Branstad will transfer more money to for-profit Medicaid managed care providers

During his long tenure, Governor Terry Branstad has typically been attentive to the concerns of for-profit corporations. So when the insurance companies picked to manage Medicaid for more than half a million Iowans reported in August that they were losing money on the deal, they got a favorable hearing.

A senior analyst from Iowa’s non-partisan Legislative Services Agency confirmed on Friday that the Branstad administration has agreed to pay an extra $33.2 million to the three Medicaid managed care providers for the contract period beginning on April 1 and continuing through June 2017. I enclose that e-mail below, along with reaction from several Democratic state senators.

Hardly a week goes by without my hearing yet another story about an Iowan hurt by Medicaid privatization. Thousands of people have been forced to change doctors or have lost access to therapy for loved ones. This summer, a survey of care providers for Iowans on Medicaid found that:

90% say their administrative costs have increased;
80% say more health care claims are being denied;
79% of providers say they are not getting paid on time;
66% say they are being reimbursed at rates lower than their contracted rates;
61% say the quality of services they can provide has been reduced;
46% have or plan to cut their services; and
28% have taken out loans while waiting to be paid.

Branstad refuses to adjust his Medicaid policy to help patients who are suffering or care providers struggling to keep the doors open. On the contrary, he keeps spinning tales (backed up by no evidence) about “protecting the interests of the taxpayers” and “stopping significant fraud and abuse.” His administration hasn’t followed up on supposed new benefits for patients and puts out impossible-to-verify accounts of “success stories.”

Critics warned that any money saved by privatizing Medicaid would come at the expense of health care for vulnerable patients. They warned that those apparent savings would evaporate once for-profit insurers demanded more money from the state, as had happened in Florida following that state’s rapid privatization of Medicaid.

Iowa enjoyed low administrative costs under the old Medicaid system. Thanks to our governor and his Republican enablers in the state legislature, taxpayers will now experience the “nightmare” scenario that has already unfolded for Medicaid patients and care providers. Connecticut saved money by moving away from managed care, back to the state-run, fee-for-service model.

Don’t expect anything that sensible from Branstad, who happily spends other people’s money when corporations come calling.

UPDATE: Branstad claimed at an October 31 press conference that the state budget will still save money thanks to efficiencies in the new Medicaid system. If those savings materialize (they didn’t in Connecticut), it will happen through companies denying health care services to Iowans.

SECOND UPDATE: Added below excerpts from an excellent post by Iowa Policy Project Executive Director Mike Owen.

Iowa Senate Democrats press release, October 31:

Reaction to Branstad Administration’s plan to shift more money to the for-profit corporations managing Iowa’s Medicaid system

Statements from Senate Democratic members of the Legislature’s Health Care Policy Oversight Committee in response to the email below, titled “Medicaid MCO rate change,” from a senior legislative analyst with the non-partisan Iowa Legislative Services Agency

“Many correctly predicted Governor Branstad’s hasty handover of the state’s Medicaid health care system to for-profit, out-of-state companies would not be in the best interests of Iowans,” said Senator Amanda Ragan of Mason City, co-chair of the Health Care Policy Oversight Committee. “So far, Medicaid privatization has been a nightmare for hundreds of thousands of elderly and disabled Iowans and their families, as well as for thousands of local health care providers.

“Surveys show that privatized Medicaid has reduced help for Iowa families, cut the quality of services provided, and increased financial strains on our state’s health care employers,” said Senator Joe Bolkcom of Iowa City, a member of the Health Care Policy Oversight Committee. “In response, Governor Branstad wants Iowa taxpayers to reward the companies responsible by handing over even more tax dollars to them.”

“Republican legislators made a terrible mistake by refusing to join Democrats in our opposition to Governor Branstad’s Medicaid mess,” said Senator Liz Mathis of Robins, a member of the Health Care Policy Oversight Committee. “I’m concerned this new $33 million increase will be followed by demands for more money from the Wall Street firms now managing the health care of one in six Iowans.”

– end –

——– Original message ——–
From: “Benson, Jess [LEGIS]”
Date: 10/28/16 8:29 AM (GMT-06:00)
To: “Trow, Brad [LEGIS]” , “Malone, Carrie [LEGIS]” , “Furlong, Zeke [LEGIS]” , “Hyatt, Anna” , “Bell, Kris [LEGIS]” , “Kehoe, Theresa [LEGIS]” , “Bronsink, Josh [LEGIS]” , “Trimble, Russ [LEGIS]”
Cc: “Lyons, Holly [LEGIS]” , “Reynolds, Dave [LEGIS]” , “McDermott, Timothy [LEGIS]” , “Banks-Adams, Angel [LEGIS]” , “Ohms, Kenneth [LEGIS]” , “Funaro, Patty [LEGIS]”

Subject: Medicaid MCO rate change

Good Morning-

Yesterday afternoon we had our regular Medicaid forecasting meeting with DHS and DOM and although we are making some final adjustments to the number and the new forecast won’t be available for a week or two, there was important news that I wanted to share with you. Based on a review of recent Medicaid data by DHS and Milliman, the Administration has decided to increase the capitation rates paid to the MCOs by $33.2 million state ($94.5 million federal) for the first MCO contract time period spanning the final months of FY 2016 and FY 2017.

Capitation rates for the MCO contracts were originally developed using FY 2014 data and with only 6 months of Iowa Health and Wellness Program data and since this time there have been some major shifts in health care spending trends. Two of the major drivers are:
· When the capitation rates were developed the Iowa Health and Wellness Program was just getting started making it difficult to estimate the overall health of that population and the types of care and services they would need(inpatient hospital vs. outpatient hospital vs. physicians’ offices). Current spending trends the population have ended up significantly higher than the rates developed. One thing to note, the difference in the federal and state numbers is greater than the regular Medicaid FMAP rate (56.28%) because much of the rate adjustment impacts the Health and Wellness population and they receive 97.5% federal FMAP rate.
· Another significant driver that lead to the rate increase was prescription drug costs. The capitation rates do not include the rapid rise in drug costs we have seen over the past several years. I’m sure most of you are aware of the new hepatitis C curing drugs that cost around $80,000 for a complete treatment and the increase in the EpiPen cost, but there have also been significant increases in a number of other drugs leading to higher drug spending. These increases have been partially offset by higher drug rebates, but the state keeps the drug rebates while the MCOs are responsible for the higher costs incurred by both the Iowa Health and Wellness and the Medicaid populations. This is one of the factors that lead to a larger surplus at the end of FY 2016.

The factors above weren’t the only ones that lead to the rate changes, but were the leading causes. I’m sure you will have many conversations with the DHS over this decision in the months to come, but the message they gave me was that to be fair to the MCOs and to the providers and patients they serve, the Administration felt it was necessary to make this change.

As I said above, it will probably be a week or two before we have a Medicaid forecast, but for FY 2017, we are probably looking at shifting from several million dollar surplus before this rate adjustment to a $20-$30 million dollar need.

Please let me know if you have any questions.


UPDATE: Mike Owen posted on the Iowa Policy Points blog on November 1,

[T]he Des Moines Register story prominently noted reassurances from the Governor and his chief of staff, Michael Bousselot:

But the situation will not negatively impact the state budget because Medicaid cost savings will exceed $140 million when compared to the old Medicaid program, they said.

Hmmm. So, we’re going to spend $33 million more — $33 million we weren’t planning to spend — and that doesn’t “negatively impact” the state budget?

That is not what we’re told when it’s $33 million for schools, or cracking down on polluters or businesses that deliberately stiff their employees for wages owed. For those things, we just don’t have the money. […]

Budget projections are always a difficult thing. But from the start of the Governor’s decision to privatize Medicaid, without legislative consent, we have been asked to accept optimistic assessments of what to expect. And if the optimism is misplaced? Education funding and other general-fund priorities inevitably lose.

LATER UPDATE: Sara Jordan-Heintz reported for the Marshalltown Times-Republican on November 3 that Central Iowa Family Planning, a non-profit serving people in a six-county area for more than 40 years, will close its last two offices in Grinnell and Marshalltown this month.

“The three companies that took over managed care for Medicaid — AmeriHealth Caritas, Amerigroup and United Healthcare — aren’t accustomed to dealing with an organization like us, who provide a unique type of care,” said Mandi Beeghly, RN, executive director of CIFP. “There are issues with payments and reimbursement levels, to the point that there is really nothing more we can do. They’ve killed us.”

According to CIFP Board Chair Deb Tharp, “Our small agency simply cannot remain financially viable while dealing with the increased costs of federally mandated Electronic Health Records and much lower reimbursements from the new Managed Care Organizations that replaced traditional Medicaid in Iowa.”

CIFP is a stand-alone entity not affiliated with a national organization. It is a non-profit, relying solely on health insurance reimbursements, donations and grant funding. It serves six counties, out of its Marshalltown and Grinnell offices.

“We served almost 2,000 different clients last year in the Marshalltown office alone. We see anybody, regardless of ability to pay. We provide STD screenings, birth control and pregnancy tests,” Beeghly said. “There are so many people that rely on us as their only access to healthcare, and most are on Medicaid or have no health insurance. Who’s going to take care of them? Where are they going to go? What about the college populations? I have fought to keep us going, but it’s a battle that’s unwinnable.”

The Des Moines Register’s editorial board weighed in on November 4.

Less than four months after taking over Medicaid, the insurers claimed they were experiencing financial losses. They refused to provide public documentation to support the assertion. The spokesperson for one company told a Register reporter it was “not appropriate” to discuss the company’s financial report.

Lucky for the already wealthy insurers, Iowa’s governor is there to lend a helping hand. […]

In fact, bailing out insurers defies the very premise of managed care, which is to create state budget predictability in Medicaid spending going forward. Iowa pays MCOs a fixed amount of money per month to insure each beneficiary. The rates are agreed upon by both parties and based on actuarial projections reviewed by both.

Now apparently a review of new data determined the projections were wrong. The governor, who has never met a for-profit company he didn’t want to funnel public money to, grabbed the state wallet.

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