

 

Should the price of drugs be based on what pharmaceutical companies can get or what people can afford?

The high cost of prescription drugs is an issue that seems to engage most people, including politicians both Democratic and Republican, left and right. The Speaker of the House of Representatives, Nancy Pelosi (D-CA), has proposed a bill (called, in fact, the Lower Drug Costs Now bill) that would control drug prices, at least for essential medication, a proposal endorsed by the Editorial Board of the New York Times. The President of the United States, Donald Trump, who disagrees with Ms. Pelosi on almost everything else (and indeed is in the process of being impeached by the House of Representatives over which she presides) is telling Americans that they will be able to buy their drugs, at lower prices, from abroad. Indeed, the President has gone even further, announcing that he will require health providers to post their actual prices, that is what insurers actually pay, not posted un-discounted prices, on line.

Both of those White House proposals would be terrific. They would not, by a long shot, solve the problems afflicting Americans in the arena of their health and health care – after all, posting the prices is not the same as making them affordable – but it would sure help. I have previously told the story of an outpatient hernia operation I had some years back. I left home at about 6am and was back there in my own bed by noon. Then I received the hospital bill – not including the charges from the doctors, the surgeon and anesthesiologist – for $10,000! I then got a notice from my insurer that I would have to pay $400, they would pay $1600, and the hospital would make a “contractual adjustment” for the rest. That is, the hospital, based on a contract with my insurer, would write off $8000. Whew. I only had to pay $400. But the thing is – the official hospital charge was $10,000. If I didn’t have insurance, I not only wouldn’t have been billed only $400, I wouldn’t have even been billed the $2000 that was the total the hospital collected from me and the insurance company; I would have been billed $10,000! This is absurd, and while requiring hospitals to post the prices they are actually paid by the insurance companies would not necessarily change this, it would bring the flagrant abuse of uninsured people out into the open. If you doubt the significance of this, note the objections of the hospital industry: ‘“This rule will introduce widespread confusion, accelerate anticompetitive behavior among health insurers, and stymie innovations,” the American Hospital Association and three other major hospital groups said in a statement.’ Yup, they hate it so it must be a good thing!

But back to drug prices. They are currently unconscionable. Americans pay a lot more for most drugs that they need than people in other countries. The main reason is that other countries regulate drug prices, and the US doesn’t. Indeed, when the Medicare Drug Plan (Part D) was passed by Congress during the GW Bush administration, it specifically forbade Medicare from using its clout as the nation’s largest insurer to negotiate drug prices. That was a win-win for the drug companies (The government requires every Medicare recipient to buy drug insurance and forbids it from doing anything but pay full price.) So, frankly, the White House proposal to allow American to buy drugs abroad is a minor step – nothing like actually regulating prices for drugs or even allowing Medicare to negotiate those prices for its recipients – but it is something. I support it as far as it goes. I also support Nancy Pelosi’s more extensive intervention.

There is reason, however, to be skeptical of whether the White House will actually implement these changes. Impeachment aside, promising things that he cannot or will not deliver on is the routine modus operandi of President Trump. I hope this is the exception. Pelosi’s Democrats are, I believe more sincere in their desire to limit drug costs, but it is unlikely that a plan of theirs will pass the Senate, and if it should, the President would likely veto it because it is not his plan. And, of course, it might hurt the drug companies; he likes to use them as whipping boys, but they are a big part of the huge corporate complex that has benefited from all of the Republican’s policies, and contribute a lot. They also contribute a lot to Democrats.

Sometimes in discussions about drug prices, similar to discussions about other situations that lead to enormous industry profits, we hear arguments that include the need for research and development on new drugs and the possibility that Americans do better as a result of paying more for their drugs than people in other countries who pay less for the same medicines. We also hear that since insurance companies pay for these drugs, the high cost really doesn’t hurt Americans. All of these arguments are worse than baloney – they are purposely produced propaganda funded by the pharmaceutical industry as part of their marketing budgets, in the interest of maintaining their profits. Luckily most Americans are now seeing through the smokescreen, as indicated by these proposals from both parties.

A recent study by Navindra Persaud and colleagues published in JAMA Internal Medicine[1] found that adherence to treatment was significantly higher among a group that received their drugs free of charge. This should surprise no one, least of all pharmaceutical companies. (The fact that only some disease outcomes improved may have more to do with how well these drugs actually are effective in doing what they are supposed to do.) The idea that lowering prices would inhibit access to medicines is belied by the fact that drug companies make plenty even with lower prices or they wouldn’t sell their drugs abroad.

So reducing drug prices and thus limiting the exorbitant profits made by the pharmaceutical industry is important. The cost of those drugs eats into the ability of Americans to pay for other things – not just luxuries, but also food and rent. And, as always, while it can affect most of us, the impact is greatest on those with the lowest income. It may happen, although the corporate ownership of both the mainstream Democratic as well as Republican parties will be a big obstacle.

But we need more than just lower drug prices, and certainly more than the ability to purchase drugs abroad. We need to have comprehensive health system reform that provides coverage and access for all health care for all people at affordable cost to them. This means cutting the income and profits of not only pharmaceutical companies but insurance companies and – absolutely not to be missed – health systems. After all, a recent article in the Mayo Clinic Proceedings describing the major individuals with an influence on health policy indicated that

there were 1700 persons named from 2002 to 2018, a minority of them women (range over the period, 17% to 28%). Most influencers are top executives from nonprofit health care provider organizations; their proportion has increased from 23% in 2002 to 72% in 2018, with an apparent substantial upward inflection in this trend since 2009. This predominance appears to be at the expense of academics, advocates, and government officials.

 The objection that we cannot take on too much all at once is specious; it is only by taking on everything more-or-less simultaneously (or in quick succession) that we can prevent gaming of the system and actually improve health care for all Americans.

---

[1]  Persaud, N, et al.,  Effect on Treatment Adherence of Distributing Essential Medicines at No Charge: The CLEAN Meds Randomized Clinical Trial, JAMA Intern Med. doi:10.1001/jamainternmed.2019.4472

Published online October 7, 2019.

Reimagining healthcare: How about imagining if everyone could get it?

Several years ago, the University of Arizona Hospital was acquired by Banner Health, a large not-for-profit system with no previous presence in Tucson. Banner now employs the physicians for their clinical time. This arrangement is not unusual among academic health centers. An advertising campaign has been in place for several months which I hear mostly on the local NPR outlet, indicating that Banner and the University have joined together in a commitment to “reimagine healthcare”. I keep trying to imagine what this means, since, in itself, “reimagining healthcare” is at best meaningless and at worst ridiculous. It is clearly an advertising message, a slogan obviously thought up by a marketing firm (or possibly an employee in marketing), that is intended to grip the pubic, make them think that Banner/UA is doing great things, and, hopefully, abandon their current healthcare providers and rush over to where healthcare is being reimagined. I have no idea if it works; I guess the future will let us know if they continue with this tagline/slogan or come up with a new one. But I am deeply offended and upset that they are using this sort of content-free marketing tactic. Indeed, any marketing tactic, although I guess when they tout their excellence in specific services, there is at least content.

First, however, let me make clear that this is not particularly about Banner/UA, or meant to single them out as an egregious abuser of advertising slogans. I cite them because I live here in Tucson and hear it on the radio. I am sure that if I lived in another city, with another large health system, in collaboration with an academic medical center or not, I would hear similar ads. It is not just the specific ad, in all its vague and substanceless inanity, that is galling; it is the fact that there is marketing of healthcare services to the public as if it were make of car or brand of cereal. We are talking about healthcare, about people’s lives. The goal of a nation’s healthcare system should be solely to bring the greatest health possible to the most people. It should not be to market one system’s health services instead of another, Ipana® vs Gleem®, Bristol-Myers vs. Procter and Gamble. At least Bucky Beaver had big teeth, so somehow relevant to toothpaste (choosing those brands is just a nostalgia shoutout).

If there is a perfectly good cancer center/heart center/neurosciences center at one hospital in town, it makes no public health sense to build another and then advertise for it (Newer! Improved!) to draw people away from the first. It would make sense, from a public health point of view, to build a psychiatric or drug treatment facility if those are lacking in the community, or to build a facility to care for the people left out of access to the existing services because they are poor, uninsured, or – and this for sure happens – have an unprofitable-to-care-for disease. Or how about, here’s an idea, to build a facility in a smaller community where people have limited or no access to health care instead of having everyone competing in the major metropolitan markets? Those things would make public health sense.

Ah, but they do not make business sense! All of the things I have just cited as bad -- competing health systems and facilities in major marketplaces resulting in oversupply of some services, marketing to try to get people to come to your place instead of the other one – make perfect sense in a for-profit competitive business. And the things I said we need – provision of services that are currently in inadequate supply, provision of care to people who cannot access it, development of services for conditions with great need but generating little income, provision of services in less densely populated areas -- make little business sense. They are more likely to lose money than to make it – or certainly make less than something else the corporation could invest in. (I often find myself mis-typing “copro-ration”; maybe it is a Freudian slip?*)

The question is why we, as a society, allow healthcare to be a business, either directly for-profit or ostensibly not-for-profit (as most big health systems including academic health centers are) but operating by the same business principles (thus being essentially for-profits that don’t pay taxes, being the worst of both worlds!)? It is not the same as Ipana® vs Gleem®, or in current terms Crest® vs Aim®. It is not the same as Dodge vs Ford, or Burger King vs McDonalds, or Cheerios vs Kellogg’s Corn Flakes (or Cocoa Krispies vs. Count Chocula)! It is about your, and your family’s and friends’, health and lives. We accept it because some of us get, or think we will get if we need it, all the health care we need, and more. And this includes all the politicians, and pundits, and frankly news media – almost everyone in the upper- and upper-middle class. And the people who own stock in for-profits. And the politicians who benefit from the contributions of the non-profit as well as for-profit health care sector, and the power they wield as major employers in town. 

Of course, some of them will be surprised when they get sick, too. The people who can’t get care because they have no money or insurance, or crappy insurance, or have diseases the care for which are not well reimbursed, or maybe are just not our target market (let’s put our sports medicine clinic in the suburbs, and for goodness sake discourage old people with arthritis from coming in, we want the high school quarterback and his parents!). There are, of course, people who benefit. Rich people. Private equity companies and their investors, as described in the article by Gustafson, Seervai, and Blumenthal in “The Role of Private Equity in Driving up Health Care Prices”, in the Harvard Business Review.

 

It does not have to be this way. It is not this way in most countries, including most capitalist countries. (see, because I like it, One thing to NOT worry about: paying for health care -- in France, July 21, 2012).Those countries realize that the health of people is not a market commodity, but is a public service like roads and police and fire departments.

Maybe we’ll make the fire department for profit. Or the police. And they’ll only come if you have not only insurance, but the right kind of insurance, and have met your deductible (of course, in some neighborhoods it is kind of like that already…)

Or maybe, better yet, we can realize that our health is not something that should be dependent on a corporation making a profit.

*https://www.dictionary.com/browse/copro-