“Direct contracting” is the latest in a long line of insidious tactics pushing Medicare towards privatization. Today we’re chatting with Dr. Claire Cohen, MD from Physicians for a National Health Program about direct contracting entities: what they are, how they threaten beneficiaries of traditional Medicare, and what is being done to stop them.
Dr. Claire Cohen is an African American child and adolescent psychiatrist who has been practicing in Pittsburgh since 1984. She grew up in Philadelphia, PA and attended Hahnemann Medical College (now Drexel University Medical School) there and did her General Psychiatry Residency at the University of Chicago. She then moved to Pittsburgh to do her Child and Adolescent Fellowship at the University of Pittsburgh’s Western Psychiatric Institute. She fell in love with Western Pennsylvania and has practiced here ever since. She has worked in a variety of settings, including community mental health clinics, partial hospitals, school-based settings and, currently, an inpatient hospital setting.
In addition to her career, Dr. Cohen has always been very active in her community. In the late 1980s, she was involved in supporting the strike of the Pittston coal miners. In the 1990s, she was a member of the group that fought to get a Civilian Police Review Board in Pittsburgh. More recently she has been involved in efforts to stop the school-to-prison pipeline on the Pittsburgh Public Schools , a founding member of the Pittsburgh Green New Deal, on the advisory board of the Pittsburgh Black Workers Center and fighting for Medicare For All as a member of Physicians For A National Health Program, the Western PA Coalition for Single Payer Healthcare, and National Single Payer. She is also on the Medicare 4 All Committee of Democratic Socialists of America.
What is a Direct Contracting Entity and how is it different from traditional Medicare?
Dr. Cohen tells us that Direct Contracting Entities are groups of doctors, hospitals, or other healthcare providers that form “preferred provider” networks. Medicare pays DCEs a monthly amount per patient to cover a defined portion of each seniors’ medical expenses. Virtually any type of company can apply to be a DCE, including commercial insurers, venture capital investors, and dialysis centers.
Traditional Medicare spends about 98 cents of every dollar on direct patient care. Existing Medicare Advantage programs operated by private insurance companies only have to spent 85 cents of every dollar on direct patient care.
The Trump administration developed the DCE program, allowing them to spend only 60 cents of every dollar on direct patient care, and keep the rest as profit.
In order to get seniors in these plans that are obviously inferior, they decided they’d sneak them into the plan without their knowledge or consent. The Trump adminsitration piloted this DCE program in 10 large cities which happened to have large BIPOC populations, and enrolled those seniors in the program involuntarily.
The Biden administration changed the DCE model a bit, but it is continuing. Now patients receive a letter that informs them of their enrollment in the DCE. The only way to get out is to change to a doctor who is not part of a DCE. Wall Street and CMS aim to have every doctor signed up with a DCE by 2030, which means complete privatization of Medicare.
How do DCEs make money?
- They’re allowed to spend less on patient care than Medicare Advantage or traditional Medicare, leaving more profit
- Diagnostic upcoding: if the patient has hypertension, they might say the patient has malignant hypertension, if the patient is pre-diabetic, they’ll code the patient as diabetic, in order to get larger reimbursements from CMS. (This is also a well-documented problem with Medicare Advantage, which serves 42% of Medicare enrollees.)
- Cherry picking: they push legitimately sicker patients into traditional Medicare, to avoid paying for their greater care needs.
In addition, DCEs offer doctors a cut of the profits, incentivizing them to make treatment decisions based on financial considerations. The doctor-patient relationship suffers under these schemes; are they recommending a treatment because it’s best for you or because it’s the most profitable for them?
What are the racial justice implications?
Due to all the other inequities in the system, when people of color first enter Medicare, they come in sicker than white patients. If they’re in a DCE, they’re at bigger risk of being denied care.
Call to Action
- Sign the PNHP petition to end DCEs!
- Call your Member of Congress (capitol switchboard: 202-224-3121) to pressure Health and Human Services Secretary Becerra to end DCEs. Encourage them to protect Medicare as a public program and expand it to everyone.
- Call Secretary Becerra yourself! 202-205-5445
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Direct Contracting: Quietly Handing Medicare to Wall Street PNHP Fact Sheet