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
Iowa will spend $600 less on each Medicaid recipient this year compared with before private companies were hired to manage the program, according to a projection from the nonpartisan Legislative Services Agency.
The data, generated through a request from The Des Moines Register, compares state and federal government costs in the fiscal year that ended June 30, 2015 — the last full year the state managed the program — with cost projections in the current fiscal year that ends next month.
It shows the average annual cost per enrollee dropping from $8,289 to $7,689, a 7 percent reduction.
Better management with a focus on eliminating unnecessary costs or procedures are the key reasons behind the savings, said State Rep. Dave Heaton, R-Mount Pleasant, and chairman of a House committee that oversees Medicaid spending.
But state and national Medicaid experts contend the numbers are deceiving.
The data does not account for millions of dollars in losses the private companies hired to manage the program have accrued in the current fiscal year, losses Iowa has agreed to at least partially repay in 2018. Those losses won’t show up in the current year’s budget.
Critics contend the review is shortsighted because of an expected increase to rates paid to the private companies starting July 1 could significantly raise long-term costs.
They additionally note hundreds of complaints to state agencies since the companies took over in April of 2016 that allege cuts to services or failure to timely pay doctors who provide services for Iowa’s $4.2 billion Medicaid program.
Jamie Campbell’s in home care has been more than cut in half since Gov. Branstad’s Medicaid privatization went though.
Savings don’t mean the program is improved or better for Iowa, they said.
“What we’re talking about here are the state’s costs,” Anne Kinzel, former executive director of Iowa’s Legislative Healthcare Reform Commission. “It’s just hard to believe the people who work at the state of Iowa outfoxed these companies.”
The companies — AmeriHealth, UnitedHealthcare and Amerigroup — began managing Iowa’s $4.2 billion Medicaid program in April of 2016 following a three-month delay from federal officials who initially determined the state wasn’t ready for the transition.
The move was controversial.
Critics in 2015 warned that profits, not public health, would dominate decisions for the 568,000 poor or elderly Iowans on the program if private companies took control.
Advocates, including Gov. Terry Branstad and Lt. Gov. Kim Reynolds, said the state would save tens of millions of dollars each year and that health would improve through better case management.
Branstad and his administration have continued to say that privatizing management of the state’s Medicaid program will save taxpayers $110 million in the first year and $232 million the next.
The saving estimates have remained in place despite the administration’s agreements that will pay the three companies an estimated $235 million more to cover their losses.
The state’s share is $10 million, payable in 2018 and not reflected in the current Medicaid cost-saving estimates.
The LSA’s estimate for the fiscal year that ends next month shows Iowa will spend $23 million less on Medicaid compared with the fiscal year that ended June 30, 2015.
That savings is in spite of almost 40,000 more recipients in the program.
If the program had the same number of recipients this year as compared with 2015, Iowa’s portion of Medicaid costs would have been $306 million less. That is more than twice Branstad’s savings estimate.
Amy McCoy, a spokeswoman for the Iowa Department of Human Services, said comparing the entire costs of the program is made difficult by more than five-dozen rates the state pays the companies for each Medicaid member they manage.
Those rates are based on factors such as demographics and health condition.
McCoy responded to questions about LSA spending projections being almost $90 million short of the Branstad savings estimate with a comparison to how a newspaper determines how many papers to print.
“You use the data you have and make the best estimates possible based on that information, and then make adjustments as needed based on actual readership,” McCoy said.
A national look
The growth in national Medicaid enrollment and total spending on the program slowed substantially in the last two fiscal years, according to information from the Henry J. Kaiser Foundation.
That’s at least partially because of the tapering of Affordable Care Act expansion. Still, the state projection of spending growth was around 6 percent in the 2016 fiscal year, according to the foundation’s brief.
At this point in the year, LSA’s Medicaid projections are typically within 0.5 percent of actual costs, noted Jess Benson, one of the agency’s researchers.
While Iowa’s spending projection might be accurate, it leaves a lot of unanswered questions in trying to assess the quality of the program, said Kelly Whitener, a researcher at Georgetown’s McCort School of Public Policy in Washington, D.C.
Questions remain about how lower payments to doctors, for example, affect the care that is available to people on the program, Whitener said.
“I do think there are too many missing pieces to draw a conclusion about whether managed care is saving the state money and, if so, why or whether the care is better,” Whitener said.
Lawmaker: savings are ‘hocus-pocus’
Heaton, the lawmaker who heads the committee overseeing Medicaid spending, publicly voiced concern earlier this month that the private companies are not paying doctors who see Medicaid patients on a timely basis, an issue that has complicated service.
But Heaton last week credited the state’s projected savings to the decision to hire the private companies to manage the program. He said he expects to see more significant savings in future years as more focus is placed on preventative care.
“It might take five or six years or maybe a decade before you get results” from preventative care efforts, Heaton said. “But we will have halted the continued increase in costs.”
Iowa City resident Casey Hayse has cerebral palsy, a permanent movement disorder. The company that manages her care, AmeriHealth, frequently fails to pay her medical care for months, she contends.
And Hayse said services such as transportation that help disabled people live independently have become complicated or unavailable under the privately managed system.
Any immediate savings obscure the problems and long-term costs occurring through the privatization, she said.
“I saw the governor say that Medicaid Managed Care is working well, and that is far from the truth,” Hayse said. “… If we are forced to go to nursing homes, it will cost the state a lot more money.”
The companies did not respond to the Register’s request for comment.
Ongoing problems associated with private management have created difficulties for some medical providers to continue to see Medicaid patients, said Sen. Liz Mathis, D-Robins, who is part of the state’s Health Policy Oversight Committee.
The state has received hundreds of complaints of terminated or reduced health services as a result, she said.
“Are we really saving money? It’s hocus-pocus,” Mathis said.
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