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The Center for Medicare and Medicaid Services “Innovation Center” recently announced that by 2030, they will move all traditional Medicare enrollees into a “care relationship” with a 3rd party private, for profit middleman, labeled a “Direct Contracting Entity (DCE) without seniors’ knowledge or consent, and without Congressional oversight. 

Every enrollee in traditional Medicare should take note of the dangers. A program titled the Global and Professional Direct Contracting model in a little-known government agency known as the Center for Medicare and Medicaid Innovation (“The Innovation Center”) is already moving them, without their knowledge or consent, to “risk-bearing,” for-profit middlemen known as Direct Contracting Entities (DCEs). The goal: to end what’s left of traditional Medicare as a public, non-profit social/health insurance program.

Simply put, it proposes that a “risk-bearing,” for-profit middleman manage health care for traditional Medicare beneficiaries, just like Medicare Advantage plans are for seniors who have signed up for Medicare Advantage plans. The difference is that while 26 million seniors have voluntarily signed up for a middleman when they chose Medicare Advantage, the 38 million seniors in traditional Medicare have not.

How do you get seniors who have specifically chosen traditional Medicare to switch to a non-traditional Medicare-Advantage-like plan with a mysterious name like “Direct Contracting Entity”? You don’t tell them! 

You lure their primary care providers to participate in a DCE by promising the doctors much better Medicare reimbursement rates and more time with their patients, and once the doctors sign up with a DCE, all their patients are automatically “aligned” by CMS with the DCE the doctor has chosen. 

The DCE sends patients a letter they are likely not going to read or understand, and presto! Millions of seniors previously on traditional Medicare now belong to a DCE. That’s how DCEs leverage and monetize the doctor-patient relationship for the profit of private corporations, oligarchs and other Wall Street entities.

The “Medicare Direct Contracting Program” is a pilot program that aims to enroll every Traditional Medicare beneficiary into a third-party “Direct Contracting Entity” (DCE). Instead of paying doctors and hospitals directly for care, Medicare gives DCEs a monthly payment to cover a defined portion of each seniors’ medical expenses, allowing DCEs to keep as profit what they don’t pay for in care. 

Virtually any type of company can apply to be a DCE, including commercial insurers, venture capital investors, and even dialysis centers. Applicants are approved by CMS without input from Congress.

Hapless traditional Medicare beneficiaries are to be “auto-aligned” in DCEs if their primary care physician is affiliated with that DCE. CMS automatically searches two years of seniors’ claims history — without their consent or knowledge — to find any visits with a participating DCE provider as the basis for aligning them with that DCE.

Most physicians, seniors, and even members of Congress have not heard of the DC program for a good reason. It was created during the Trump Administration and continued by the Biden Administration using the CMS “Innovation Center,” whose mission is to test and implement health payment models without Congressional approval. 

The DC “pilot phase” includes 53 DCEs in 38 states, potentially covering 30 million of the 36 million Traditional Medicare beneficiaries. If left unchecked, DCEs could essentially privatize Traditional Medicare within the next few years.

There are different types of DCEs, but they all assume some level of “risk sharing,” meaning they keep as profit some or all of what they don’t spend on care, or take as a loss some or all of what they spend beyond the capitation payment. This payment model is very similar to Medicare Advantage, establishing an incentive for DCEs to both “upcode” diagnoses to increase capitation payments, and then spend as little as possible on patient care.

However, the opportunity for profit is much higher in the DCE program: While Medicare Advantage (MA) insurers are required to spend 85% of their revenues on patient care, DCEs have an “implicit but irrelevant” medical loss ratio requirement of approximately 60%, positioning them to keep virtually all savings as profits. Virtually any company can apply to be a DCE, including investor-backed startups that include primary care physicians, MA plans and other commercial insurers, accountable care organizations (ACOs) or ACO-like organizations, and for-profit hospital systems. Applicants are approved by CMS without input from Congress or other elected officials.

There are three types of DCEs: Geographic (GEOs), Professional Direct Contracting, and Global Direct Contracting:

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  1. Geographic DCEs (GEOs) are the most extreme of the three models, with the potential to fully privatize Traditional Medicare. Under the GEO model, every TM beneficiary living in a number of large geographic regions is auto-assigned into a DCE, with no right to opt out. GEO DCEs assume 100% risk (profits and losses) for a beneficiary’s medical services. Under pressure from health care advocates, the GEO pilot was paused by the Biden Administration in early 2021.

  2. Professional DCEs assume a 50% risk-sharing arrangement with CMS, and can also participate in “primary care capitation,” receiving a monthly payment from CMS for primary care services only, at an amount determined by each enrollee’s risk score.

  3. Global DCEs assume 100% risk via two payment options from CMS: primary care capitation or total care capitation, for all services provided by the DCE and its contracted “preferred” providers.

In both the Professional and Global DCE models, patients are allowed to get medical care outside of the DCE’s network; those providers are then paid directly by CMS at Medicare-contracted rates, and CMS ultimately reconciles those costs back to the DCE. The DCE thus has a business, profit motive imperative.

DCEs privatization will make money for oligarchs, investors and other Wall Street entities because:

  1. Medicare pays DCEs more money for sicker patients, DCEs have a strong incentive to engage in a type of fraud called “upcoding,” meaning they exaggerate — or falsify — seniors’ diagnoses.

  2. DCEs are allowed to keep as profit and overhead what they don’t pay for in health services, a dangerous financial incentive to restrict seniors’ care.

  3. Former CMS Administrator Dr. Don Berwick and former CMS Innovation Center director Dr. Rick Gilfillan estimate that DCEs may spend as little as 60% of Medicare payments on patient care, keeping 40% as overhead and profit.

DCEs once again clearly show that President Biden, the Democratic Party and America’s neoliberal vision of world order is rooted in an economic philosophy of privatization and financialization. 

To maintain corporate control of U.S. health care insurance, our system is privatized and unregulated. Private, big insurance companies are in the business of making money, not providing health care, and when they undertake the latter, it is likely not to be in the best interests of patients or to be efficient. Administrative costs (and immense profiteering ) are greater in the private health care insurance system, with Medicare itself weakened by having to work through the private system.

Wall Street Slowly Taking Over Medicare

Biden and many Democrats have spent their careers defending the financial sector, including big insurance and big pharma, whose leading policy is also to maintain and further privatize basic health care financing and infrastructure. 

Distinguished economist Michael Hudson notes that, “Biden’s long political career has been right-wing. He’s the senator from Delaware, the country’s most pro-corporate state – which is why most U.S. corporations are incorporated there. As such, he represents the banking and credit-card industry. He sponsored the regressive bankruptcy “reform” written and put into his hands by the credit-card companies. As a budget hawk, he’s rejected Modern Monetary Theory (MMT), and also “Medicare for all” as if it is too expensive for the government to afford – thereby making the private sector pay 18% of US GDP for health-insurance monopolies, far more than any other country. That means blocking governments from providing basic services at cost or on a subsidized basis – education, health care/health insurance, roads and communications. Privatized and financialized economies are high-cost.”

Although health insurance affordability for the majority of US citizens remains a very large problem, Pres. Biden wants to shift many more dollars into private, Wall Street insurance industry hands. The complete takeover of health insurance by private Wall Street entities continues apace with DCEs as Democrats/Biden also propose to increase taxes and give it to the private profit insurance industry – the source of our profound administrative waste, along with the costly administrative burdens they place on the delivery system. 

Profiteering continues unabated as private insurance sells us services we don’t need/want, such as deductibles and other cost sharing, maintenance of narrow networks, requiring prior authorization with increased administrative costs, excessive ongoing paperwork/documentation requirements, all while avoiding paying for surprise bills and other denied benefits.

A new grassroots movement has formed to stop DCEs, a flawed and dangerous scheme. DCEs could radically transform Medicare into a bonanza for Wall Street while incentivizing harmful restrictions on patient care. Advocates argue that if left unchecked, DCEs could essentially privatize Traditional Medicare without the consent of its own enrollees, or even a vote by Congress.

Medicare’s other privatization project — Medicare Advantage — demonstrated that injecting a profit motive into patient care actually leads to higher costs for taxpayers, with tragic consequences for patients. 

Thousands of physicians, mental health professionals and other advocates have signed a petition calling for Secretary of Health and Human Services Xavier Becerra to halt the DCE program, provide real oversight of CMS’ Innovation Center, and protect Medicare for future generations. 

If you’d like to join the fight against Medicare Direct Contracting, please call your member of Congress at (202) 224-3121 and ask them to demand HHS end this dangerous and insidious program; hold hearings on DCEs; and establish Congressional oversight of the Center for Medicare and Medicaid Innovation (CMMI). traditional Medicare.

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