The Effects of Iowa’s Privatized Medicaid
Since April 2016 the Medicaid program of Iowa has been handed over to three private insurance companies by the state; Amerigroup Health, AmeriHealth Caritas and United Healthcare. It is the job of these three companies that the processing of patients’ claims are met, that the patients receive adequate care and that the coverage of care is paid for within reason. The effects of the change have not been small and have often been disorganized, with its effects being felt at both the state economic level and in the personal lives of those affected by the change of healthcare services. The changeover from public owned Medicaid to privatized Medicaid under the current Managed Care Organizations (here after referred to as MCOs) has resulted in several issues appearing. Medicaid as it currently stands faces a lack of oversight regarding the companies involved in the program, higher than anticipated costs associated with the program for both the state and the companies involved, questions in the reliably of information given by the MCOs regarding their service of allotted patients, and the questionable service practices the MCOs have directed towards the high cost segments of those same patients. Because of the myriad of issues that have plagued the privatized MCO program, higher cost patients should be allowed to return to a public form of Medicaid. Enacting this change would lead to a more economical model for all parties and would help to better alleviate the suffering of high cost patients under the privatized Medicaid model.
To understand why this issue is important as well as to understand the impact that this privatization has had thus far, it first takes gaining an understanding of the circumstances that allowed Iowa’s state Medicaid program to become privatized in the first place. Iowa is a purple state and with that distinction comes with it a heavy mixture of Republican and Democrat policy measures. Brad Wright, an associate professor of the Health Management and Public Policy at University of Iowa, and his associates point out that in Iowa’s recent Medicaid history that is in part due to this distinction that Iowa’s Medicaid program has ultimately come to where it happens to be today. Both then and now Iowa legislators thought that by through privatizing Medicaid, that is by moving the management and oversight of a public service over from the state into the hands of private firms, at least in part, that the state could cut cost. The firms in this case were and are private insurance companies that had chosen to accept the responsibility of taking care and processing needs of Medicaid patients.
According to Mr. Bright and his colleagues the Medicaid program to Iowa after the implementation of the Affordable Care Act(ACA) then Governor Branstad moved to push forward the “conservative health care agenda by incorporating private-sector approaches to Medicaid expansion” (3). By seeking compromise in the Iowa’s heavily purple legislature Governor Branstad succeeded in gaining enough support to foster a bi-partisan agreement, leading to the creation and implementation of the Iowa Health and Wellness plan in 2013(Bright, et al 3). While initially slated to have a functioning marketplace of private insurers to choose from the market place had issues in finding private providers and only opened with two carriers; Coventry and CoOportunity Health (4). In 2015, CoOportunity Health collapsed due to financial issues leaving Medicaid patients with only Coventry and the Iowa Wellness Plan MCO Program to choose between (Bright, et al 7). The failing of this prior attempt to offer a privatized option is struck with a few similarities to the current situation in that the program was expected to give more options of insurance and a larger provider networks for patients, yet when the market opened there were only two private insurers to choose from. CoOportunity Health ended up going bankrupt due to the cost associated with the Medicaid program and opted out of its agreement much in the same way that AmeriHealth Caritas did in late 2017. This in both cases left the patients in Medicaid with one option of private healthcare to choose from, negating one of the selling points behind offering a private Medicaid market while placing a heavier financial and logistical burden on the private insurer still enrolled as Medicaid providers. In CoOportunity’s case it left Coventry as the only private insurer available to service Medicaid patients coverage and this led to Coventry eventually having to opt out as well. This indicated a fundamental failure in the concept of trying to integrate private entities as the managerial entities of a public service such as Medicaid and yet it did not dissuade leadership from attempting to try privatizing public insurance again.
Former Governor Branstad chose to move Medicaid from expansion to modernization after the failure of the initial market place plan initially in 2015 by contracting out Medicaid services to privatized MCOs. The plan to modernize by way of privatizing Medicaid’s MCO program was set in effect in April 1, 2017 and was suggested by Branstad as a cost saving measure in comparison to the state’s managed MCO plan. Despite the former Governor’s claim of the program’s savings versus predicted state Medicaid cost there are issues that cannot be overlooked economically and terms of human cost in how the currently implemented program is functioning. According to Chelsea Keenan, a reporter for the Gazette, in the 2016-2017 fiscal year all three of the MCO insurers “lost more than $100 million during their first year of operation” and in 2017 the MCOs charged the state $10 million and the federal government $225 million to continue to provide services as MCOs. The losses in revenue are due to the cost of patient care and overhead being higher than expected as well as being higher than the amount of revenue the companies bring in. Furthermore, due to the losses that the MCOs have suffered due to taking on the state’s 680,000 Medicaid patients, the state chose to enter into an agreement with the MCOs that would require the state to cover losses that the MCOs generated that are higher that their generated revenue(Keenan). What that means that under the Risk Corridor Agreement that the state could end up paying greater costs to the MCOs to ensure their continued functioning on top of what they already pay annually alongside the federal government to the MCOs.
Yet despite these efforts, AmeriHealth Caritas left the Iowa Medicaid program in late 2017 due to financial losses and by leaving Medicaid the former MCO flooded the MCO marketplace with all its formerly covered clients. Due to the MCO marketplace now having more patients than the remaining MCOs could reasonably handle, Amerigroup stopped accepting new Medicaid patients leaving only UnitedHealthcare available for access by the remaining Medicaid(IDHS). UnitedHealthcare chose to remain open to the marketplace despite the logistical issues involved with the influx of AmeriHealth patients. Yet again the lack of Medicaid recipient choice effectively undermines the premise, much like with CoOpportunity under the initial marketplace plan, that a privatized Medicaid market would provide better options to Medicaid participants. It was expected that the private healthcare insurers would provide those under Medicaid access to better provider networks, that the care received would be more fitting and that if clients didn’t like or had issues with one insurer that they could switch to another all while keeping the cost to the state down.
However, with the leaving of AmeriHealth from Medicaid and the subsequent move by Amerigroup the conclusion could also be drawn that the cost burden and client logistic of Medicaid is far too great for the MCOs in retrospect. This is because private insurers act as a cash pool holder for members under insurance that pool. Under normal circumstances the insurer would pay coverage of a member up to an agreed upon amount and would up the premiums and deductibles of anyone who took more than what they paid in as compensation. With Medicaid however, the companies can not do that and instead must either ask for more money from the government, cut their profit margin or pull from their private pools to make up for higher than expected cost. Pulling from the private pools raises the cost of insurance for paying customers and causes those customers to go elsewhere, cutting revenue earned leads the insurance companies struggling to pay their workers and overhead costs. Both get transferred over to to paying customers and now, due to the Risk Corridor Agreement, to the government. Furthermore, having to return back to legislators to petition for more funds raises the questions of the cost efficiency of choosing private insurers over direct state ran Medicaid. These financial issues only serve to lead directly into other issues that taken place under privatized Medicaid as well.
Ms. Keenan’s article also states healthcare providers that “insurers were not paying them properly or on time”. This untimely payment of healthcare providers effects the care of patients by effectively limiting the doctors in the network that accepts Medicaid plans in the long run. Furthermore, it effects the operation and livelihood of the doctor and healthcare staff as improper and untimely payments in large enough amounts over a large enough period could leave provider groups without the means to adequately pay their employees. State Senator Tony Bisignano (D), reported to the Des Moines Register in 2016 the finding of a healthcare provider survey conducted by Iowa House Democrats showing that at that time: “90 percentof providerssay privatization has increased their administrative expenses,79 percent are not getting paid on time by the for-profit corporations now running Iowa Medicaid,28 percent have had to borrow money to pay their bills while waiting to be reimbursed by out-of-state Managed Care Organizations,66 percent say when they do get reimbursed, it’s at lower rates than agreed upon”. These issues caused the providers to reduce services provided or planned to provide and many of those same doctors refused to see Medicaid patients due to how the privatization had affected those providers and their organizations. This is an issue that has not been fixed yet and because of it healthcare provider groups such as clinics and homecare agencies have suffered layoffs, loss of wages and having to shut activity in Iowa down due to a lack of funds.
Furthermore, the MCOs have been limiting the services which certain high cost clients can receive. These denials and reductions of services are often likely due to the MCOs trying to save money, but in doing so they are cutting needed services for people who often are unable to care for themselves adequately due to disability or mental illness. By cutting the care services of people who have nursing and aid staff the MCOs put both the patient and their staff in difficult circumstances. For home staff, their economic livelihood is attached to the cases that they work and by cutting the patients services it prevents the nurses from doing their jobs while also destroying their job security. Family members and guardians are often left to choose between taking care of their severely disabled family (who may require 24/7 care) and their other obligations with the cuts to the patient’s provided services. An example would if a parent had to choose whether to go to work to keep their house and electricity on or forgo work in order to provide for the immediate cares of their bed ridden child with a severe degenerative disorder because the MCOs came to the conclusion that the child didn’t need adequate nursing staff.
For the patients, however, the taking away of homecare services and required equipment is at best a significant quality of life drop as they become reliant on only their untrained family for their needs. Unlike family members nurses, particularly those who work home care, are there to monitor and ensure that a patient is within their normal vital range. The Nursing staff provides trained eyes and skills to prevent bed sores, when a patient needs treatment and if the patient’s vitals are suggesting that they are sick enough to be taken to the hospital. Those who are untrained may end up unintentionally hurting their family member, they not catch the signs of underlying conditions or complications and they don’t necessarily know to monitor for all the vitals of the patient. Also, this puts stress on the family member in question as the needs of the patient without the buffer of nursing staff can lead to mistakes or mistreatment in the care of the patient. At worse the patient’s health may worsen or even fail due to the lack of adequate care and equipment given and the patient could very well die due, in part, to the reduction or denial of their services.
James Clayworth and Amber Eaton reported on the topic of MCO denials and the reduction of services. What Clayworth and Eaton found in their report was that Medicaid patients were having their required services reduced or denied. Of note was a young man by the name of Nathan McDonald, who has cerebral palsy, whose condition was severe enough to require aid staff to visit him twice a day to help him wipe himself after stooling because he was incapable of doing so himself as well as preform other menial tasks. The MCO AmeriHealth cut his hours down to five times a week meaning that he was sitting in his own passed bowel movements for hours on end. During Nathan’s case Dr. Brian stated in defense of AmeriHealth’s reduction claimed, “People have bowel movements every day where they don’t completely clean themselves, and we don’t fuss over (them) too much. … You know, I would allow him to be a little dirty for a couple of days”(qtd. in Clayworth and Eaton). This provides an issue as the care that Nathan had been previously given allowed him to function independently and with without that assistance he is unable to do so. Because cerebral palsy signifies damage to the brain and can make even basic motor functions (such as reaching behind oneself to wipe after stooling) difficult, if not impossible, for the sufferer to manage on their own, people with cerebral palsy may require help to clean after toileting or to preform other seemingly mundane tasks depending on severity. Furthermore, sitting in one’s own stool for prolonged periods can lead to itchiness, sores, and potential infection due to a lack of proper hygiene.
The same article reported on, Ann Carrigan, a 70-year-old woman with cerebral palsy and a brain injury. Due to this afflictions Carrigan required a special made wheelchair that allowed her to move it on her own and that was specially design to keep her from choking or falling out of the chair due to muscle atrophy caused by her ailments. By the account given by Clayworth and Eaton, “multiple medical officials, an administrative law judge and the Iowa Department of Human Services director all agree she needs the customized $4,200 wheelchair… but UnitedHealthcare and its doctors disagree and have taken the battle over Carrigan’s special wheelchair to district court.” By the companies own claim it was their belief that the wheelchair was not required for Carrigan to continue to function normally despite what other care professionals had told them. It was their claim that the “information sent to them does not show this wheelchair is needed at this time”(Dr. Bradley qtd. in Clayworth & Eaton). Beyond that the company had no other clear reasoning for the choice. Furthermore, at no point did the company send a case worker to personally examine Carrigan to verify the severity of her condition beyond what doctors had already done. Considering that Carrigan’s brain injury and cerebral palsy rendered her unable to properly walk or to use a standard wheelchair for fear of choking or falling out and potentially hurting herself, the company showed a both a lack of callous and due diligence to ensure the patient’s care was being properly administered.
The denial or reduction of services are not just limited to a few cases either. The Ombudsman’s 2017 annual report pointed out that contacts reaching out about issues involving the MCOs equaled roughly 4855. These complaints include people on Medicaid much like the two other benefictaries mentioned above that require services and were denied. According to the Hirschman, the ombudsman in question, the Office of the Ombudsman “asked the MCOs what had changed in the member’s medical condition to merit the reduction in hours. We were invariably told that the member’s condition had not changed. Instead, we were told the member did not need all the services they were receiving, or that services were duplicative…”(1). Furthermore her report goes on to mention that her investigative team asked if the MCOs had given proper notification to which the MCO replied, according to Ombudsman, that “notices were not required because services were technically not reduced…When we asked the members about this, they said that their case managers had to submit multiple service plans to the MCOs, each with diminishing services, until the MCO would accept it”(Hirschman 1). All these comes attached with the fact that even should these Medicaid recipients win their appeals in court that they may very well face the MCOs reducing and denying their services yet again only for the patients to have to go through the process again. Considering the strenuous and often fragile nature of the clients affected by such tactics the MCOs persist against even official court rulings in providing their patients adequate services.
To make matters worse, the privatization of formerly public information that came couple with the move to privatized Medicaid has raised issues in determining what set of numbers best reflect how well things are going with transition as it is unclear if the state is being provided the full set of facts. This is because the MCOs being private organizations can choose only those statistics that may reflect positively on their performance to DHS. Between the Office of the Ombudsman and the Office of State Long Term Care Ombudsman(OSLTCO) a total of 9042 contacts had been made in 2017 and all of them were over issues with MCOs. According to the managed care ombudsman’s, operating out of OSTLCO, 2017 Executive report “they received a total of 4,187 contacts regarding managed care from October 1, 2016 to September 29, 2017” (1) The managed care Ombudsman and the OSTLCO focus solely on long term patients, often but not always the elderly. According to the executive report the top recurring reason for contacts between 2016 and 2017 was over denial or reduction of services (OSTLCO, pg 2-4) This comes during after a court just denied and then dismissed a class action lawsuit filed against the Governor, DHS and the MCOs by disabled Iowans regarding the mistreatment they experienced by at the hands of the MCOs. Leys and Clayworth reported that the lawsuit represented “15,000 Iowans with serious disabilities”. When added together it would seem that the those who disabled recipients of Medicaid are receiving a denial of services and are being mistreated. This has raised question is DHS is providing adequate oversight over its monitoring of the MCOs. Furthermore, since the MCOs are private companies there is the question how much of the information they have that they are required to give over. Furthermore, it is implicit in their actions by way of the numbers given to DHS that the MCOs are only providing data that shows their successes while avoiding data that could end up getting them in trouble with the state.
Fortunately, there the legislative body of Iowa has not been sitting by and doing nothing while this has gone on. Brianne Pfannenstiel of the Des Moines register reported on House bill 2462, a cleanup bill designed by the Iowa House of Representatives “would require those managed care organizations to pay providers within the timelines specified their contract and to provide reasons for their denials of claims. It also says that if a member successfully appeals a denial of services, that company must continue providing the services for a period of time to be decided by the Department of Human Services director.” This would be major as it would protect Medicaid patients from being forced to appeal the repeated denial attempts by the MCOs and would require the MCOs to pay healthcare providers of their services. However, the bill doesn’t address that since the MCOs are doing this in the first place because as private companies the cost burden to support their patients is too much.
This is where Iowa Senate file 2013 comes in. According to The Des Moines Register’s Clark Kauffman senate file 2013 “would create an exemption from the managed-care component of Medicaid for disabled and elderly Iowans who rely on long-term support services such as housing, meals, employment and transportation.” This would allow those higher cost patients to be given exemption from the MCOs and put under Iowa’s public care directly and, coupled with house bill, may very well create a situation that would be more manageable and fiscally sustainable for the state and tax payers to deal with. However, the main issue that against senate 2013 is republican opposition since the bill would create effectively create a two-tier system and would, for a segment of Iowa’s Medicaid population, re-instate direct state financing of their medical needs(Kauffmen). Yet as the situation currently stands, through damages created by the neglect of MCOs could end up costing the state as it is and it will likely in the long run be more profitable for the state and it taxpayers economically to move to a two tier system under the joint effects of house bill 2462 and senate 2013. If the MCOs are unable to pay providers and are forced to do so anyway, they could be driven out of busy yet if house bill 2462 isn’t adopted into law, healthcare providers will continue to go out of business or be forced to deny Medicaid patients.
As such, due to the complex situation surrounding Iowa’s privatized Medicaid system that due to the failing there in and the impacts that have occurred that it would be in the best interest of the state, taxpayers, healthcare providers, the Medicaid recipients and the MCOs themselves if, at the very least, high cost patients were transferred to state funded care. This ensure that the MCOs were able to provide a stable and sustainable service to those still under MCO managed Medicaid and would ensure that they are making a profit in doing so. Providers would be more often be paid on time by both the state and MCOs under this proposed structure. Taxpayers wouldn’t be stuck with paying for both the damages caused to Medicaid patients or in covering the losses of revenue of private MCOs. But most importantly though Iowa would ensure that its most vulnerable Medicaid recipients are receiving proper care compared to the current system.
The Effects of Iowa’s Privatized Medicaid