How Wall Street Is Taking Over Medicare
(AP Photo/Patrick Semansky, File)
Biden’s expansion of a new, insidious form of for-profit Medicare is benefitting private equity firms and well-connected health care giants.
The Biden administration’s recent entrenchment and expansion of the Trump administration’s efforts to privatize Medicare is helping a shadowy set of big-business beneficiaries: private equity firms and major health care companies, including one that previously employed the government official overseeing the privatization plan, a Lever analysis shows.
In April last year, the Biden administration contracted with 53 third-party companies to mandate privatized health care plans through Medicare. The resulting health care options are effectively Medicare Advantage plans, or private coverage offered through the national health insurance program for seniors and people with disabilities — but with one wrinkle: Patients are being assigned to these new plans without their consent.
The 53 participating companies — called “direct contracting entities,” or DCEs — are allowed to offer benefits beyond traditional Medicare, like gym membership coverage. But as for-profit businesses that receive a set payment from Medicare no matter how much care they approve, these DCEs are incentivized to limit the care that patients receive, especially when they are very sick. The first DCEs were launched by President Donald Trump in 2019, and so far, at least 350,000 seniors have already been moved onto these privatized Medicare plans.
Now, a new Lever analysis of the 53 DCEs found additional cause for concern: 15 of these entities, or slightly more than a quarter, are backed by private equity firms, which are known for extracting profits at the expense of workers, the environment, and even their own pension fund investors. The firms include big-name firms like the Carlyle Group, General Atlantic, Clayton, Dubilier & Rice, Benchmark Capital, and Warburg Pincus. What’s more, another 15 DCEs are linked to big health care companies — including one with a direct connection to the Biden appointee in charge of the new privatized Medicare scheme.
Wall Street’s encroachment into Medicare is the latest example of private equity’s aggressive expansion into health care, which has ranged from hospitals to ER doctor groups. In 2021, private equity managers deployed $172 billion in capital in the health care sector — nearly four times the total budget of the National Institutes of Health.
Biden himself has lambasted the for-profit industry’s takeover of elder care services, noting during his State of the Union address in March: “As Wall Street firms take over more nursing homes, quality in those homes has gone down and costs have gone up. That ends on my watch.”
Biden apparently doesn’t have the same concerns about Wall Street’s growing role in Medicare — a development that could lead to higher medical bills for patients. The financial industry has already demonstrated its willingness to take a forceful approach to generating health care profits; private equity waged an aggressive campaign to derail legislation designed to stop so-called “surprise” medical bills, which formed a significant part of their hospital staffing firms’ bottom line.
Now, as private equity muscles into privatized Medicare, industry lobbyists are likely to push for more generous payment structures that benefit for-profit firms at the expense of Medicare patients. The Medicare Payment Advisory Commission, an independent body that advises Congress on Medicare, hinted at this scenario while discussing private equity’s role in the Medicare Advantage space at an April 2021 hearing.
“The end result might or might not be better for consumers, but I think that it does have an impact on Medicare payment policy,” said commissioner Pat Wang.
Experts fear that the Medicare space could be especially vulnerable to Wall Street’s predatory approach.
“We have lots of evidence from many other situations in which private equity puts profits before patients,” said Eileen Appelbaum, co-director of the Center for Economic and Policy Research and co-author of Private Equity At Work: When Wall Street Manages Main Street. “They are looking for a place where it's easy to make money — and it's easy to make money when it’s the taxpayer footing the bill.”
Big Players, Big Profits, And A Big Conflict
While the DCE program was launched under President Trump, Biden expanded the effort in February under a new name: the Accountable Care Organization Realizing Equity, Access, and Community Health program, or “ACO REACH.” Now, hospital-backed for-profit health benefit programs are also allowed to automatically enroll Medicare patients into their health care plans.