In April 2016 three for-profit companies took over management of Iowa’s Medicaid program. Gov. Terry Branstad says the program is saving the state money but the companies say they are losing money. Critics worry about a loss of services.
Zach Boyden-Holmes/The Register
Scrambling to meet a shrinking budget, Iowa is cutting tens of millions of dollars in Medicaid payments to hospitals, doctors and other health care providers.
Many health care providers say Medicaid already pays less than it costs to treat patients. But state administrators say they must trim some of the pay rates to meet their 2018 budget.
The Medicaid payment reductions were approved this week by a sharply divided Iowa Council on Human Services, which advises the Department of Human Services.
The cuts are part of the way the department is implementing budget cuts ordered by the Legislature for the fiscal year that starts July 1.
Council Chairman Mark Anderson of Decorah, who is a Lutheran minister, said many of the cuts in Medicaid payments effectively would come from hospitals’ budgets.
“Rather than a cost-containment strategy, we could really be calling this a cost-shifting strategy,” he said at Wednesday’s meeting. “… It’s less for saving money and more for playing a shell game.”
However, Anderson joined two other council members in voting to approve rules implementing the cuts to meet the department’s tight budget. The vote was 3-2.
The council expressed concerns that the cuts would drive more health care providers away from the Medicaid program.
Medicaid serves more than 600,000 poor or disabled Iowans, and it historically has paid health care providers much less for services than private insurance plans pay. The new payment reductions are likely to sharpen the disparity.
Council member Kim Spading, who is a University of Iowa pharmacist, said the payment rate reductions would force hospitals to make up the difference. She said that’s especially true for a cut in how much hospitals are paid for patients with unusually complicated and costly health problems.
Spading gave a hypothetical example of a patient with hemophilia who needs surgery. Such a patient could require $1 million worth of a blood-clotting medication to prevent deadly bleeding, she said.
But under the new rule, the maximum extra charge to Medicaid would be dropped from $75,000 to $16,000.
“I agree these are tough decisions, but you’re trying to target in something like this the most complicated patients, and they’re the ones where there are not other options,” Spading told Human Services administrators.
The cut in those Medicaid payments is expected to save the state $10 million in the next fiscal year, Medicaid Director Mikki Stier told the council.
In all, the Medicaid cuts being implemented next month are expected to save the state nearly $31 million over a year, she said.
The state reductions will automatically trigger a cut in the federal share of such payments.
The federal government generally pays more than half of Medicaid expenses, though Stier said she did not immediately have a total estimate of how much Iowa health care providers stand to lose.
Stier said the Medicaid reimbursement reductions were needed for the department to meet a tight budget set in law by the Legislature and the governor.
“These are not easy decisions. I do not want to sound really crass,” she told the council.
Spading, who voted against the proposals, said it was especially disheartening to see the state reducing Medicaid payments to Iowa care providers shortly after it hired for-profit companies from out of state to manage the program.
“That is just so wrong,” she said.
Council member Sam Wallace, a retired hospital executive from Des Moines, voted to approve the cuts.
“I don’t think it’s quite fair, but that’s the way it is,” he said. “… If we’re going to make a difference in the long term, everybody’s going to have to take less, or do more with less.”
Council member Alexa Heffernan of Cedar Falls joined Anderson and Wallace in voting to approve the Medicaid rate reductions. Council member Kimberly Kudej joined Spading in voting no.
The council voted unanimously to send a letter of concern to legislators about the effect of such cuts. All council members were appointed by former Gov. Terry Branstad, who is a Republican.
After the council meeting, Iowa Hospital Association spokesman Scott McIntyre released a statement criticizing the cuts and the private Medicaid management firms that will implement the new payment rates.
“It’s further proof that these companies cannot deliver effective management, despite their claims, and have placed healthcare providers and the vulnerable Iowans they care for in jeopardy,” McIntyre wrote. “Further, this comes as Congress and the administration are considering massive cuts to the Medicaid program and rolling back Medicaid expansion, undermining coverage and health care gained by thousands of Iowans. It’s a perfect storm of fiscal folly that seems to ignore the day-to-day realities of poor, elderly and disabled Iowans.”
The Iowa Medical Society, which represents physicians, also complained about the payment cuts ordered by legislators.
“We recognize that the state is facing difficult financial decisions, but we do not believe the most appropriate method of reducing state spending is to impose cuts that have the potential to reduce access to care for the more than 600,000 Iowans with Medicaid coverage,” the group wrote in a statement after the meeting.
Planned Parenthood of the Heartland said Thursday it is closing four clinics in Iowa in response to state legislation passed by majority Republican lawmakers that blocks public money for family planning services to abortion providers.
At its meeting Wednesday, the human services council voted 4-1 to reject a controversial change to the state’s family planning program. Under the change, which is to take effect July 1, any agency that provides abortions is to be barred from receiving state money to provide birth control.
The change would mean Planned Parenthood of the Heartland, UnityPoint Health and University of Iowa Hospitals and Clinics would no longer be allowed to participate. It also would mean the state would forgo $3 million in federal money for family planning efforts.
Abortion opponents favor the change, saying other clinics can provide the birth control services. But skeptics say the change will severely limit moderate-income Iowans’ access to birth control.
The council’s rejection of the proposed family planning change was so unusual that council members and top department administrators were not immediately sure what the practical effect would be on the new program, which is to start in less than three weeks.
On Thursday, the council scheduled a telephone meeting for Friday to reconsider the issue, which was listed on their agenda as “a double emergency” amendment.