Iowa’s Medicaid managed care disaster

Don't pay managed care firms a penny more

By the Editorial Board
The Des Moines Register, December 22, 2016

Iowa’s Medicaid program was operated by the state for decades. With modest administrative costs and among the lowest per-patient spending in the country, it worked well.

Then along came Gov. Terry Branstad and his unpopular idea of handing over the government health insurance program to three for-profit insurers. While providing no reliable evidence, he insisted privatization would save the state money and improve the health of more than 600,000 Iowans who rely on Medicaid. On April 1, three managed-care companies took over the program’s administration.

These insurers signed contracts with the state, agreeing to cover the health expenses of Iowans in exchange for fixed monthly payment rates based on actuarial projections reviewed by both parties. The companies, including giant UnitedHealthcare, didn’t just fall off the health insurance turnip truck. They knew exactly what they were doing.

And within months, they were begging for more public money. In October, Iowans unexpectedly discovered the state agreed the companies could milk an additional $127 million out of the state and federal government.

Private companies receiving billions of public dollars to operate a public program refuse to be accountable to the public. They want to do their business with the state behind closed doors.

So what is happening behind closed doors? The companies are complaining that the controversial privatization project is “drastically underfunded” and the situation has been a “catastrophic experience.”

One insurance executive wrote that without changes — such as paying the companies more or allowing them to cut benefits and reimbursement rates — privatized Medicaid may not be sustainable.

Great. The program should not be sustained.

It has been a disaster. Since privatization began, numerous Iowans have complained about everything from catheters to surgeries not being covered. Health providers have not been reimbursed for services, forcing them to borrow money or close their doors.

The state should not pay the private insurers a single penny more than what was agreed upon in the contracts. If the companies don’t like it, they can jump ship, bail out of the contracts, and Iowa can return to the state-run Medicaid that was a trusted, reliable payer of health services.

Because what MCOs are doing in Iowa looks eerily like what they’ve done in other states: Secure a state contract with agreed-upon payment rates and come back later to demand more and more taxpayer dollars. They attempt to essentially hold the state hostage.

Iowa is less than nine months into privatization and insurers are laying the groundwork to pocket more public health dollars. Giving it to them defies the very premise of managed care, which is to create budget predictability for the state going forward.

And why would Iowa fork over more cash anyway? To sustain a privatized system that has been a disaster for Iowa patients and providers?

No thanks.



By Don McCanne, M.D.

Medicaid is a chronically under-funded government health care program for the poor. Private Medicaid managed care organizations have been taking over these programs from the state governments contending that they can provide care at lower costs.

These organizations have higher expenses due to the complex administrative infrastructure that they create, not to mention the extra costs of high executive compensation and funds siphoned off for investor profits. The only way to save money is to spend less on health care. That means a reduction in remuneration for the already underpaid health care professionals and institutions, or a reduction in essential health care benefits provided to the patients, or, more likely, both.

We need to reduce administrative waste, not create more of it. Regular readers of this blog should have an idea of how we could do that.

But now let’s share with all our holiday of peace and joy as we clear political hurdles to make this a better America and a better world for all of us.