Progressive Lawmakers Demand Fraud Probe Into Medicare Privatization Scheme

A group of progressive lawmakers led by Sen. Elizabeth Warren and Rep. Pramila Jayapal is calling on Biden health officials to immediately launch a fraud probe into the organizations taking part in ACO REACH, a slightly reformed version of a Medicare privatization scheme that the Trump administration set in motion during its final months in power.

In a Thursday letter to Chiquita Brooks-LaSure, head of the Centers for Medicare and Medicaid Services (CMS), 21 members of Congress voiced alarm that the ACO REACH pilot “provides an opportunity for healthcare insurers with a history of defrauding and abusing Medicare and ripping off taxpayers to further encroach on the Medicare system.”

“No matter the name, these systems are designed to create profit for private insurers by delaying or denying care.”

The newest version of the program, which entails shifting some traditional Medicare recipients onto privately run insurance plans without their knowledge or consent, is scheduled to formally begin on January 1, months after CMS announced largely cosmetic changes to the Trump-era Global and Professional Direct Contracting (GPDC) model.

The lawmakers noted in their letter that Physicians for a National Health Program (PNHP)—a doctor-led group pushing for the complete termination of ACO REACH—has identified at least 10 GPDC Direct Contracting Entities (DCEs) with records of “healthcare fraud, abuse, and violations of healthcare laws prior to 2021.”

Those organizations, the lawmakers stressed, “have continued to operate in the program even as CMS pushes for additional oversight, vetting, and transparency.”

“In its three-year history, the Medicare Direct Contracting program, now ACO REACH, has roughly doubled in size each year: it had 53 participants in its first year, 99 in the second year, and as many as 202 participants planned for 2023,” the letter continued. “The exponential growth of the program heightens our concerns about the potential for fraud and abuse of taxpayer Medicare dollars.”

One example the letter cites is Centene, a healthcare firm that is the parent company of three DCEs currently operating in 27 states. DCEs are paid by the federal government to fund a portion of Medicare enrollees’ care and act as private middlemen between patients and healthcare providers.

Under ACO REACH, which has faced mounting opposition at the local and national levels in recent months, the middlemen will be able to keep 40% of what they don’t spend on care as profit and overhead.

Critics of the pilot, set to run at least through 2026, argue that such an incentive invites fraud and other abuse of patients—practices that have been rife in privately run Medicare Advantage (MA) plans, which now provide coverage to nearly half of the eligible Medicare population.

The lawmakers point out in their letter that Centene “paid over $97 million in 2021 to settle allegations of ‘duplicate and inflated claims submitted to the Department of Veterans Affairs’ that occurred while its subsidiary, Health Net, was acting as a third-party administrator for VA medical care.”

Centene is hardly an outlier, as the letter makes clear.

“AdventHealth, which operates a DCE in Florida, was the subject of one of the largest healthcare fraud settlements in 2015, paying $115 million to settle allegations that the organization ‘submitted false claims to the Medicare and Medicaid programs,'” the lawmakers note.  “An audit by the Department of Health and Human Services Office of Inspector General found that Humana, which operates a DCE in 13 states, improperly collected nearly $200 million in 2015 through upcoding and ‘overstating how sick some patients were.'”

Warren (D-Mass.), Jayapal (D-Wash.), Sen. Bernie Sanders (I-Vt.), Rep. Alexandria Ocasio-Cortez (D-N.Y.), and the letter’s other signatories warned that the presence of entities with long records of fraud and abuse puts “patients and taxpayer dollars at risk” and called on Biden’s CMS to “quickly to address these risks and protect patients before the new ACO REACH program begins operations.”

Specifically, the lawmakers urged the Biden administration to “closely examine” ACO REACH participants, halt participation by “any organizations that have committed healthcare fraud,” and terminate “DCEs that do not meet the new standards for the ACO REACH program.”

“We have long been concerned about ensuring this model does not give corporate profiteers yet another opportunity to take a chunk out of traditional Medicare,” they wrote. “The continued participation of corporate actors with a history of fraud and abuse threatens the integrity of the program.”

As lawmakers push for reforms to bar bad corporate actors from the program and enhance oversight, patient advocates are demanding that the program be cut off entirely, arguing that it poses a fundamental threat to traditional Medicare and cannot be salvaged with policy tweaks.

In a tweet on Sunday, the progressive advocacy group Social Security Works warned that “no matter the name, these systems are designed to create profit for private insurers by delaying or denying care.”

“We need to expand and improve Medicare—not destroy it with backdoor privatization,” the group added.