Lane: Medicare is in Danger, and Few are Watching

Many are worried about the projected impending bankruptcy of the Medicare Trust Fund, which is currently spending more money than it brings in. Theoretically, if nothing changes, the fund will become insolvent in 2028 according to Medicare’s actuaries, and the Congressional Budget Office estimates by 2030. The worry is likely overblown. If Congress lets Medicare go insolvent, seniors backed by AARP — one of the strongest lobbying powers in America — would turn out in droves and all of Congress would be applying for unemployment. For its own sake, Congress can’t let Medicare go broke. Perhaps they will raise new taxes, lower benefits, or simply print more money, but they will do something. Seniors vote in higher proportions than any other age group, and Congress is rightly afraid of making them mad.

Instead, what worries me is a program few people outside the health policy world know about. It’s called ACO REACH: Accountable Care Organization Realizing Equity, Access and Community Health. Despite its wonderful-sounding name, it accomplishes none of the things it claims to achieve. It’s actually a Biden administration rebrand of the Trump-era Direct Contracting Entity program by the Center for Medicare and Medicaid Innovation (CMMI). The CMMI spokespeople and other (usually corporate) proponents I’ve heard from never can pinpoint what the program will actually accomplish. Instead, they try to cover up this failure with fancy jargon about “value-based care” — today’s health policy buzzword — and a shallow understanding of equity. The program is dangerous for seniors, a waste of money and should be terminated as soon as possible.

ACO REACH is a test to see how a privatization of Medicare would play out. Under the program, Medicare contracts out with Wall Street, which usually involves private health insurance companies, but also private equity and venture capital firms, plus anyone else who thinks they can make a profit. These firms then directly provide health insurance plans to Medicare beneficiaries instead of Medicare itself. Medicare pays these private plans a sum of money for each patient, with the exact amount varying based on patients’ pre-existing conditions. Covering a sicker patient yields a higher payment from Medicare. On the surface, it sounds fairly innocuous, with Medicare simply contracting with someone else to do the dirty work for them. Again, it’s not so simple.

In fact, private insurance companies make more money by denying care. If their bureaucracy finds a way to determine what your clinician prescribes isn’t medically necessary, they can refuse to pay the bill. For insurers, fewer claims paid out equals more profit. ACO REACH is essentially a beefed-up version of a current program called Medicare Advantage (MA), in which seniors can choose to buy a private health insurance plan rather than using traditional Medicare. The Department of Health and Human Services Inspector General released a report this year revealing how private MA insurers are denying medically necessary care to seniors, functionally practicing medicine without a license. In contrast, traditional Medicare usually defers to doctors’ expertise and professional judgment. Medicare isn’t trying to turn a profit — only providing the public good of healthcare. ACO REACH upends that by inserting a harmful profiteering motive where none should be.

Additionally, ACO REACH doesn’t offer seniors a real choice about whether they want to participate in the program. Doctors choose whether to join, often incentivized by offers of higher pay. If they do, CMMI assigns all of the doctor’s Medicare patients to the ACO REACH program. If seniors don’t want in, they have to find a new doctor who isn’t in the program. Given the program is relatively unknown, it’s difficult to know which doctors are in and which aren’t. While proponents of increased privatization of healthcare often claim that privatization will increase patient choice, ACO REACH takes that agency away. Not only do seniors have a hard time opting out, but private insurance plans also frequently impose restrictive physician networks. If you see a doctor not on the list, you pay dramatically higher fees even if there are no in-network options near you. In contrast, traditional Medicare lets you see almost any doctor in the country, no questions asked.

ACO REACH hurts Medicare beneficiaries and ordinary taxpayers alike. Let’s go back to Medicare Advantage, ACO REACH’s older sibling. Under MA, insurance companies have to have a medical loss ratio of at least 85%, meaning they only have to spend 85% of the money they bring in via premiums and federal funding on healthcare. Thus, they can spend up to 15% on administration and profit. Traditional Medicare spends only about 2% on administration. In other words, traditional Medicare is far more efficient per dollar spent than private Medicare Advantage health insurers. 

Traditional Medicare is also cheaper. Medicare Advantage costs taxpayers about $321 more per enrollee per year than traditional Medicare does. Scale that up to the over 61 million (and growing) Medicare beneficiaries nationally, and the result is about $20 billion down the drain annually. If that’s not alarming enough, ACO REACH has a medical loss ratio of only 60%, meaning up to 40% of its expenditures can go towards profits and administration. Yet we’re all paying for it as taxpayers, even if we aren’t yet eligible for Medicare ourselves. In order to stop this waste and the endangerment of seniors, ACO REACH needs to end.

It probably seems odd, a 20-something college student writing an opinion column about Medicare, the health insurance program that is — save a few exceptions — only for senior citizens over 65. But soon my parents will be eligible, and one day I’ll be a senior citizen too. I want to make sure a solid Medicare is there for us, as it should be for every family in America.