The stealth privatization of Medicare is afoot

Plus, Josh Gottheimer made two wild claims in a speech this week, both of which are falling apart.

Toward the end of the Trump administration, a former dorm-mate of Jared Kushner’s who was put in charge of the Center for Medicare and Medicaid Innovation launched a privatization experiment that is not just continuing but has grown substantially under Biden. 

In January 2019, ahead of the launch of a new direct contracting model, the Office of the General Counsel for the Health and Human Services Department warned, in comments on a draft of the proposal, that it appeared as if the new project was being set up to benefit specific companies.

“We are concerned based on [Centers for Medicare and Medicaid Services]’s regular references to organizations like Chen Med, Oak Street Health, and Verily in the comments and otherwise, that this model has been designed with specific private sector entities in mind. If accurate, this could create ethics concerns, as the creation of this model would give those entities a leg up in the market,” read the guidance, a copy of which was obtained by The Intercept.

The direct contracting model was announced publicly in April 2019 and began its implementation phase in October 2020. 

Adam Boehler, prior to working in the Trump administration, ran a startup called Landmark Health, which was backed by venture capital money, including the firm Oxeon. Multiple Oxeon-funded health companies, such as Oak Street Health, were directly referenced in the documents setting up the new project, which drew scrutiny from the Office of the General Counsel. Under Boehler, CMMI contracted with Oxeon to recruit the non-career staff for CMMI, who then went on to design the program. Once the project was set up, Landmark Health announced it would be contracting with CMMI to become a direct contracting entity — meaning Boehler’s model was shoveling money to the firm he had left. Boehler is now CEO of Rubicon Founders, a venture capital and private equity firm operating in the health care industry. 

In May 2019, a calendar alert went out to staff reading “discussion with Landmark on the direct contracting model.” Career staff were appalled. “This shit is so fucking gross,” wrote one in a group text with other aides which was shared with The Intercept. “Ugh. What the fuck,” replied another, with a third sending a link to the Office of the Inspector General, suggesting it be reported. (It does not appear to have been reported.)

The payment model is designed to be lucrative for firms contracting with the government: The government pays a set amount of money annually per patient based on a risk score that is easily gamed by the health care company, and there is no requirement that a minimum percentage of the money be spent on care, a requirement known as a “medical loss ratio” that is typically used to constrain insurance firms or providers from eating the bulk of the funding.

Read the full piece here.

For reasons laid out in the story, the design of the project is deeply flawed, but the principle behind it – paying for quality over quantity – is a sound one. In reporting on this project, it appears to me that there could be an interesting opportunity for a progressive city or state to step in and set up a better version of what the private equity and venture capital bros are capitalizing on. Under the new CMMI model, Medicare pays a predetermined amount per year, per patient. It’s enough to treat every patient and walk away with a pretty big profit, which is why all these firms are getting into it. But imagine if a city launched its own version, and billed Medicare for it? It’s designed for private companies, not cities or states, but there are workarounds, and experts I’ve spoken to say it shouldn’t be impossible to structure a direct contracting entity that is basically publicly owned. (I talked about this on Rising here.)

I also have a story up today about Josh Gottheimer making two wild allegations – one that the organization founded by Jamal Khashoggi has links to Al Qaeda, and another that a Working Families Party activist disrupted an event of his and screamed “Jew!” at him. The first isn’t true, and I have video of the second, and that one’s not true either.

The full story is here.