The End of Traditional Medicare?

By Cris M. Currie, RN (ret.)

The Traditional Medicare program is once again in serious trouble.  The Center for Medicare and Medicaid Innovation (CMMI) is currently assessing a new pilot privatization program called Global and Professional Direct Contracting, where all Traditional Medicare beneficiaries could be involuntarily assigned to a Direct Contracting Entity (DCE) by 2030.  The DCEs primarily include investor-owned private insurance companies and private equity firms, with a smaller number of provider-owned organizations.

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DCEs are the latest version of the more familiar “risk bearing” managed care entities of the past 50 years, including Health Maintenance Organizations, Accountable Care Organizations, and Integrated Delivery Systems.  All are designed as intermediary administrators which receive government payments for each member and are either allowed to split profits and losses with the government or pocket any surpluses not spent on health care while absorbing any losses.  Their primary goal has always been to minimize their “medical loss ratios” (money spent on direct care).  They have all failed miserably to either control rising costs or improve outcomes, primarily because the wrong diagnosis has been applied and definitions and objectives have been vague.  

Fee for service and overutilization have been blamed for our high costs, but they are not the fundamental problems.  Rather, what has caused our healthcare to be the most expensive and have some of the poorest outcomes in the developed world is that we encourage profit-making by these unnecessary, corporate intermediaries which add nothing of value to the system.   Approximately one-third of each private health care premium dollar collected in the U.S. is spent on useless overhead, including ever rising administrative costs, obscene executive salaries, inappropriate shareholder dividends, absurd lobbying and advertising expenses, and skyrocketing profits.  Commercial managed care has also encouraged huge monopolistic mergers which have made it much easier to arbitrarily force higher regional prices.  In stark contrast, Traditional Medicare spends only 2-3% on overhead.

Another false premise on which the privatization of healthcare financing is based is that doctors are motivated mainly by money, such that they can be manipulated to provide less or cheaper care if they are financially rewarded for doing so.  In fact, while most doctors would still like to maximize their income, most are motivated more strongly by the desire to see their patients gain health and prosper.  Thus, the financial incentives offered by managed care work to undermine these incredibly important motivations.

It is virtually impossible to make high profits providing health care without denying substantial amounts of service, as demonstrated by Medicare Advantage Plans (MAs).  These commercial plans attempt to insure only the healthiest of seniors while encouraging the sickest to switch to or stick with Traditional Medicare.  MAs also tend to encourage their physicians to inflate member diagnosis (HCC) codes to make their members appear sicker than they really are.  Administrators can then submit higher risk scores and maximize their capitation payments.  Despite CMMI’s assurances to the contrary, it is extremely likely that the 53 initial DCEs in 38 states will all find ways to continue and expand these lucrative practices.  If they were not confident, there would not be such a high degree of interest in participating.

Many Americans think we have nothing to gain from the experiences of other countries because we are somehow exceptional.  In reality we have much to learn from the numerous other countries that have successfully implemented single-payer, government sponsored, health care financing, known in the United States as Improved and Expanded Medicare for All.  It is truly long past time to abandon the failed privatization of Medicare and move toward a unified financing system that considers health care a human right and grants every resident uniform comprehensive benefits, motivates high quality while minimizing waste, controls prices while offering fair reimbursements, and excludes profit-making.  DCEs fall woefully short of this goal, and Americans deserve far better!

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