Fallout from state's selection of companies to manage Medicaid for half a million Iowans

On Monday, the Iowa Department of Human Services announced the four private insurance companies selected to manage care for almost all of the 560,000 Iowans on Medicaid. Pending successful contract negotiations, Amerigroup Iowa, AmeriHealth Caritas Iowa, UnitedHealthcare Plan of the River Valley, and WellCare of Iowa will start managing care for Iowans on January 1, 2016. It’s too early to say how the change will affect medical services. Speaking to the Des Moines Register, Democratic State Senator Amanda Ragan expressed concern “that people will fall through the cracks” and said she hopes Iowans will contact state lawmakers “if problems develop” under the new system.

Some losers have emerged from the process already: namely, two companies now managing care for some Iowans on Medicaid, which were not selected to continue in that role next year. Follow me after the jump for background on the Medicaid privatization plan and the fallout from the Iowa DHS not choosing Magellan Health Inc and Meridian Health Plan as managed care organizations for 2016.  


Governor Terry Branstad didn’t campaign for re-election in 2014 on any plan to reorganize Medicaid services. Nevertheless, in February the Iowa Department of Human Services put out a request for proposals from private insurance companies, with a view to putting four companies in charge of managing care for almost all the 560,000 Iowans on Medicaid. Branstad did not seek legislative input on the policy.

This Medicaid Modernization Request for Proposal Fact Sheet covers the main goals of the privatization:

The initiative aims to improve the coordination and quality of care while providing predictability and sustainability for taxpayers in Medicaid spending. […]

DHS proposes to enroll the majority of the Medicaid, Healthy and Well Kids in Iowa (hawk-i) and Iowa Health and Wellness Plan enrollees in comprehensive managed care organizations (MCOs). DHS will contract with MCOs to provide comprehensive health care services including physical health, behavioral health and long-term services and supports (LTSS). This initiative creates a single system of care to promote the delivery of efficient, coordinated and high quality health care and establishes accountability in health care coordination.

What are the goals of Medicaid Modernization?

The main goals of Iowa’s Medicaid Modernization are:

 Improving quality and access

 Achieving greater accountability for outcomes

 Creating a more predictable and sustainable Medicaid budget

Why is Iowa making this change?

Iowa’s current Medicaid model operates multiple care management approaches based on the population being served. This contributes to a fragmented model of care. Where managed care arrangements are employed, services such as behavioral health, physical health, and transportation are provided by separate entities, which promotes the lack of care coordination among providers and limits financial incentives to actively manage a patient’s health care. Additionally, by excluding Medicaid enrollees when they become eligible for HCBS waivers or long-term care, there is no financial incentive to prevent institutionalization.

This initiative seeks to address the shortcomings of the current model by uniting health care delivery under one system, enabling all Medicaid enrolled family members to receive care from the same entity. This creates a single system of care to promote the delivery of efficient, coordinated and high quality healthcare and establishes accountability in health care coordination.

The “modernization initiative” wasn’t popular with Iowa legislative Democrats or with the majority of Iowa voters, according to a Public Policy Polling survey conducted in April. Ryan Foley reported for the Associated Press on August 17, “The contracts are expected to be potentially lucrative, worth up to 15 percent or more than $600 million of the state’s Medicaid spending going toward administrative expenses and profits.”

Democrats have warned that dollars redirected toward corporate profits and administrative expenses will come out of medical services Iowans need. Earlier this year, Mary Caffrey reported for the American Journal of Managed Care,

In other states, transitions to Medicaid managed care that were driven primarily by the need for budget savings have been rocky, with service disruptions and complaints about bureaucracy. Last year in Ohio, for example, news accounts chronicled tales of home health aides who left long-term clients for other jobs, after working for weeks without pay. New Hampshire’s move to Medicaid managed care is not yet complete, but already some families say they lack access to longtime providers.

The Branstad administration contends the new system will be a win-win for Medicaid recipients and the state budget. From Foley’s August 17 report:

The state says patients will receive the same benefits but the new system should reduce duplicative services.

“We want to choose an approach that would be the most successful in terms of managing the care and increase the healthy outcomes for people that receive these programs,” Branstad told reporters Monday, saying his administration carefully reviewed the bidders’ proposals in recent weeks.

Branstad’s administration believes the change can save $51 million in the first six months alone while not affecting “medically necessary services.” […]

The four companies will manage care using statewide networks of health care providers. They will receive set monthly fees from the state per beneficiary, giving them an incentive to keep costs down. That will replace a system in which Medicaid was billed for each service provided.

State officials believe the companies can improve care for the most expensive patients while cutting costs. The top 5 percent of the “high-cost, high-risk members” account for 90 percent of hospital readmissions within 30 days, 75 percent of total inpatient costs, 50 percent of prescription drug costs and average having five doctors, program documents show. Better coordination should be able to improve some of those outcomes, they say.

Let’s all hope for the best-case scenario: better care addressing health problems with fewer hospitalizations, readmissions and other expensive procedures. Many Iowans on Medicaid are not optimistic, though.

Magellan loses bid to keep managing mental health and substance abuse services

Foley’s August 18 report for the AP focused on this angle:

Magellan Health Inc. emerged as a major loser in Gov. Terry Branstad’s plan to turn over administration of the $4.2 billion Medicaid program to four national companies beginning Jan. 1. Magellan was one of six bidders passed over by the Iowa Department of Human Services for the work, a decision that surprised many Iowa providers and sent the company’s shares tumbling Monday afternoon.

The program will end Magellan’s contracts to provide behavioral health services, which were worth $461 million in the most recent fiscal year, on Dec. 31 and turn over those functions to the four companies who were selected. […]

Magellan has been a bedrock in Iowa’s Medicaid program for low-income and disabled individuals since 1995, serving hundreds of thousands of adults and children who needed mental health and substance abuse treatment. The company also recently worked with Medicaid and community providers to start Integrated Health Homes around the state, a concept meant to improve services for emotionally disturbed children and adults with serious mental illness.

Foley quoted advocates who were “shocked” Magellan was not one of the winning bidders. Some expressed fear that the transition to managed care by other companies could affect continuity of care for Iowans.

This week I’ve been in touch with many Iowans who are familiar with one aspect of Magellan’s work: managing mental health care for children. A Black Hawk County parent told me she is “worried sick” about Magellan not getting a state contract.

My daughter is 15 and is in out of state treatment. She has had the same case manager since before she moved in with me at the age of 6. Her case manager knows her, knows our family, and helps us in so many ways. I’m scared to death about what this will mean for her care.

The same parent is especially concerned that her daughter’s most consistent care provider may no longer be involved in her treatment, once Magellan leaves the scene.

My daughter is very sick, and she deserves someone experienced helping her. […]

We have never had anything in terms of medications or care denied [by Magellan], and I attribute that to a caring case manager and the length of the relationship. She knows my daughter and understands her needs. With these severely traumatized kids, that is key.

On the other hand, several parents of children with mental health conditions have shared difficult experiences with Magellan. Most did not want to speak on the record, with the exception of Alissa Tschetter-Siedschlaw (disclosure: she is a personal friend). Tschetter-Siedschlaw has adopted children through the foster system. They have complex mental health and behavioral issues, sometimes requiring multiple medications and therapies, and Magellan has not always agreed to cover treatment prescribed by medical professionals. For some years, Tschetter-Siedschlaw’s son had dual insurance, Medicaid and private. When he lost the private insurance coverage, Magellan refused to cover medication that had been keeping him stable. Tschetter-Siedschlaw appealed to an administrative law judge using the Iowa DHS appeals process, but the ruling went against her. A long trial and error period followed as she and medical professionals tried to get her son stable on medications Magellan would cover.

Some of Magellan’s cost-cutting policies make sense on paper but can cause problems for families. Tschetter-Siedschlaw described how certain medications cost the same per pill, regardless of the dosage. So if a child needs, say, 15 mg of a certain drug, Magellan might cover 30-mg pills only, to allow patients to receive twice as many doses for the same price. It’s a logical way to keep expenses down. The trouble is, parents are not always able to cut the pills evenly, which creates problems for administering the correct dose. Or, attempts to halve or quarter pills may leave some of the medication in powder on the cutting surface, again making it difficult to give children the correct dose.

Two attorneys who have represented children in the foster care system described problems with Magellan not covering prescribed medications or refusing to pay for placements at in-patient facilities (either in Iowa or out-of-state) that were suited for the child’s needs. In some cases, children with mental health problems have been placed in shelters or foster care during the appeals process, even though the shelter workers or foster parents had not been trained to handle the child’s severe issues.

According to people with working knowledge of such cases, Magellan has sometimes been slow to approve transfers from Broadlawns Hospital in Polk County to private facilities where beds were available. Those delays leave fewer beds available at Broadlawns for patients in crisis coming from the emergency room.

While some parents of children on Medicaid welcomed the news that they will not have to deal with Magellan after this year, others are worried that having multiple companies managing care for mental health services will create new problems. Sometimes children in the same household are on different Medicaid waivers. Will those parents have to deal with more bureaucracy when new companies take over their cases? Since children with intense mental health needs can be among the more costly patients to insure, will companies have an incentive to deny services and drive the parents of more severely ill children to one of the other insurers selected to manage care for Iowans on Medicaid?

Meridian loses bid to keep managing care for most of its current customers

Foley noted that having failed to become one of the winning bidders, Meridian Health Plan “will lose its state contract to manage care for some Medicaid beneficiaries that was worth $145 million last year.” Meridian is a physician-owned plan that Dr. Andy McGuire led until shortly after she became the Iowa Democratic Party’s state chair this year. Under its current contract, it has been managing care for about 58,000 Iowans.

I sought comment from McGuire, who directed me to Meridian spokesperson Ray Pitera. He said the company is “disappointed” with Monday’s announcement and “evaluating opportunities for reconsideration with the State of Iowa.” He noted that Meridian “does serve Medicare Advantage and Medicare/Medicaid dual members in limited service areas within Iowa,” and said there is no end date for such products.

Assuming Meridian is not able to convince the Iowa DHS to change its mind, the company will lose almost all of its Iowa business, though it will remain a managed care provider for many Medicaid recipients in Illinois and Michigan.

McGuire is not running for any elected office in 2016 but is widely considered a possible future candidate for governor, or possibly for Congress. She was Mike Blouin’s running mate during the 2006 Democratic gubernatorial primary. Politically, it would be more of an asset to lead a company still coordinating health care for tens of thousands of Iowans.

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