Over 50 Lawmakers Urge Administration to End Direct Contracting

More than 50 lawmakers led by US Representative Pramila Jayapa urged the Biden administration to discontinue the Medicare Direct Contracting (DC) program and transition Medicare beneficiaries into the Traditional Medicare model.

In a letter written to HHS Secretary Xavier Becerra and CMS Administrator Chiquita Brooks-LaSure, the lawmakers stated the DC program is a Trump-era privatization tactic. Under the current DC program, private payers and other for-profit companies are authorized to “manage” care for seniors enrolled in Traditional Medicare.

The DC pilot phase enrolled 30 million Traditional Medicare beneficiaries across 38 states without their approval, they added. 

“Direct Contracting Entities pose a threat to patient care and outcomes due to the encroachment of profit-driven organizations on their care,” said the lawmakers in the letter.

“We ask that you permanently end the programs and coordinate the transition of traditional Medicare beneficiaries currently in these programs back into the traditional Medicare model by July 1, 2022.”

Medicare offers Direct Contracting Entities (DCEs), typically privately-owned and controlled coverage networks, monthly payments to cover beneficiaries’ healthcare expenses.

In addition, DCEs can profit off any funds left over after costs are paid. The lawmakers indicate that this practice is “a dangerous financial incentive to restrict and ration seniors’ care.

“Unfortunately for patients in these entities, DCEs are incentivized to funnel patients to providers within their networks to maximize profits which can limit patients’ care options,” the lawmakers stated.

“These models transform the care of a traditional Medicare beneficiary to care typically seen in a private Medicare Advantage (MA) plan despite the fact that the patient chose not to enroll in an MA plan.”

Most of the 53 DCEs are owned and controlled by investors, including private equity firms, Wall Street investors, and large private payers.

“HHS allows Direct Contracting Entities to keep as profit what they don’t pay for in medical services, establishing a dangerous incentive to ration and restrict seniors’ care,” Susan Rogers, MD, a retired internal medicine doctor and president of the 24,000-member Physicians for a National Health Program said in a public statement. “If left unchecked, Medicare Direct Contracting will hand Traditional Medicare to Wall Street investors, without input from seniors, doctors, or even Congress. We applaud Rep. Jayapal and the more than 50 members of Congress who stood up to protect Medicare today and for future generations.”

DCEs spend as low as 60 percent of their budget on patient care, allowing them to keep 40 percent of revenues for profit. Meanwhile, Traditional Medicare spends 98 percent of its budget on patient care.

The Biden administration has temporarily paused components of the DC model for review, but the lawmakers ask for the permanent end of the program.

Several doctors and groups, including Physicians for a National Health Program, have also called on HHS to end the DC program immediately. 

However, America’s Physician Groups (APG) disagrees with terminating the program.

APG, a national association representing over 340 physician groups with nearly 195,000 physicians, wrote to HHS and CMs regarding DC criticism.

“Direct Contracting presents an invaluable opportunity to study in real-time the effect a capitated payment system has on primary care in the United States,” Donald H Crane, president, and CEO of America’s Physician Groups, stated in a letter. “The model also provides resources opening the door to expansion of primary care into distressed communities that have previously been unreachable by proactively empowering primary care doctors to serve underserved communities that are disproportionately affected by the consequences of health disparities and inequities.” 

Specifically, the group said the geographic track of the model “should be a physician group focused model which enables physicians to provide care centered around attaining greater outcomes for patients in an efficient, coordinated manner.”

The geographic track was one of the DC program tracks paused by the Biden Administration early last year.