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Jayapal Urges Medicare to Take Broad, Quick Steps to End Trump-Era Privatization Program

CMS announcement acknowledges deep flaws in program, but reforms will not be enacted for nearly 10 months

WASHINGTON – Today, following an announcement from Centers for Medicare and Medicaid Services (CMS) that they would be canceling the dangerous Geographic Medicare Direct Contracting Model and transitioning the Global and Professional Direct Contracting Model at the end of 2022, a Trump-era privatization effort that has put millions of seniors on traditional Medicare into corporate-owned programs to administer their care without their full knowledge and consent as we know it, U.S. Representative Pramila Jayapal is calling on the Biden Administration to take these steps immediately, rather than their proposed timeline of 10 months, before thousands more seniors are unwittingly placed into it this year. 

“Direct Contracting is a major threat to Medicare coverage, hidden in bureaucracy,” said Congresswoman Pramila Jayapal. “While I’m glad to see the administration taking steps to transition away from this flawed program – waiting 10 months to roll back a program they agree is flawed will only embolden the private investors that are already taking advantage of the system. More needs to be done, and I will continue to fight against any and all efforts to privatize Medicare.”

This harmful initiative to privatize Medicare was executed under the radar of seniors directly affected and lawmakers until Congresswoman Jayapal led a letter signed by more than 50 members of Congress urging the Biden Administration to end the DC program. That letter followed an earlier effort by Congresswoman Jayapal to stop the privatization of Medicare.

The announcement made by CMS today acknowledges that there are several fundamental flaws in the program, which allows commercial insurers and other for-profit companies to “manage” care for seniors enrolled in traditional Medicare. It includes plans for an end to the program as we know it and a welcome transition to a new, improved Realizing Equity, Access, and Community Health (REACH) ACO model. The REACH ACO model will restore the emphasis on physician-led coordinated care and cut down on industry profiteering. While the proposed changes made by CMS would help to improve transparency and care equity under the program, none of these changes would take effect until January 2023. In addition, these changes do not include a limit on the size of the model. At the same time, CMS released the names of the 49 new DCEs that began January 1, 2022, further expanding this model before these corrective changes are made. 

Instead of paying doctors and hospitals directly for seniors’ care, Medicare gives Direct Contracting Entities (DCEs) a monthly payment to cover a defined portion of each seniors’ medical expenses. DCEs are then allowed to keep what they don’t pay for in health services, a dangerous financial incentive to restrict and ration seniors’ care. While Traditional Medicare spends an impressive 98 percent of its budget on patient care, DCEs only spend 60 percent of tax dollars on patient care — keeping up to 40 percent of revenues for their own profit and overhead. 

A majority of the DCEs in place today are investor-owned and controlled. Owners of DCEs include private equity firms, Wall Street investors, and large private health insurance companies. By setting January 2023 as the date for changes to take effect, investors are given the opportunity to enroll thousands more seniors and therefore make the changes more difficult to enact. The new REACH ACO model also fails to explicitly prohibit private insurers and investors from entering the model, leaving the door open for profiteering within Traditional Medicare.

The effort is also supported by doctors across the nation and groups including Physicians for a National Health Program who have called on HHS to immediately end the DC program. 

“ACO REACH is Direct Contracting in disguise,” said Dr. Susan Rogers, president of Physicians for a National Health Program (PNHP), an organization of 25,000 doctors that support Medicare for All and oppose Medicare privatization. “This new model doubles down on Direct Contracting’s fatal flaws, inserting a profit-seeking middleman between beneficiaries and their providers.”