Cash-strapped Iowa DHS agrees to pay private Medicaid managers more

No matter how strained Iowa’s fiscal condition may be, count on Governor Terry Branstad to lend a sympathetic ear to corporations asking for more handouts. Tony Leys brought the latest example to light in a late Friday scoop for the Des Moines Register. The Iowa Department of Human Services will “help private Medicaid management companies shoulder huge losses they’ve suffered in covering more than 500,000 poor or disabled Iowans.” DHS officials estimate the deal struck in February will cost the state about $10 million, “which would be paid more than a year from now.”

The Branstad administration agreed last fall to transfer an extra $33.2 million to the three private firms picked to manage the state’s Medicaid program. It wasn’t enough to satisfy Amerigroup, UnitedHealthcare and AmeriHealth Caritas. They soon asked for much higher payments from the state, saying they were losing money under their contracts. Documents indicate each company lost at least $100 million during the first year of managing care for Iowans on Medicaid, Chelsea Keenan reported earlier this month for the Cedar Rapids Gazette.

One salient fact from Keenan’s story: administrative costs for the insurers totaled 6.8 percent, 11.6 percent, and 11.9 percent of expenditures. Before Branstad unwisely rushed to privatize Medicaid, our state-run program was only spending about 4 percent on administrative costs.

DHS Director Chuck Palmer told reporters in January that the state would not offer the Medicaid managed-care providers more money for the 15-month period running through the 2017 fiscal year. Only weeks later, officials amended the current-year contracts with “risk-corridor agreements” calling for the DHS “to shoulder the management companies’ financial losses if they grow beyond a certain point.”

Federal officials “have signed off on the contract amendments,” but no one informed key legislators about the development. Republican State Representative Dave Heaton, who co-chairs the Health and Human Services Appropriations Subcommittee, found out from Leys.

Speaking of appropriations, where will Iowa find extra money to pay the Medicaid managers? Around the time DHS leaders signed the contract amendments last month, the department was forced to absorb $25.5 million in spending cuts before June 30.

State lawmakers have not yet set fiscal year 2018 budget targets, but money will surely be tight following a recent downward revision to revenue projections. Mid-year budget cuts can’t be ruled out for next year either.

Meanwhile, Medicaid recipients are getting less care than before privatization or having to fight insurance companies over denied claims. Managed-care companies have slashed in-home services for Iowans with disabilities. About a quarter of the Iowans on Medicaid cannot access a program providing transportation to and from medical appointments. AmeriHealth Caritas is cutting payments to agencies that serve people with disabilities, leaving some caseworkers out of a job. Reimbursement problems drove some providers out of business last year.

Given Branstad’s track record of doing whatever big business asks of him, it wasn’t hard to predict that the DHS would end up shoveling more money to the Medicaid managers. The governor’s imminent departure creates an opportunity for Lieutenant Governor Kim Reynolds to learn from her predecessor’s mistakes. Here’s hoping she will demonstrate her capacity for independent thinking by pulling the plug on Iowa’s failed Medicaid privatization.

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