Privatizing Medicaid is wrong way to go

Independent Record (Helena, Mont.), November 5, 2010

The IR’s Oct. 14 headline caught me off guard: “Gov mulls privately run Medicaid.” Is this the same governor who in August 2009, welcomed President Obama saying: “Did you know that, just 300 miles north of here … they offered universal health care 62 years ago?”

Gov. Schweitzer certainly understands that the Canadians didn’t accomplish universal care by privatizing health care programs that are publicly funded. Thanks to excellent coverage by reporter Mike Dennison it appears that the state is considering a five-county Medicaid demonstration project and it includes a proposal from Centene Corp.

So what’s going on? To begin with, Medicaid, at $315.2 billion per year in 2005, covering 60.4 million people, has become the nation’s largest public health insurance program. This caught the attention of health insurance companies. United Health Group and Wellpoint and smaller companies such as Centene all want a cut of the pie.

Centene, in fact, is listed by Goldman Sachs as one of the country’s fastest growing Medicaid HMOs. John Geymen, in his book “Do Not Resuscitate,” says “two of these companies (WellCare and Centene) have grown 300 to 400 percent since their IPOs all within the last six years.” As if to emphasize Geyman’s point, Centene joined the Fortune 500 list this summer.

And these details leave me wondering. How can a company that specializes in managed Medicaid plans and CHIP become a darling of Wall Street?

After all, Medicaid has often been targeted in budget cuts around the country and is widely regarded as being underfunded. Beyond that, all of the money going into Medicaid is tax financed. We’re not arguing here about what percentage of the money is tax based — Medicaid is 100 percent funded by state and federal taxes.

By that measure, Centene is a publicly funded “private” corporation. Geyman once again hits the nail on the head: “Privatization of public programs has clearly been a bonanza for private insurers.”

Listed on the New York Stock exchange as CNC, Centene’s CEO is Michael Neidorff, who earns (according to Reuters) $6.1 million a year and has $9.5 million in stock options. Wall Street likes the company’s ability to generate profits. On July 27, Centene’s CEO laid out the following company policy: “Protecting our earnings stream is crucial and we will continue to be bottom-line focused.”

Hopefully, thinking about how these outfits make tons of money and attract the attention of Wall Street makes you as uncomfortable as it does me. It begs another question: How do companies squeeze profits out of an underfunded public program,?

Massachusetts’ experience is instructive. In 2009 Massachusetts transferred 30,100 green-card-holding immigrants from its state-subsidized insurance program to a Centene subsidiary, CeltiCare. CeltiCare was paid $1,500 per enrollee for a plan that covered less than the one it replaced; $1,500 is well below Kaiser’s projections for adequate care. Eight months after the plan became active, a brief study in the Aug. 5 New England Journal of Medicine accused Centene of “rationing by inconvenience.”

Medicaid managed care plans profit by cutting costs, by exclusionary contract language, and by denying care. In New Jersey, private Medicaid plans enrolled large numbers of low-income families and then denied up to 30 percent of their claims for hospital care. Both Montana and Massachusetts undertook earlier attempts to provide private Medicaid funding in mental health with disastrous results.

But there’s another key item I haven’t mentioned. It’s called the medical loss ratio. Centene’s is variously reported as 81-82 percent. That means that they spend either 81 or 82 cents on every dollar on actual care. The company gets to keep the rest. So if Montana continues down this path, the state will see 18 to 19 cents of every tax dollar spent on Medicaid feed Centene’s bottom line.

Finally, Centene began its involvement in Montana quite a while back. They undertook renovations at the old American Legion baseball park in Great Falls and it’s now called Centene Stadium. They then announced the development of a data processing center in Great Falls. That deal was worked out and had the attention of both state and local development authorities. Makes one wonder whether the current privatization proposal is about health care for families living on the margin or about employment and business. Think about it. What’s the deal here?

The Schweitzer administration and Legislature should focus on building a robust and functional state-managed Medicaid program. At the very least, a state-run program doesn’t have to add a profit motive to the costs of serving children and families in Montana. Beyond that, I liked the rest of Gov. Schweitzer’s comments to the crowd greeting President Obama at the Gallatin Field Airport hangar. He reminded them that the Canadians had recently selected the “father” of Canada’s single-payer health care system, former Saskatchewan Premier Tommy Douglas, as the greatest Canadian.

Remember, Medicaid covers four of 10 births in the U.S. and provides care for one in every three children. Montana can ill afford to expose at-risk families to denials and the profit-making focus of yet another health insurance company.

Robert Putsch, a retired physician and a clinical professor emeritus of medicine at the University of Washington School of Medicine and member of Physicians for a National Health Program, a national organization dedicated to the extablishment of a single-payer sytem, lives year round in Canyon Creek.