Iowa's Medicaid privatization raising more red flags

The Branstad administration has justified its “Medicaid Modernization Initiative” with optimistic projections about more “efficient, coordinated and high quality healthcare” and greater “accountability in health care coordination,” delivered at a savings to taxpayers.

Jason Clayworth shared a less encouraging perspective in the August 21 Des Moines Register: all four private insurance companies now negotiating contracts to manage Medicaid in Iowa have “faced serious charges of fraud or mismanagement” related to serving Medicaid recipients in other states. Some of those violations led to “hundreds of millions of dollars in fines” against the insurers.  

Click through to read the whole Clayworth exclusive, with links to news reports about each incident. Some lowlights:

Amerigroup in 2008 agreed to pay $225 million to settle claims that it defrauded the Illinois Medicaid program by systematically avoiding enrolling pregnant women and unhealthy patients in that state’s managed care program, documents from the U.S. Department of Justice show. […]

WellCare in 2009 agreed to pay $80 million – half in restitution to victims – to settle allegations that the company had inflated expenses in Florida, skimped on health care services to Medicaid recipients there and pocketed the difference. […]

UnitedHealthcare was fined $173.6 million in 2014 by the state of California for multiple issues including failing to make timely payments and respond to provider disputes. […]

AmeriHealth agreed to pay $2 million in damages to the Kentucky Medicaid program after it falsely reported providing health services such as Pap smears, which helped the company receive a $677,000 bonus, according to that state’s attorney general.

Employees representing three of the insurance companies responded in writing to questions from the Register about the mismanagement. Short version:

• Amerigroup’s answer was what we would have called “non-responsive” in high school debate. Instead of commenting on the specific fraud claims from Illinois, the statement strung together some broad assertions: “we fully comply with the rules and regulations of the Medicaid agencies,” “Amerigroup’s primary focus is providing access to high quality health care and helping improve health outcomes,” “We are proud of the high quality services we provide,” and so on.

• Wellcare blamed problems on “actions of a few individuals” who were “separated” from the company in 2007.

• UnitedHealthcare did not respond to the Register but has filed a lawsuit to block the fine California’s insurance commissioner levied last year.

• AmeriHealth said their “settlement of a civil matter […] does not in any way constitute an admission of wrongdoing. We entered into this settlement to resolve disputes and avoid the delay, expense and distraction associated with protracted litigation.”

Democratic State Senator Amanda Ragan told Clayworth that such problems are “one of the main reasons the Legislature pushed for an oversight committee.” Iowa House Republicans initially declined to act on an oversight bill that senators had passed unanimously. But Senate Democrats kept pushing on the issue during conference committee negotiations. The final health and human services budget contained oversight provisions that somehow escaped Governor Terry Branstad’s veto pen:

[T]he bill establishes a new legislative committee to provide oversight of the Medicaid program. The bill also outlines a procedure for oversight of managed care that represents a hybrid between the original Senate oversight proposal and the oversight proposal championed by [the Iowa Medical Society] through our seat on the Medical Assistance Advisory Council (MAAC). The legislation directs the Department of Human Services (DHS) to partner with stakeholders to convene monthly statewide public meetings beginning in March 2016, shortly after the January 1 start of Medicaid managed care. DHS is directed to use these meetings to receive input and recommendations from stakeholders and members of the public regarding managed care, and will then submit that input to the Executive Committee of the MAAC on at least a quarterly basis. The MAAC is a federally-mandated patient and provider stakeholder group that provides guidance to DHS regarding the state’s Medicaid program. In addition to our seat on the full MAAC, IMS has held the seat representing Iowa physicians on the MAAC Executive Council for several years, and earlier this year was reelected to another two-year term.

Members of that oversight committee (not yet named) will have their hands full. With four insurance companies managing Medicaid for about 560,000 Iowans, a lot of problems could go undetected.

The Branstad administration projects $51.3 million saved in Medicaid spending from January 1 (when the managed care shift goes into effect) until the end of the current fiscal year on June 30. Speaking to Clayworth, State Senator Janet Petersen echoed concerns of many Medicaid patients that the savings will come at the expense of medical care. Talking to Iowa parents affected by one area of Medicaid services, Bleeding Heartland heard wide-ranging fears about what the transition to new insurance providers will mean for children with serious mental health problems. Will companies deny coverage of medications or behavioral therapies in order to cut costs in the short-term and perhaps drive more expensive Medicaid recipients to other providers?

Iowa Senate President Pam Jochum, the primary caregiver to a developmentally disabled adult daughter on Medicaid, used stronger words in an interview with Mike Glover of the Iowa Daily Democrat.

“This is simply not a good idea; it’s a train wreck waiting to happen.” […]

“There are two options: people just aren’t going get services they used to get or the reimbursement rate to the local providers is cut,” Jochum said.

If those reimbursement rates are cut, the problem is likely to get much worse, Jochum argued. “Some providers are going to decide we can’t make it any more if the reimbursement is cut,” Jochum said.

Jochum said that those looking at the issue need to look at the history. The government got into the business of providing health care for the poor and disabled almost exclusively because private insurance companies couldn’t figure out how to make a profit from it, and that may have changed.

“The private sector couldn’t figure out how to make a profit from it and now the private sector has figured out a way to make a profit from it,” Jochum said. […]

“What people forget is the Medicaid program is the second largest insurance company in the state of Iowa,” Jochum said. Any shift to having the services provided by private companies would require tough oversight that’s not built into Branstad’s proposal.

Iowa Department of Human Services spokesperson Amy Lorentzen McCoy assured the Register that the contracts with Medicaid managers will contain strong monitoring and reporting provisions, and that DHS will hire an outside expert to track the quality of services provided.

The Russian expression “hope for the best but prepare for the worst” comes to my mind. It will not be easy to monitor billions of dollars in Medicaid spending on more than half a million people scattered across the state.

Any relevant comments are welcome in this thread.

P.S.- Speaking of red flags, Clayworth reported for the Register on August 18 that former State Representative Renee Schulte jumped straight from contract work for the Iowa DHS to contract work for WellCare, one of the companies that submitted a successful bid to manage Medicaid. Schulte worked on mental health care issues during her two terms in the Iowa House. Shortly after losing her 2012 re-election bid to Democrat Art Staed, Schulte got a six-month contract to advise the top DHS mental health administrator. State officials extended that contract. Clayworth picked up the story:

Schulte’s consulting firm was paid almost $100,000 a year to assist DHS’s mental health division since January 2013, but terminated its contract Feb. 20, four days after Gov. Terry Branstad announced the state was seeking competitive bids to contract with private companies to manage Iowa’s Medicaid program.

Days later, Schulte began working with WellCare – one of four companies selected Monday to manage the state’s Medicaid program, which provides health insurance for 560,000 poor and disabled Iowans. […]

Schulte told The Des Moines Register that her role for DHS was not related to the agency’s efforts to privatize Medicaid management and never overlapped with her work for WellCare. […]

“I quit so I could get involved with the bid,” Schulte told the Register. “At the time I had talked with a couple of different companies, but it ended up and was WellCare that I signed a contract with.”

Since contract workers are not covered by Iowa’s “revolving door” law, Schulte probably did not break any rules. But to put it mildly, it doesn’t look good to switch in a matter of days from advising the government to advising a company hoping to profit from a contract with that government.

About the Author(s)