Patrick Carr is a former staff writer and alumnus of the Trachtenberg School.

Last summer, The Lever interviewed Jenn Coffey, a former EMT and free-market Republican state legislator who found her Medicare Advantage (MA) plan all-too willing to “deny stuff you need.” Constant coverage denials and consequential emergency room visits left her on the verge of signing a do-not-resuscitate order, preferring death to haggling over the cost of life-altering medical procedures.

Why, then, is there a bipartisan effort to expand this model of public health insurance which caused Jenn Coffey this much suffering?

For the first time in 2023, over 50% of seniors are enrolled in Medicare Advantage plans. In this arrangement, the Centers for Medicare and Medicaid Services (CMS) pays private insurers to cover seniors who would otherwise be covered through a traditional Medicare plan. Advantage plans offer lower premiums than traditional Medicare, caps out-of-pocket expenses, and  includes dental and vision coverage. Patients on Medicare Advantage are more likely to access preventive care, less likely to be readmitted to a hospital following a procedure or discharge to an out-patient facility, and have an easier time acquiring prescription drugs, according to KFF. 

Presidents Trump and Biden have expanded this success story to traditional Medicare. President Trump’s CMS allowed for private third parties, thus known as direct contract entities (DCE), to stand between patients and traditional Medicare. Under the new plan, private companies will receive money from CMS, as well as a cohort of Medicare patients whose physicians have consented to participate. This contrasts with the traditional system, whereby Medicare plans pay providers directly without any input or objection from a middleman. Although the Biden administration tweaked the policy and changed the name of direct contracting entities to accountable care organizations (ACO), the structure of the policy persists — namely, the existence of direct contracting.

Both administrations explicitly cited Medicare Advantage as inspiration. Trump praised Medicare Advantage as a model, noting it “delivers efficient and value-based care through choice and private competition.” In announcing Biden’s ACO program, CMS claimed the program will “leverage” lessons learned from the “innovative approaches from Medicare Advantage and private sector risk sharing arrangements.” There’s no question why: the structure of the ACO/DCE policy is identical to that of Medicare Advantage. Praise of one is praise of the other.

According to some policy professionals, an expansion of private power is exactly what the American public health system needs. Last August, Dr. Robert Moffit at the Heritage Foundation attributed the growth of Medicare Advantage to “its affordability, its broader benefit offerings, its superior performance in delivering quality care, and its protection against the financial devastation of catastrophic illness.” A Harvard-Inovalon study found that MA “has substantially lower utilization and expenditures” than Medicare does and that “overall healthcare costs … are 12% lower under MA.”

Why, then, should we stick with traditional Medicare at all? What of Jenn Coffey’s adventure in care denial? 

Advantage plans’ most damning practice is their consistent inclination to refuse care that would have been covered by traditional Medicare. Insurance companies restrict access to care via prior authorizations, whereby a provider requests payment from the insurance company before providing care — a practice that, in traditional Medicare, is practically nonexistent. If the insurance company decides the care isn’t “medically necessary,” they don’t pay. About 2 million requests were denied in 2021. In an American Medical Association survey of physicians, 94% reported prior authorization causing delays in care, with 56% saying the practice delayed care “often” or “always.” 25% of physicians reported prior authorizations being the cause of a patient’s hospitalization and 19% reported them leading to a “life-threatening event.” 

This is not “efficient and value-based care.”

Although Advantage patients experience lower health expenditures and utilization rates, this does not correlate with a higher quality of life. A patient succeeds in keeping down healthcare expenses and utilization rates when they refuse care after their insurance plan declined to cover it.

Nor has Medicare Advantage “delivered quality care.” Researchers who studied CMS’s provider quality measures found that Medicare Advantage enrollees consistently visit lower quality cancer hospitals, nursing facilities, and home health agencies. When highly-rated medical professionals are out-of-network, patients must settle for less or pay significantly more. Dr. Moffit’s characterization of MA’s “superior performance in delivering quality care” and “protection against the financial devastation” is an odd way to describe this behavior.

Medicare Advantage has not stoked “choice and private competition.” Unlike traditional Medicare, MA’s managed care system subjects consumers to provider networks that limit the choice of care available. While nearly every physician in the nation accepts Medicare, only 46% of those physicians take Advantage plans.

It’s true that MA plans entice seniors with benefits and reduced premiums, but is it worth the pain?

Assume for a moment that the priority of the program was a return on invested tax dollars, not the delivery of healthcare. Has private Medicare at least made its existence justifiable to the American taxpayer? 

Medicare Advantage has a rich history of overbilling the federal government. CMS offers “risk-adjusted payments” to private insurers “for beneficiaries expected to have higher-than-average medical costs.” As these companies have an incentive to maximize these payments, they regularly engage in manipulating patient information. According to a report from the Department of Health & Human Services’ Office of the Inspector General, companies will “inappropriately leverage” medical records to “make beneficiaries appear as sick as possible.” The Committee for a Responsible Federal Budget estimates that eliminating this practice in 2021 could have saved Medicare upwards of $355 billion by 2030.

On top of this, in a process known as “favorable selection,” Advantage plans use targeted marketing to attract healthier individuals who require less care. Since payments to MA providers are based on healthcare utilization of traditional Medicare patients (even after accounting for risk-adjustment), MA providers are paid billions of dollars more than is required to cover their pool of enrollees. Favorable selection results in 11% lower per-patient costs for Advantage providers, despite the fact that these plans cost the federal government over $20 billion a year more than traditional Medicare.

The strategy seems to be to attract healthy individuals who require the least amount of care despite being paid to cover the median enrollee, make them appear sicker to maximize payment from CMS, then nitpick and stall when a patient files a claim.

Although expansion of this model is a bipartisan project at the executive level, Congress remains unimpressed. Employing profiteers to administer Medicare has irked Democrats for decades, but the GOP also spoke up against the model at a pair of Senate hearings last autumn [1] [2]. Sen. James Lankford of Oklahoma complained that hospitals in his state are refusing Medicare Advantage as they “can’t afford the constant chasing from all the denials.” Sen. Mike Crapo of Idaho clarified that his support for MA “does not mean that I like the prior authorization process and that I do not see some problems here that need to be solved.” Earlier in the year, Sen. Mitt Romney decried the fact that MA is “becoming more expensive than the old fee-for-service Medicare,” while Sen. Mike Braun recognized the disproportionate amount of money being sent to Medicare Advantage is a”definitely [a] reform issue.”

The new ACO/DCE system shares a myriad of similarities with MA, including risk adjustment, monthly payments per patient, and the lack of any requirement that a set percentage of Medicare dollars be spent on care (Medicare spends 98% of its budget on care while DCEs spend 60%). The incentive structure for contracted insurers remains identical: collect as much federal money as possible while minimizing the amount of treatment distributed. Unlike Medicare Advantage, however, patients are enrolled into a DCE automatically and without their consent.

DCE remains an experimental policy with a limited timeframe, with its test run set to end in 2026. And yet, former CMS administrator Donald Berwick notes that many companies offering Advantage plans are either in the DCE business themselves or acquiring smaller companies that are. He warns: 

“The largest national insurers are positioning to become DCEs. Each of these national MA companies has a broad national network. The possibility of their using these networks to enroll millions of traditional Medicare beneficiaries is very real. Currently, CMS has stated publicly no limits on the growth of DCE networks and geographies. An extension beyond 2026 is conceivable.”

This policy represents an expansion of the Medicare budget while restricting access to care, an impressive failure. This DCE plan will allow for traditional Medicare to be ravaged by the worst of Advantage-style policy, especially if Berwick’s warning comes to pass. Medicare is a much-loved public program safeguarding all “seniors,” a title all of the lucky among us will earn. Pillaging it would be a mistake. 

This piece was edited by Executive Editor Nathan Varnell.

Photo by Abby Anaday on Unsplash.