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The End of Traditional Medicare?

By Cris M. Currie, RN (ret.)

Traditional Medicare is once again under serious threat as this country continues to drift further off course with how it pays for healthcare. Since 1970, Congress has encouraged the privatization of the Medicare program under the guise of reducing costs and increasing efficiency without reducing quality. Predictably, because healthcare is an essential service not subject to standard market forces, the opposite has occurred. Among 30 developed nations since 1970, the U.S. has steadily gained the notoriety of having the lowest life expectancy and the highest expenses of any country. This has happened largely because we are the only country to have inserted intermediary commercial profit oriented “managers” between patients and healthcare providers. 

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What was once a simple transaction between the government and providers, now must include thousands of different plans and contracts, and numerous profit-hungry corporations.  Today, about 48% of Medicare beneficiaries belong to one of these private Medicare Advantage plans which spend upwards of one-third of every dollar they receive on administration, profit and shareholder dividends, advertising, lobbying, and outlandish executive compensation.  Under CMS’s revised plan which started January 1, 2023 and called ACO-REACH (Accountable Care Organization-Realizing Equity Access and Community Health), everyone still remaining in Traditional Medicare will be transferred to a private plan run by a Direct Contracting Entity (DCE) by 2030, and the government will no longer do any direct Medicare administration.  

The DCEs are owned and managed by private equity firms, insurance companies, and other investor or provider-owned for-profit entities which will be allowed to retain for overhead from 25% to 40% of their prepayments from the government.  In other words, the less money they spend on healthcare, the more they can keep, and it is virtually impossible to make profits in healthcare without denying substantial services, as Medicare Advantage has proven.  Obviously, there is a huge conflict of interest here which provides strong motivation to deny claims and find more ways to skimp on services.  

The DCEs are also likely to use the same kinds of strategies that Advantage plans use, such as aggressive upcoding to make beneficiaries appear as ill as possible, cherry-picking and lemon-dropping to ensure the most favorable risk pool, pressuring doctors with financial penalties and rewards to avoid specialist referrals and costly procedures, limiting networks for referrals, denying needed care, imposing prior authorization policies and strict formularies, and using training and proprietary software to steer physicians into lower cost care.

All Traditional Medicare beneficiaries will be assigned to a DCE without their full knowledge or consent, and the only escape is to find a suitable physician who is not part of a DCE.  To make matters worse, Medicare officials have already contracted with numerous companies that have recently paid huge settlements for Medicare fraud and abuse.  Among those companies, according to PNHP, are Centene, Clover, Sutter Health, Bright Health, Advent Health, Humana, Vively Health, and Cigna. PNHP believes that eliminating these bad actors from the program should be the first step in shutting down the further privatization of Medicare.  

This disturbing trend must be stopped because Medicare has been one of the most cost efficient (spending only about 2% for overhead) and successful social programs the U.S. has ever devised, and it continues to provide a strong foundation for universal, nonprofit, high quality, affordable healthcare.  If Medicare becomes completely privatized, the chances for securing Improved Medicare for All will greatly diminish.  

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