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Austin AFL-CIO Council Urges Biden to End Medicare Privatization Scheme

The resolution is the latest to reject a plan to build on a privatization ploy constructed by the Trump administration.

Xavier Becerra, Secretary of Health and Human Services, speaks during a press conference in Washington, D.C., on June 28, 2022.

The labor council of the Austin, Texas AFL-CIO has passed a resolution urging the Biden administration to terminate a Medicare privatization scheme that is quietly moving ahead despite vocal opposition from doctors, seniors, and progressive lawmakers.

The pilot program, which inserts private middlemen between patients and healthcare providers, was unveiled with little notice during the final months of the Trump administration despite internal concerns about its legality. The experiment has since been largely upheld by the Biden administration, which announced mostly cosmetic changes earlier this year, winning applause from industry groups that lobbied against complete elimination of the program.

Now known as ACO REACH, the pilot involves shifting traditional Medicare recipients onto privately run insurance plans without their knowledge or consent in the name of cutting costs and improving quality.

The resolution unanimously adopted by the Austin AFL-CIO Labor Council last week raises alarm over that aspect of the pilot, noting that “ACO-REACH allows doctors and their offices to convert a patients’ traditional Medicare choice into ACO-REACH coverage without first informing their patients about the change nor getting their patients’ written permission.”

“Doctors and their offices will have a financial incentive to convert to ACO-REACH coverage as they will also be allowed to keep up to 40% of their revenue that they don’t spend on healthcare services as overhead, resulting in a ‘windfall profit’ versus traditional Medicare programs that are only allowed to keep the balance of 2% of their revenue after paying for overhead,” the resolution continues.

Under the ACO REACH model, which critics warn could fully supplant traditional Medicare if it is allowed to continue, private entities that are accepted as participants are paid by the Centers for Medicare and Medicaid Services (CMS) and allowed to pocket a significant chunk of what they don’t spend on healthcare. The newest version of the pilot, which was announced without congressional approval or oversight, is set to formally begin in January and will run at least through 2026.

The CMS Center for Medicare and Medicaid Innovation (CMMI), which is overseeing ACO REACH, is currently headed by Elizabeth Fowler, the former vice president of public policy and external affairs at WellPoint, Inc. — a health insurance firm that later became Anthem.

The Austin AFL-CIO Labor Council resolution implores the Biden administration to “immediately stop and dismantle the ACO-REACH program, and instead, immediately protect and preserve traditional Medicare plus adding coverage for hearing, vision, and dental care.”

The labor council’s resolution marks just the latest expression of outrage over the Biden administration’s decision to build on a privatization ploy constructed by the Trump administration, which was replete with industry allies hostile to Medicare and other popular government programs.

In August, the AFL-CIO’s Alameda, California labor council passed a resolution noting that it is “within the power of the Biden administration to end [ACO REACH] with the stroke of a pen” — and urging it to use that power. Similar resolutions have been approved in recent months by the Arizona Medical Association, the Seattle City Council, and the Texas State Democratic Executive Committee.

On top of opposition from hundreds of local and national advocacy organizations, lawmakers at the national level — including prominent progressives such as Sen. Elizabeth Warren (D-Mass.) and Rep. Pramila Jayapal (D-Wash.) — have raised concerns over the pilot, which could allow the private insurance giants that have profited hugely from Medicare Advantage to further entrench themselves in the Medicare program.

“We must immediately end Medicare privatization programs like ACO REACH,” Jayapal, the chair of the Congressional Progressive Caucus, tweeted in April. “There’s no excuse for allowing the same Medicare Advantage organizations to now administer ‘care’ for traditional Medicare beneficiaries.”

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