More ‘illegal’ denials of care under Iowa privatized Medicaid, state auditor says

The denial of medical services for Iowa’s Medicaid members dramatically increased following a 2016 switch to private managed care, a state audit released Wednesday shows — a finding the program’s overseers quickly rejected.

A report by the Iowa State Auditor’s Office shows the number of times an independent judge overturned an insurer’s denial or reduction of service for a Medicaid member went from 11 cases in a period before the switch to managed care to 109 cases in a comparable period following privatization — an increase of 98 overturned cases, or 891 percent.

At the same time, the number of times a judge upheld the insurer’s decision dropped 72 percent, the audit found.

To Iowa State Auditor Rob Sand, that indicates managed-care organizations were illegally denying care for Iowans and shows that the state needs to provide more oversight of these private insurance companies to ensure they maintain adequate care for vulnerable Iowans.

“Long story short, Iowans are not getting what they paid for,” Sand in an interview. “When I say that, I mean taxpayers are not getting what they're paying for and Medicaid members are not getting the medical care that they're legally entitled to get.”

Sand, a Democrat who has talked publicly about running to unseat Republican Gov. Kim Reynolds but has not announced a decision, has been critical of the privatization shift that occurred while Reynolds was lieutenant governor. In 2020, he criticized “bad data’ that hampered an audit of Medicaid’s home health care service and in 2019 accused private companies of breaching their state contracts in reducing services to two quadriplegic Iowans.

The Iowa Department of Human Services — which oversees the Iowa Medicaid program — rejected his new report, calling it “incorrect and flawed.” Officials said the methodology used is not an accurate comparison of the Medicaid appeals program before and after privatization.

“While the Department of Human Services welcomes external oversight, this report is inaccurate and shows a deliberate lack of understanding of the Medicaid appeals process,” agency officials said in a statement Wednesday.

The report’s findings

In 2016, the state switched its Medicaid program from a government-managed fee-for-service model to a managed-care system. Under the managed care model, private insurance companies — called managed-care organizations — are contracted through the state to provide services to the hundreds of thousands of disabled or poor Iowans who qualify for Medicaid.

Medicaid benefits in Iowa currently are administered by two managed-care organizations — Amerigroup and Iowa Total Care.

Under federal regulation, Medicaid members have the opportunity to have their cases reviewed during a State Fair Hearing if their claim for medical services is denied or reduced. If the appeal fits the criteria for a hearing, a judge with the Department of Inspections and Appeals reviews the case.

The report, published on the state auditor’s website, covered the period between July 1, 2013, and Aug. 31, 2019. It studied the difference in outcomes in appeals filed before April 1, 2016 — or pre-privatization — and appeals filed after April 1, 2016 — or post-privatization.

The report analyzed 5,074 appeal cases in that time period.

Following privatization, the number of instances a court overturned a decision by a managed-care organization to reduce or deny services to a Medicaid member increased by 98 cases. At the same time, the number of instances a judge agreed with the reduction or denial of services decreased 72 percent. That’s a decrease from 417 upheld denials to 116 upheld denials, or a difference of 301 cases.

“The combination of these two measurements shows privatized Medicaid in Iowa for the period reviewed is less likely to treat members according to the law than the pre-privatization system,” the report states.

Sand said the report studied Medicaid members who received services from a managed-care organization during the pre-privatization period and continued to receive services under a managed-care organization following privatization.

The total number of appeals dropped 45 percent following the switch to managed care in 2016, the report states. It further says that 891 percent figure calculated by the State Auditor’s Office shows privatization “substantially increased the number of illegal denials of care in Iowa.”

The state’s response

Human Services officials said the attempt to compare appeals processes between the old fee-for-service and the managed-care models was an “apples-to-oranges comparison.”

“The process is not the same, so making a comparison without factoring in the improvements we built into the MCO appeals process prior to ever seeing an administrative law judge is just wrong,” Iowa Medicaid Director Elizabeth Matney wrote in a statement. “Under managed care, most appeals can be resolved without an ALJ, allowing them to focus on more complex cases.”

Department officials had also questioned the report’s methodology in a letter to the State Auditor’s Office. They said because managed-care organizations conduct their own review before an appeal hearing is granted, it “inherently creates skewed results” in the comparison groups.

“In short, we believe that much more information would be needed to substantiate that a higher number of ‘reversed’ administrative law judge State Fair Hearing dispositions was caused by managed care,” Matney wrote.

In its statement Wednesday, Human Services officials also noted clinical staff with the Medicaid program review each appeals cases to resolve any identified issues.

“Over the past couple of years, my team and I have made many good faith efforts to demonstrate transparency and integrity with the Auditor of State, which is why this is so disappointing,” Director Kelly Garcia said in a statement. “I’m proud of the work Iowa’s Medicaid team is doing and I am excited for the positive changes as Director Matney builds out Iowa’s Medicaid team to ensure strong managed care oversight, as well as innovative improvements to the program.”

Other findings

Sand said his office also discovered a number of instances in which a member’s appeal was misclassified by the managed-care organization as a grievance — meaning the decision would not go through the hearing process.

“Our review raised concerns that issues that should be treated as appeals are regularly, if not systematically, misclassified as grievances or first-level reviews,” the report states. “This means that the member never reaches an independent judge that can review the issue and determine the legal and appropriate resolution.”

But Sand said the report did not measure the scope of the problem, “so we can’t tell you if that happens rarely or if that happens frequently.”

Sand pointed to possible issues within the managed-care organizations’ administrative processes as a potential reason for the difference in appeals outcomes reported. The audit, however, did not draw any specific conclusions.

“The cause of that issue, whether it's expertise or poor training or whatever, doesn't really change the bottom line,” Sand said.

Comments: (319) 398-8469; michaela.ramm@thegazette.com