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THE DOGE CZAR’S PLAN TO LOOT MEDICARE  
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Maureen Tkacik
February 14, 2025
The American Prospect
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_ Elon Musk’s coup plotters cut their teeth at an obscure Obamacare
agency that burned $10 billion testing bogus cost savings initiatives.
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Brad Smith, then director of the Center for Medicare and Medicaid
Innovation, speaks about the coronavirus during a press briefing in
the Rose Garden of the White House, May 11, 2020., Alex Brandon/AP
Photo

 

Four and a half years ago, Department of Government Efficiency
co-czar Brad Smith
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on a counterintuitive revelation: The most effective way to slash
federal health care spending involved drastically _raising_ Medicare
and Medicaid reimbursement rates for hospital care.

At the time, Smith was running something called the Center for
Medicare and Medicaid Innovation, an obscure off-the-books laboratory
created by the Affordable Care Act for experimenting with
“alternative payment models”—neoliberal for “larger sums with
less accountability.” In its ten years of operation, CMMI had spent
more than $10 billion testing various methods of tweaking
reimbursement standards in (theoretical) hopes of improving health
care outcomes for lower costs. They had worked with UnitedHealth,
Aetna, Molina, and other insurers in 13 states to reward primary care
physicians who administered more preventative care and collected more
specific data on their patients. They’d worked with more than 100
hospitals and mega-practices to bundle payments for complex patients,
in hopes of lowering the ultimate cost of treating chronic illnesses.
CMMI had spent some $10 billion testing out dozens more schemes,
nearly all of which subscribed to an ideology called “value-based
care,” in which the central flaw of American health care is
“volume-based” fee-for-service compensation schemes that
incentivize “overutilization” of the health care system, and so
the natural “solution” involves the government paying health care
providers and various intermediaries to take steps designed to
decrease said “utilization.”

_MORE FROM MAUREEN TKACIK_
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Value-based care grew especially important during the Obama years,
because the ACA mandated that insurance companies spend a minimum of
85 percent of patients’ premium dollars on “care,” wiping out
profit drivers like the mandatory insurance policies UnitedHealth sold
to college students that often boasted medical loss ratios as low as
10 percent. Insurers in turn began to focus their energies around
their highest-revenue patients: seniors with a lot of complex health
issues who were enrolled in the private Medicare offerings known as
Medicare Advantage. They would soon buy up the medical practices, home
health agencies, and surgery centers that treated these patients, in a
move that enabled them to at once “align incentives” (i.e.,
control more of the medical decisions they were paying for), park the
excess profit margins they weren’t allowed to report on their
insurance sides, and find more Medicare patients to convert to MA
plans.

Brad Smith was a value-based guy. He’d gotten in on the ground floor
of the craze during the first term of the Obama administration, while
helming the education reform foundation of former Senate Majority
Leader Bill Frist (R-TN), whose billionaire brother Tom Frist founded
the hospital behemoth HCA, whose long
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of unnecessary overtreatment
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Medicare patients perhaps ironically gave birth to the value-based
revolution. Together, the two had built a home health care business
with more than 650 employees that they had just sold for $440 million
to health insurer Anthem.

Smith had been working as the chief operating officer of Anthem’s
value-based business when he’d been tapped for the CMMI gig by one
Adam Boehler, another value-based evangelist who often talked
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how he wanted to “blow up” the “volume-based” ancien régime.
Still, doctors, especially the types of doctors who complained about
Obamacare and voted for Trump, hated value-based care, because it
required spending way too much money on software and far more hours
doing paperwork than the incentive payments could justify. Smith’s
boss, Centers for Medicare & Medicaid Services (CMS) head Seema Verma,
was value-based skeptical, and wanted to know whether CMMI’s
programs were actually working as “intended.” So Smith ordered his
staff to conduct a financial analysis of all 54 programs CMMI had
bankrolled to test out the new approach to health care.

Smith and a 24-year-old deputy from his Nashville VC firm are said to
be building the vision of what will replace everything that DOGE has
eradicated.

The verdict was unambiguous: Value-based care was a bust. For two of
its biggest programs, CMMI had spent $7 billion more than it had
saved, just from compensating all the various intermediaries that had
administered the trials. The reasons for this were twofold, say two
individuals who worked on value-based care policy for the Obama
administration: One, CMMI and CMS invariably outsourced the management
of the trials to “venture capital or private equity firms or
nonprofits where the CEO is making millions of dollars” that
typically alienated and underpaid the clinicians they were ostensibly
seeking to incentivize; and two, most of the policymakers involved
were too preoccupied with “how they were going to monetize their
expertise” to design programs that might actually save CMS money.

Lending credibility to that analysis, the shining star of the small
agency’s roster of reform measures was the “Maryland All-Payer
Model,” a state-operated system originally devised in the early
1970s by which an independent commission fixed flat hospital prices
for the state that every payer
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Blue Cross to Medicaid—is expected to pay. The Maryland Model, which
was modified in 2014 and discarded in favor of a more complex, almost
European-style “global budgeting” system in 2018, is a rabbit hole
with its own unique advantages and disadvantages, but it is
decisively _not _value-based care, and sources familiar with CMMI
said its affiliation with the initiative was something of a fluke,
especially given that Medicare conclusively pays far higher rates for
medical care in Maryland than anywhere else (though yearly per capita
expenditures are higher in Florida). And yet the Maryland system saved
CMS $1 billion over just five years
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by CMMI, likely in large part by lacking the administrative middlemen
and arbitrageurs in the system and the waste and fraud that tend to
accompany them.

This analysis might have made for an embarrassing news cycle for CMMI
and all the affiliated grifters who had cashed in on the value-based
boom, like Smith’s predecessor Boehler, a college roommate of Jared
Kushner’s who would soon sell his home health agency for $3.5
billion to UnitedHealth, or CMMI founding director Patrick Conway,
who’d left the agency a few years earlier to become the richly
remunerated CEO of Blue Cross in North Carolina, where he had rolled
out a mandatory value-based care regime in conjunction with the
CMMI-friendly healthtech Aledade, and recently been charged
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driving under the influence after crashing his car with his two
elementary school–aged daughters inside.

Instead, they were all saved by the pandemic, during which Smith was
detailed to the Trump inner circle for assistance with various
pandemic response efforts, and ended up becoming close to Kushner
himself, according to _The New York Times_. By the time he returned
to CMMI to write up
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his staff’s analysis in _The New England Journal of Medicine_, CMS
had rained down hundreds of billions of bailout dollars on the health
care system, and no one even bothered making hay of the news that the
agency had wasted $10 billion testing out cost-cutting ideas that
didn’t pan out.

In one of his last acts at the agency, Smith introduced a new program
called the Geographic Direct Contracting Model, or “Geo,” by which
all remaining traditional Medicare beneficiaries were slated to be
automatically assigned on the basis of their residence to a
value-based care organization to which CMS would pay a flat annual fee
to assume their health care “risk.” Geo contractors would be
virtually unregulated, though they would be held to a medical loss
ratio minimum requiring them to spend at least 60 percent
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their revenues on care. The Biden administration scrapped
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in early 2021, but kept a slightly less radical Smith plan with a
similar goal of stealth total privatization
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renaming it ACO REACH, for “Accountable Care Organization Realizing
Equity, Access, and Community Health.”

Smith moved back to Nashville and took the helm at two new value-based
care upstarts, a Medicaid home health intermediary called CareBridge
and a rural Medicare Advantage play called Main Street Health. In late
October, he sold
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former to Elevance, the new name of the insurer to whom he’d sold
his first home health company, Aspire. This time, the head count was
lower—fewer than 500 employees—but the price tag was much, much
bigger, at $2.7 billion.

A putative class action lawsuit
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last month in Florida by a “clinical assessor” for CareBridge
alleges that she and other low-level employees were required to work
45 hours a week for only 40 hours’ pay, and dozens of negative
reviews on job sites suggest assessors work as many as 20 extra hours
without pay. Worse, employees say the job mostly consists of
“managers … demanding that you drastically cut caregiver hours for
people who desperately need someone in their home.”

“This is a greed-driven company that is preying on our nation’s
most vulnerable and poorest people. If you can sleep at night and live
with yourself while harming the poor and disabled during the day, this
job is for you,” reads one review
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Glassdoor. “If CareBridge is the future of healthcare then we
heading to a sad state of affairs,” reads another.

Just months after the CareBridge deal, Smith was reported
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be hanging around Mar-a-Lago with Steve Davis, the longtime Elon Musk
loyalist who ran the hostile takeover of Twitter. Underneath Musk and
Vivek Ramaswamy, who would soon depart, Smith and Davis are said to be
the real operating leaders of DOGE, with the latter playing the bad
cop masterminding the scorched-earth shutdowns and cuts, while Smith
and a 24-year-old deputy from his Nashville VC firm are said to be
building the vision of what will replace everything that DOGE has
eradicated, according to a source familiar with his recruiting
efforts. CMMI, a highly unusual agency with a ten-year, self-renewing
budget outside the appropriations process and an extraordinary ability
to grant waivers from the statutes governing CMS, including fraud and
kickback statutes, is said to be a model for how Musk wants DOGE to
reimagine the federal government.

As further evidence of that, Smith’s predecessor as CMMI director,
Boehler, whose brand-new venture capital firm Rubicon Founders last
spring raised more than a billion dollars for its latest fund and also
groomed Trump’s newest CMMI director, 33 year-old Abe Sutton
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is currently working as Trump’s special presidential envoy for
hostage affairs. Boehler got his start in the health care business as
a medical debt collector, first at a firm called MedeFinance and then
with a shadowy empire called Accretive, which was banned from the
state of Minnesota in 2012
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an employee left a laptop in a taxi that revealed the company had
essentially seized the operations of a Minneapolis nonprofit hospital
system and was using confidential health records, collected under the
guise of value-based care modeling, to manipulate patients into
coughing up large cash payments for hospital services to
“embedded” collection agents, sometimes while under the influence
of powerful anesthesia.

The obscure agency Boehler launched after leaving CMMI, the U.S.
International Development Finance Corporation—best known for its
failures to do much of anything
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its nine-figure budget for bolstering supply chains during the
pandemic after an ill-fated $765 million loan it made to Eastman Kodak
was shelved after revelations of insider trading—was reported
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Wednesday to be DOGE’s designated “replacement” for the U.S.
Agency for International Development, under the leadership of venture
capitalist Joe Lonsdale and Ben Black. The latter is the son of
disgraced billionaire Leon Black, an accused sexual predator who was
forced to leave the private equity juggernaut after revelations that
he had wired nearly $200 million to Jeffrey Epstein, whom he
considered his best friend, in the years before Epstein’s death. A
January Substack post
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Lonsdale and Black on their plans for “disrupting” the $43 billion
USAID budget is light on specifics but advocates defunding
nongovernmental organizations to pursue an “investment-driven model
focused on strategic project finance initiatives.”

Foreign aid, of course, is a rounding error compared to the
multitrillion-dollar health care budget, in which
the _Prospect _estimates a team of forensic accountants might easily
find as much as a half-trillion dollars
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waste annually, roughly $100 billion of that in Medicare Advantage
overpayments alone. (Obama had the chance to clamp down on the obvious
MA grift, but abruptly reversed course
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2014.) In a 2021 Zoom panel
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anniversary of the agency and the future of “value-based care”
moderated by ubiquitous value-based care venture capitalist Ann
Lamont, Smith, Boehler, and CMMI founder Conway, now the CEO of
UnitedHealth’s OptumRx division, held forth almost giddily on the
rosy “future of value-based care,” with Boehler jokingly
describing Conway as the agency’s “Adam Neumann,” the
self-aggrandizing WeWork founder who burned some $20 billion in
venture capital funding. At one point, Smith brought up his analysis,
commending the agency for making “value-based care” such an
inescapable industry buzzword but acknowledging that only five of the
group’s 54 experiments had delivered any cost savings whatsoever.
Lamont quickly changed the subject. “Imagine in a few years, we
receive 90 percent of payments in value-based commitments. How do we
get there?”

This probably wasn’t how any of them imagined it going down, but
with Smith running the rogue operation that is apparently running the
country, it seems likely we’ll get there.

_MAUREEN TKACIK is investigations editor at the Prospect and a
senior fellow at the American Economic Liberties Project._

_Used with the permission. The American Prospect, Prospect.org, 2025.
All rights reserved._

_Read the original article at Prospect.org
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* DOGE
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* Elon Musk
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* Brad Smith
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* Health Care
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* Affordable Care Act
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* cost cutting
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* corporate profits
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