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Iowa House to consider $150M additional money for Medicaid

April 10, 2019

DES MOINES, Iowa (AP) — Just days after residents learned that a second insurance company was quitting the Iowa Medicaid program, House lawmakers introduced a spending bill that would give the program $150 million more to ensure all Medicaid obligations are met for this year.

The measure is scheduled for debate on Thursday. But critics of privatized Medicaid contend it makes no sense that insurance companies are leaving Iowa, saying they’re losing money, while the state continues to pump hundreds of millions of dollars more into the program.

Providing inadequate funding was the primary reason UnitedHealthcare said it was leaving.

“The state has materially underfunded the Medicaid program since its inception, by hundreds of millions of dollars,” the company said in a statement from March 31.

United said it lost $250 million since it joined Iowa in 2016 and the state was pushing it to assume nearly $150 million in additional losses for the coming year.

An April 1 update by the nonpartisan Legislative Services Agency shows Iowa underfunded Medicaid by $150.3 million for the current 2019 fiscal year and is already underwater by nearly $80 million for 2020. That amount will likely rise as contracts are negotiated with the remaining insurance companies Amerigroup and Iowa Total Care.

“The future of this is we’re going to see increased costs. It’s certainly not saving us any money in my opinion,” said Rep. Lisa Heddens, an Ames Democrat and member of the appropriations and human resources committees.

Former Gov. Terry Branstad promised he would save the state millions of dollars when he signed an executive order that shifted the state program serving 600,000 children, poor and handicapped people — about 20% of the state’s population — to a managed care system in which private insurers provide case management, arrange medical providers and pay the bills for those who qualify.

It’s uncommon for a state to switch its entire Medicaid program to managed care at once and officials with the federal Centers for Medicare and Medicaid Services took the unusual step of forcing the state to slow down. Three years into privatization, the program has frequent complaints of services and medications being denied or delayed.

Hospitals, nursing homes and other community service providers say they’re not being paid and some are forced to take out loans to get by.

Gov. Kim Reynolds acknowledges the early funding projections failed to allocate enough money, but now that the program has been operating for three years the monetary demands are clearer. She still believes privatization is right for Iowa.

“From the moment that I was sworn in as the governor this has been something that I’ve worked on every day and that is not an exaggeration. I’m always looking at ways to make the system better and I will continue to do that,” she said.

She said UnitedHealthcare wanted to be released from performance requirements the state has established to improve care for patients. The company denied it was leaving Iowa over performance metrics and insists it was about Iowa’s underfunding.

United was paid $2 billion last year in Iowa to manage care for more than 427,000 people. AmeriHealth Caritas pulled out of the program in October 2017.

Republican Rep. Joel Fry, chairman of the subcommittee that develops the human services budget, said it’s not abnormal for lawmakers to approve supplemental funding for Medicaid.

“I certainly would like to see a supplemental much less than $150.3 million but it is what it is so we will continue to make sure Medicaid patients in the state are taken care of,” Fry said.

Thirty-nine states have managed care but only three — Kansas, Hawaii and Iowa — pay more than 80% of their Medicaid dollars to managed care insurance companies, according to The Henry J. Kaiser Family Foundation, a nonprofit health care policy research group. In most states, the government continues to manage at least a portion of the Medicaid eligible population, often those with chronic illness or long-term disabilities.

Critics of Iowa privatization and some health care providers have pleaded with Reynolds to take out those segments of the population and place them back under state management.

“Managed care can make inroads with part of the population but not with people in nursing homes and not with chronically ill and disabled people because for the most part they’re not going to get better,” said Peggy Huppert, the executive director of the Iowa chapter of the National Alliance on Mental Illness.

Medicaid reports show that while the disabled and elderly are just 27% of the Medicaid population, they consume 69% of the money. Huppert said managed care can achieve good results for some but not everyone.

“It’s just the way it’s been implemented here in Iowa has been an unmitigated disaster,” she said.

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Follow David Pitt on Twitter: https://twitter.com/davepitt