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By Steve Kemble MD and Kip Sullivan
Beware of the latest proposal to privatize Medicare. The Centers for Medicare and Medicaid Services (CMS) proposes forcing Medicare beneficiaries in the traditional Medicare program into insurance companies called Direct Contracting Entities.
The traditional Medicare program has been far more efficient than the Medicare Advantage program. The Medicare Advantage program is the one in which insurance companies are overpaid to insure Medicare beneficiaries. Congress has focused far more attention on reducing spending in the traditional Medicare program. The Affordable Care Act sought to reduce health care costs in the traditional program by encouraging doctors and hospitals to form networks called Accountable Care Organizations (ACOs). In ACOs, doctors, and hospitals share insurance risk with CMS. That is, they split profits and losses with CMS.
ACOs have not performed as their advocates said they would. They have saved or lost a few tenths of a percent for Medicare since CMS implemented the first ACO programs in 2012. If ACO overhead is considered, ACOs have raised costs. Stay tuned for direct action OPS members may need to take on this issue and reverse the current privatization of Medicare.
Moreover, they have worsened disparities by giving bonuses disproportionately to clinics and hospitals with healthier-than-average patients and penalizing clinics and hospitals with sicker-than-average patients. This “reverse Robin Hood effect” creates powerful incentives for ACO providers to avoid sicker patients and to short-change the sicker patients they cannot avoid, and for ACOs to drop doctors who take care of high-cost patients. These toxic outcomes were supposed to be prevented by “risk adjusting” bonuses and penalties to reflect the health of patients and socioeconomic factors that affect health. But the risk-adjustment algorithm CMS uses Is grossly inaccurate. Moreover, the ACO reward/punishment system incentivizes providers to inflate the illness-severity codes for their patients.
Although almost a decade has passed since CMS started its first ACO programs, CMS refuses to pull the plug on ACOs. Instead, it is proposing to create a variation of the ACO CMS calls the Direct Contracting Entity (DCE). The DCE will function exactly like an insurance company, that is, instead of sharing losses and profits with CMS, it will keep all profits and eat all losses. In fact, six of the 53 DCEs that are participating in the new DCE program are insurance companies (Humana and Anthem are among them). As if this weren’t bad enough, CMS is also proposing mandatory assignment of traditional Medicare enrollees within certain geographic areas into DCEs. CMS is calling this program the Geo program. If CMS were to expand Geo to the entire country, that would force nearly 40 million Medicare beneficiaries who deliberately chose to stay out of the Medicare Advantage program into an insurance company.
Four members of Congress (Representatives Pocan, Pascrel, Doggett and Porter) were disturbed by the news about the Geo and DCE programs and have written Health and Human Services Director Becerra. They want him to stop insurance companies from participating in the DCE and Geo programs. For the reasons mentioned above, the OPS Policy Work Group believes removing insurance companies from these programs is an insufficient response. The Work Group proposes that CMS terminate the Geo, DCE, and ACO programs.
Stay tuned for direct action OPS members may need to take on this issue and to reverse the current privatization of Medicare.