by Marian Shostrom and Pat Snyder

The February 2023 Health Care Update was about “Efforts to Privatize Medicare.” This month’s update provides more information about this important topic.

Many seniors and people with disabilities choose to enroll in traditional Medicare, rather than in private Medicare plans. Because traditional Medicare does not have restrictive provider networks, individuals can seek care from any provider who takes Medicare. Prior authorizations are not required, and treatment is determined by the patient and the medical provider. Traditional Medicare does not take profit from the Medicare Trust Fund. The Mayo Clinic is actively encouraging patients to enroll in Traditional Medicare.

Private companies have played an increasing role in Medicare since 1966, as described by The Commonwealth Fund in 2017. Almost 50% of Medicare beneficiaries are now enrolled in private plans rather than in traditional Medicare. Most people are familiar with private Medicare Advantage plans, such as those offered by Kaiser Permanente and United Healthcare. These cover some healthcare services not offered through Traditional Medicare.

The Direct Contracting Entities (DCE) program was started as a pilot program under the Trump administration by the Center for Medicare and Medicaid Innovation (CMMI). Under the program, 53 for-profit companies were designated DCEs and allowed to purchase existing medical groups, or to set up their own medical group. That program was continued under the Biden administration, and rebranded “Accountable Care Organizations Realizing Equity, Access, and Community Health” or ACO/REACH. Because it is an innovation program, it does not require Congressional approval or regulatory oversight.

Sutter Health recently became an ACO under the program. Patients may be placed in an ACO/REACH program without their consent, and sometimes without their knowledge. If they wish to leave the program, they can do so by finding another primary care provider. This can be particularly difficult for areas with small populations and for rural communities, where there may be only one medical group providing care.

Many articles have been written about the ACO/REACH model and efforts to privatize Medicare. The Centers for Medicare and Medicaid Services (CMS) had announced that all Medicare, and most Medicaid beneficiaries would be in an ACO by 2030. Many Physicians, Congressional Members, and Organizations are opposed to ACO/REACH, and have advocated for an end to the program. In response, Elizabeth Fowler, Deputy Administrator and Director of CMMI, told the CalPERS Board that CMMI has no current plans to allow new ACO/REACH applications. Expansion of ACO/REACH is on hiatus; currently there are 132 for-profit organizations managing approximately 2.1 million Medicare beneficiaries.

Many of the most vulnerable populations, seniors and people with disabilities, rely on traditional Medicare to access their healthcare. It is critical that the Medicare Trust Fund remains solvent for these populations. A 2023 Kaiser Family Foundation (KFF) report found that payments to private Medicare Advantage plans nearly tripled as a share of total Medicare spending between 2011 and 2021. Increases in Medicare Advantage enrollment, and higher per person spending in Medicare Advantage than in traditional Medicare are drivers of the increased costs.