Half-baked state audit doesn't settle questions about Medicaid savings

Privatizing Medicaid saved the state of Iowa about $126 million during the fiscal year that ended June 30, according to a report State Auditor Mary Mosiman released on November 26.

I put low odds on that estimate holding up after a more diligent auditor takes office.

Even if it did, this review of “savings” was too narrow to reveal whether turning Medicaid over to for-profit companies was a good deal for Iowans.

Democratic State Senator Pam Jochum requested a special investigation by the State Auditor’s office in May, after the Iowa Department of Human Services failed to provide a credible explanation for why it had tripled its previous estimate on Medicaid savings.

Mosiman agreed in early June to have her staff look into the matter. Five auditors worked on today’s report, enclosed in full below.

Strike one: Mosiman kept voters in the dark.

Ideally, the auditor would have taken the initiative to investigate what was going on with Medicaid privatization herself. The program costs taxpayers billions and covers health care for more than one-fifth of Iowans.

At the very least, she should have prioritized Jochum’s request so that voters could consider the findings before the general election. Medicaid management was a major area of concern for Iowans, according to several recent polls by Selzer & Co for the Des Moines Register (see here and here).

Mosiman did the opposite. She guaranteed the report would not appear before election day by setting the review period from January 1, 2017 through November 7, 2018.

Why update the estimates on November 7? It would have been more logical to examine costs and spending through the end of the last fiscal year (June 30) or through the first quarter of the current fiscal year (September 30).

Strike two: The review didn’t address the relationship between money spent and services provided.

Auditors compared three methodologies for calculating Medicaid savings: one the governor’s office used in January 2017, one the Department of Human Services used in November 2017, and one the DHS used in May 2018. They concluded that the first two estimates “did not account for all Medicaid program costs” during the year incurred, whereas the third technique “is an accurate and reliable method for estimating Medicaid savings.”

The report noted on page 6, “This review does not examine the impact on quality or timeliness of services provided to Medicaid beneficiaries under the fee-for-service or managed care program. The Department and the MCOs [managed-care organizations] have both established grievance and appeal procedures to address services provided by the MCOs.”

If I buy half as much food this week as usual, I’ll “save money” at the grocery store. But analysis of those savings wouldn’t be meaningful without comparing what I spent with what I purchased.

Jochum specifically wanted the auditors “to look at all the numbers and tell the public, if there are savings, where are they coming from?”

Strike three: The review didn’t consider the for-profit insurers’ unpaid bills.

Getting reimbursed for health care services was a non-issue under state-run Medicaid, but providers of all sizes, from small local businesses to large hospital systems, have had trouble with the MCOs. Sometimes the insurers didn’t pay at all, or paid late, or reclassified a service to avoid covering the whole cost. Democratic State Senator Liz Mathis gave one example of this shell game in April 2017, when the Branstad administration claimed Medicaid privatization had greatly reduced hospital admissions.

They say that hospital admissions are down 54 percent overall. Wow! Here’s the ugly truth: that hospitals are continually battling with the MCOs over appropriate classifications of patients. For instance, if a patient comes into the ER, they’re sick, unstable, or mentally ill, the MCO is now telling the hospital that these patients are “observation patients,” and that classification has led to the admission number looking much lower than the comparison of what we used to do. Hospitals report an incredible increase in observation stays, and hospitals are not getting paid. It is much cheaper for the MCOs to do this. That’s the ugly truth.

Mosiman’s staff do not appear to have explored reimbursement problems when considering the state’s cost savings on Medicaid.

Auditor-elect Rob Sand promised during the campaign that Medicaid MCOs “would get subpoenas” rather than raises if he becomes state auditor. His comment on today’s report highlighted its defects.

I wouldn’t try to tell my wife how much money I saved buying a particular truck that hasn’t got an engine or wheels. Yet this report “does not examine [privatization’s] impact on quality or timeliness of service.” So we have no idea what we are getting for our money.

That the State Auditor choose the day after the election to close the review period and thus to issue it as a lame-duck leaves Iowans wondering about motivations.

I was elected to provide truth, integrity, and accountability to Iowans, and they deserve more answers. I will dig into this issue when I assume office in January, as I promised voters.

The Iowa Senate Democrats released this statement from Jochum:

“The partial review of the Medicaid privatization disaster by the departing State Auditor is a big pile of excuses with no good answers for Iowa taxpayers who are being ripped off.

“State Auditor Mary Mosiman joins a long line of Republican politicians – led by Governor Reynolds and Republican legislative leaders – who still cannot answer these simple questions:
· What data is there to show that privatized Medicaid is making Iowans healthier?
· What data is there to show how much the out-of-state corporartions still owe Iowa hospitals, doctors and other health care providers for services provided to Medicaid members?

“We remain concerned that the unexpected $100 million increase in payments to the out-of-state corporations running Medicaid will result in further cuts and delayed payments to Iowa health care providers that provide critical services to hundreds of thousands of Iowans, as well as additional cuts to education, health care and public safety to cover the additional payments to the corporations.

“We hope that the Governor and legislative leaders of both parties will work with the newly elected State Auditor, Rob Sand, to open up the books and give Iowans an honest assessment of the impact of privatized Medicaid on Iowa taxpayers, Medicaid members and health care providers.

“Finally, we renew our call for Governor Reynolds and legislative Republicans to finally reverse course and join legislative Democrats in supporting a return to a more efficient, publicly managed system.”

State Representative Lisa Heddens, the ranking Iowa House Democrat on the Human Services Appropriations Subcommittee, had this to say:

“While the State Auditor’s report is still incomplete, it does at least confirm that Iowans were misled by the Reynolds Administration on several occasions. The report does not include millions in unpaid claims that the out of state companies owe to providers or the services that have been denied to thousands of Iowans, including our seniors and those with disabilities. The report also confirms a complete lack of transparency with the current Medicaid system despite the billions of dollars Iowa taxpayers are giving to these private companies.

The only conclusion to draw from today’s report is that Medicaid privatization is still a disaster. It’s time for the Legislature to work together and fix this broken system next session. Iowans deserve it.”

Governor Kim Reynolds’ office provided a classic non-answer to the Des Moines Register.

The Register asked the governor’s office for response to the audit’s findings. Reynolds’ spokeswoman, Brenna Smith, replied with a reiteration that the governor has confidence in the financial sustainability of the privately managed Medicaid system. “The governor is working to ensure Iowa has a program that better helps improve patient health,” Smith wrote. “The governor has already made positive changes to the program since taking office and will continue to do so.”

Iowans will learn much more about what is happening with Medicaid after Sand takes office.

Appendix: Report from State Auditor’s office on Iowa Medicaid savings, released on November 26:

  • Iowans are supposed to take this audit seriously??

    When I initially saw the news story about this audit, my first thought was to wonder whether the savings might have come from not providing needed services or not providing them well. Then I thought “surely this audit has addressed that issue in detail.” Instead, that issue wasn’t addressed at all??? “Half-baked” is a generous assessment. Apparently this raw mess never even saw the inside of the oven.

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