Express Yourself: An argument to eliminate direct contracting entities

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This is part three of a three-part series that takes a dive into the history of Medicare, Direct Contracting Entities, and how citizens can make their voices heard to make change for Medicare.

By Wally Pearce
Special to the Express

The Trump administration unveiled the plans for Direct Contracting Entities (DCE) to Wall Street investors in April 2019, with a planned roll-out in 2022. Some refer to the new program as the Medicare Money Machine.

The DCE concept, established by Congress in 2010, was created by the Center for Medicare and Medicaid Services called “Innovation Center,” established to pilot health payment models without congressional authorization. The program was intended to identify ways to improve healthcare quality and reduce costs in the Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) programs, and also approves and signs contracts with DCE’s and can scale up the program to cover all of Medicare, without so much as a vote or hearing in Congress.

Since DCE is a pilot program, it must be immediately stopped. If the DCE stays, the complete privatization of Medicare will be next.

Experience with commercial Medicare Advantage plans show that when inserting a profit-seeking middleman into Medicare, it ends up costing taxpayers more, with fewer choices and worse outcomes. Traditional Medicare has proven its value for more than half a century. Instead of selling it off to the highest bidder, Traditional Medicare must be strengthened and improved so its benefits can continue and even be expanded to cover every American.

Like Medicare Advantage, DCEs will receive significant monthly payments for patients’ healthcare services. Recently the Biden administration is hearing mounting calls to end the abhorrent DCE program. At the same time, the Biden administration is getting serious pressure from the health care industry that fears the threat to the loss of a very lucrative Wall Street plan worth billions in profits.

DCE will maximize the profits of new fiscal intermediaries while limiting the healthcare options of over 38 million beneficiaries of Traditional Medicare.

Physicians for a National Health Program (PNHP), representing 25,000 health professionals and has spearheaded opposition to DCE stating that ending the program is in the best interests of all Medicare beneficiaries.

But, while Medicare Advantage spends up to 85 percent of their revenues on patient care, DCEs are allowed to keep up to 40 percent of the taxpayer dollars they receive. (By contrast, Traditional Medicare spends 98 percent of its budget on patient care.)

For DCEs, less healthcare services translate to billions of dollars in profits for Wall Street’s bank balance. The Direct Contracting pilot program affects Medicare beneficiaries in 38 states, including California. Fifty-three DCEs have already signed contracts to be the fiscal intermediaries between patients and their providers.

Because DCE provides a profit motive, companies are rushing to find a way around proposed “guardrails.” As an example, Medicare Advantage (MA) shows that when regulators install new guardrails that threaten profits, the insurance industry simply builds a giant bus to run over them.

The argument for the elimination of DCE threatens profits and stocks for startups banking for DCE and have fallen as regulators prepare an announcement about the model’s future.

US Senate inquiry
On Feb. 3 at a Senate Finance Hearing, Sen. Elizabeth Warren, D-Massachusetts, called for the Biden administration to end the direct contracting payment model over fears it would turn Medicare over to corporate profiteers and privatize all of Medicare.

Warren also argued that President Biden should not permit Medicare to be handed over to corporate profiteers, because doing so is going to increase costs, reduce services, and put more even strain on the system.

Warren also called for changes to the risk adjustment system for MA plans, pointing out that over the past 12 years MA plans have cost the federal government $143 billion more than Traditional Medicare. Medicare Advantage plans are not finding new diagnoses so they can help people find more care, according to Warren. They are doing it so they can make more money from Medicare, because that’s how the system is set up.

Medicare already takes money out to adjust for miscalibration, but the Medicare Payment Advisory Commission, an independent panel that advises the federal government and Congress on Medicare issues, has called for them to do more. The best way to mitigate the undesirable effects of DCE is to stop the program.

If DCE is something you would like to see eliminated, please contact your elected officials. Here is their contact information:

US Senator Diane Feinstein, One Post St., Suite 2450, San Francisco, CA 94104
Phone: 415-393-0707, Fax: 415-393-0710

US Congressman John Garamendi, 412 G St., Davis, CA95616
Phone: 530-753-5301, Fax: 530-753-5614

President Joseph Biden, The White House, 1600 Pennsylvania Ave., N.W. Washington, DC 20500

Health and Human Services Secretary Xavier Becerra, The White House, 1600 Pennsylvania Ave., N.W. Washington, DC 20500

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