This editorial appeared May 25 in The Des Moines Register:
Iowa is now 14 months into its experiment with privatized Medicaid management.
The stated rationale for moving away from state-managed Medicaid and into a system administered by private, profit-making companies was cost savings: The change was supposed to save taxpayers a fortune while also resulting in healthier Iowans.
Few people bought that argument, partly because some of the other states that had pinned their hopes on privatization had already experienced a rude awakening: Privatization was costing more and, at the same time, resulting in complaints of nonpayment from medical providers and patients.
And that’s where Iowa stands today. Privatization is a slow-motion train wreck, with providers across the state closing up shop or taking out loans to make payroll because the checks from Medicaid are slow to arrive and patient services are being paid at a lower rate. At the same time, the managed care organizations that Iowa hired to administer Medicaid say they are losing million, and need an enormous increase in funding in order to make ends meet.
This was not only predictable — it was predicted. There was never any reason to suspect that a group of corporations, new to Iowa and burdened with all of the financial obligations associated with every for-profit endeavor, would somehow be able to serve the health needs of Iowans better and more efficiently than the state itself.
A new report from the nonpartisan Government Accountability Office illustrates one reason for this: executive compensation.
The report examined the salaries and bonuses of top executives at Medicaid MCOs in 10 states — Iowa was not among the 10 — and compared them with the salaries of state-employed Medicaid directors.
The report shows that:
In 2015, Medicaid directors earned far less than most of the top executives at MCOs. The state-employed directors averaged $152,439 per year, while the total compensation for top MCO executives averaged $314,278.
Although the MCO executives were collecting far more pay than the state Medicaid directors, their work was easier.
According to the GAO, MCO executives who once worked as state Medicaid directors said their duties at the state had been far more complex, time-consuming and demanding.
State Medicaid directors told the GAO that the federal government, the media, their governors and their state legislatures all held them personally accountable for the performance of their Medicaid programs.
The MCO executives, who operate in comparative anonymity, told the GAO they were not generally accountable to lawmakers, the media or the public.
Just a few days after the GAO issued its report, two of Iowa’s MCOs reported another round of claimed losses in filings made with the Iowa Insurance Division.
According to these filings, AmeriHealth Caritas Iowa claimed losses of nearly $24 million in the first quarter of 2017, while Amerigroup Iowa posted a loss of $4.5 million. (The third MCO, UnitedHealthcare, has several lines of business in Iowa and does not file a separate set of financial reports for its Medicaid operation.)
The three MCOs are now in the process of renegotiating their capitation rates, which are the monthly, per-member fees the state pays the insurers to manage Medicaid.
The MCOs believe Iowa’s Medicaid program is “drastically underfunded” and claim that, during their first year of operation in Iowa, they each lost more than $100 million. In fact, AmeriHealth claimed losses of nearly $300 million and then informed providers of home- and community-based services it would no longer pay them the agreed-upon rates but, instead, would pay them the absolute minimum Medicaid rate, regardless of the individual patients’ needs.
That’s a critical cost-cutting maneuver that will make it harder for providers to offer in-home caregiving for the elderly and the disabled.
If these services, which include assistance with cooking and cleaning, are curtailed, more Iowans will be forced to leave their homes prematurely and move into costly care facilities where they’d rather not live.
Branstad bypassed the Iowa Legislature in privatizing Medicaid, and he did so with the blessing of the federal Centers for Medicare and Medicaid Services, but our state lawmakers aren’t powerless.
They can intervene next year with legislation that prohibits the continued outsourcing of a fundamental function of state government — the provision of health care for Iowa’s most vulnerable citizens.