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Iowa DHS to give $386 million raise to Medicaid insurers

July 10, 2019

DES MOINES, Iowa (AP) — The Iowa Department of Human Services said Wednesday it has agreed to pay two insurance companies providing Medicaid services for the 2020 fiscal year $386 million more than last year, an 8.6% increase.

The state general fund share of the increase is $115 million over the state’s funding share last year. The federal government pays the remaining portion. The new fiscal year began July 1.

The $5 billion Medicaid program serves about 600,000 poor and disabled people.

The DHS says the rates include changes made by the Iowa Legislature which account for about 2% of the increase and policy changes.

The new contracts with Amerigroup, a subsidiary of Anthem Inc. and Iowa Total Care, a division of Centene Corp. include increased funding for nursing facilities, certain health care facilities including rural health clinics and providers of care for intellectually disabled Medicaid recipients.

Gov. Kim Reynolds said the additional funding is partly due to increase health costs generally and a response to health care providers who said they needed more money.

“We’ve started to stabilize the program,” she said. “Included in that contract are increased fees for providers, increased access for mental health and increased accountability. All of that was taken into consideration. It’s a little bit higher than it was last year but it’s not a lot.”

The program previously run by the state was privatized by Reynolds’ predecessor former Gov. Terry Branstad in 2016 with the promise of saving money and improving care. Critics including Democrats say the program hasn’t accomplished those goals.

“The big cheerleaders for privatized Medicaid — Governor Reynolds and Republican legislators — cannot back up their claims that privatizing would save money and make people healthier. That’s because it hasn’t happened,” said Senate Democratic Leader Janet Petersen.

Under state management she said the program grew at an average rate of 5% each year over a 10-year period before privatization. Last year, the increase was 8.4% and this year the increase is 8.6%.

“To make matters worse, Iowans who rely on this health insurance system for their well-being are getting less service,” said Sen. Pam Jochum, a member of the Senate’s committee on human resources. “So, taxpayers are paying more and getting less service. It doesn’t take an Einstein to realize we’re getting the short end of the stick.”

Last year the agency approved a $344 million increase over the previous year of which the state’s share was $103 million.

The Iowa Medicaid program experienced the loss of two insurers in two years causing concerns the program had become unstable. AmeriHealth Caritas pulled out of the Iowa program in October 2017 and UnitedHealthcare left the program last month saying it lost $250 million since it joined Iowa in 2016 and the state “materially underfunded” the program.

Last month, DHS Director Jerry Foxhoven unexpectedly resigned at the request of Reynolds for reasons never fully disclosed.

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