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California Says No to Privatizing Medicare 

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On Sept. 7 an unheralded piece of legislation passed 30-6 to put California unequivocally on the side of protecting traditional Medicare.

Assembly Joint Resolution 4 requests President Biden to eliminate Wall Street profiteering from Medicare via a new program, ACO REACH. REACH is an invention by the Center for Medicare and Medicaid Innovation (CMMI) that began this year without any Congressional approval or oversight. Ending this program will not only be a boon to California with its 6.6 million seniors and people with disabilities but to an entire nation that has enjoyed 58 years of traditional Medicare — the public program we all pay into with our taxes.

The acronym ACO REACH (which stands for Accountable Care Organization Realizing Equity and Community Outreach) sounds pleasant but is wholly misleading. It has opened the floodgates to Wall Street plundering by private equity firms, investment bankers and venture capitalists.

Fifty-eight years ago, the idea of Medicare was to remove all cost sharing and provide unencumbered access to health care for seniors and disabled persons. But from the 1970s forward, a healthcare revisionist history has unrolled in pushback against Lyndon Baines Johnson's successful implementation of the Medicare program.

In 1972, the Nixon administration allowed the insertion of certain middlemen, (Health Maintenance Organizations (or HMOs), into the Medicare payment process. These middlemen, mostly insurance companies, demand profit but have never produced data to indicate they are delivering on promises of lower costs or improved care. In fact, the data indicates just the opposite.

Medicare Advantage (MA), a privatized version of real Medicare, began in 2003 under the Bush Administration and furthers investors' goals. It allows non-medical middlemen to restrict provider networks, deny medically prescribed care, cherry pick the healthiest enrollees, lemon drop the sickest and up-code health scores to make patients appear sicker in order to game the Medicare Trust Fund. Medicare Advantage plans overcharge Medicare by more than $75 billion per year, and private equity companies reap many billions more.

It comes down to a payment model called capitation. While Medicare pays providers for services actually performed, Medicare Advantage collects a per-person monthly stipend from the Medicare Trust Fund in anticipation of expected — not actual — need. It's easy to see how making patients appear sicker would jack up that anticipated need and, accordingly, the capitated payment — without oversight to record whether or not that need is addressed.

The REACH payment model creates similar, dangerous incentives to restrict care. Already 2.1 million Americans have been enrolled in ACO REACH without their express knowledge or consent. Here's how it works: An investor buys into control over hospital and physician groups and all seniors therein are automatically "aligned" into the REACH program. The only way to opt out is to find a new doctor who is not party to the scheme — not an easy proposition in rural areas where physician populations are shrinking.

An important difference between Medicare Advantage and ACO REACH, however, has to do with that powerful profit incentive. REACH physicians become financial risk bearers, meaning they are incentivized to restrict care in order to gain financially — a proposition that undermines doctor-patient trust. More troubling, while Medicare Advantage programs are required to spend 85 percent of monies received from Medicare on patient health, leaving them to keep 15 percent for overhead and profit, ACO REACH programs may keep up to 40 percent of their take while spending only 60 percent on patient care. Compare that to the 2-percent overhead spent by traditional, nonprofit Medicare.

No wonder people are saying Medicare is going broke! Today, as the Health Justice Monitor has observed, "the system has become maddeningly complex, with armies of functionaries working every angle, straddling every ethical line, to unlock a big safe full of money."

This ongoing privatization has created a $350-billion market that Wall Street and private equity firms are rushing to exploit, undermining Medicare's solvency and putting crucial decisions about patient care in the hands of private insurers rather than doctors. Further, the Center for Medicare and Medicaid Services has declared its goal for total privatization of Medicare by the year 2030. If this is allowed to happen, Medicare as we have known it will cease to exist as premiums rise and healthcare access is further delayed and denied.

California's passage of Assembly Joint Resolution 4 is an important step to put the entire nation on alert to this eventuality. The next step will be improving and expanding Medicare into a universal, single-payer, publicly financed healthcare system similar to those in so many other developed nations that value health as a human right available to all.

Please contact your California state senator today and thank them for this final vote (Go to to see sponsors). Humboldt's own California Second District Sen. Mike McGuire is a co-author of the resolution. His office can be reached at (916) 651-4002.

Patty Harvey (she/her) is a co-chair of Health Care for All/Physicians for a National Health Program-Humboldt and a retired professor at College of the Redwoods.

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Patty Harvey

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