Under Pressure, the Biden Administration Rebrands Its Medicare Privatization Initiative

After quietly pushing an insurance-industry-backed Medicare privatization scheme, the Biden administration has come under fire from pro-Medicare activists. In response, the administration has rebranded the scheme — but left its privatizing substance intact.

The Biden administration has spent the past year advancing a Trump–era program to insert profit-driven middlemen between retirees and their Medicare. (Drew Angerer / Getty Images)

Though it sounds unbelievable, the Biden administration has spent the past year advancing a Donald Trump–era program that inserts a profit-driven corporate middleman between retirees and their Medicare, something its critics warn is the first step to the total privatization of the program. And it appears the ensuing battle is just starting.

Joe Biden seemed to be dangling a blade over the “direct contracting” program after a groundswell of opposition among both grassroots activists and progressives in Congress forced his hand. Officials began hinting that they would overhaul the program or even cancel it entirely, with those businesses set to profit from it working feverishly to prevent the latter outcome. For the past week, both the health care industry and advocates for public health care have been waiting anxiously to find out what the administration decided.

Yesterday, they got their answer. In response to “feedback from stakeholders and participants,” the Centers for Medicare & Medicaid Services (CMS) announced the direct contracting program would be turned into something called ACO REACH (Accountable Care Organization Realizing Equity, Access, and Community Health).

Besides the name change, the administration has offered several reforms. Now those entities participating in the pilot program have to “develop and implement a robust health equity plan” for “underserved communities,” there will be more transparency, and CMS is also promising to “explore stronger protections against inappropriate coding and risk score growth” — referring to the practice of private middlemen presenting Medicare beneficiaries as sicker to siphon off higher payments from the program. So far, so vague.

Most substantively, CMS is now requiring any ACOs taking part in the program — what used to be called the “direct contracting entities” (or DCEs) that would serve as those middlemen — to have “participating providers” control at least 75 percent of their governing bodies, compared to the older policy of 25 percent, and include two beneficiary advocates with voting rights.

The question is, is this change enough to fix what worried public-health campaigners about direct contracting in the first place? The answer, they say, is no.

“We don’t see anything other than a name change,” says Diane Archer, president of Just Care USA.

The Physicians for a National Health Program (PNHP), one of the groups that has led the fight against the program, has reacted similarly, with president Dr Susan Rogers calling ACO REACH “direct contracting in disguise,” and warning that it “doubles down” on the fundamental problem at hand: needlessly placing a profit-driven middleman that no beneficiary ever asked for into traditional Medicare.

As for the most substantive change — increasing the number of providers on the DCEs’ governing bodies — CMS has quietly added a loophole. In the request for applications to the program it put out on Thursday, CMS notes that any ACO can “seek an exception from the 75 percent control” at the agency’s discretion. All they need to do is describe its current governing body and explain how they’ll “involve Participant Providers in innovative ways in ACO governance.”

“They’re doubling down,” says Dr Ana Malinow, professor of pediatrics at the University of California, San Francisco. “They realized the words ‘Direct Contracting Entities’ have become toxic because of all the pressure we’ve been applying.”

Malinow sounds an ominous note about the rebranded program’s new focus on “equity” and “underserved communities.” Right now, an ACO’s performance is judged on how much it lowers spending for a group of Medicare beneficiaries against a benchmark, or spending target, that’s based on historical levels of spending. But underserved communities tend to have lower health spending compared to their actual needs, creating a disincentive for ACOs to serve these communities. CMS will increase the benchmarks for ACOs that serve higher proportions of such populations — in theory, a good thing — but it also means that lower-income communities are now more likely to end up ensnared in the direct contracting pilot project, or ACO REACH, as it’s now known.

“It’s putting a bull’s-eye on poor people so venture capital firms can make more money off them,” she says.

The Biden administration’s course here aligns more or less exactly with a letter sent by a DCE trade group over a week ago. There the industry urged the administration, “Fix, don’t end” direct contracting by “limit[ing] participation to certain types of DCEs, such as provider-led DCEs,” and carrying out a “rebranding and name change,” both the centerpieces of this ACO REACH program. In the tug-of-war between public health care campaigners and big business, the administration sided with the demands of the latter.

The direct contracting program was already an obscure and overly technical route to partial Medicare privatization that few knew about, and the rebrand may have bought its proponents more time to carry on with their plans. Now defenders of public health will have to continue trying to raise awareness and muster public outrage over what’s billed as something entirely new. The fate of Medicare as we know it depends on their success.