Iowa recovers $23 million in Medicaid savings

Iowa's general fund will benefit from the state's share of more than $23 million in savings under a new Medicaid integrity initiative.

“We consider it a significant achievement,” said Iowa Medicaid Director Jennifer Vermeer. “Twenty-three million (dollars) is a lot of money.”

Savings come from a $14 million, three-year contract with OptumInsight of Eden Prairie, Minn., which checked that paid Medicaid services were medically necessary, examined “upcoding” of claims by providers and ensured Medicaid is reimbursed if the health service was eventually covered by another insurer.

The state provides a 39 percent match, so the bulk, or 61 percent, will go to the federal government.

Medicaid is a $3 billion program in Iowa, of which about $1 billion is paid by the state.

Vermeer noted that most of the savings involved billing errors and were not related to fraud or abuse.

About two-thirds of the savings are recoveries because of analysis of paid claims, including about $6.5 million from a program that reviews situations in which a provider, usually a hospital, is paid by both Medicaid and other insurance payers for the same patient visit or procedure.

The Iowa Department of Human Services, which oversees Medicaid, noted that hospitals process thousands of transactions daily and many have limited staff to help detect credit balance overpayments that need to revert to Medicaid.

OptumInsight provides Iowa Medicaid with on-site assistance at several major Iowa hospitals to identify overages and duplicate payments for which Medicaid should be reimbursed.

Duplicate payments can occur because of the timing of reimbursements by insurance companies, a provider's financial reconciliation schedule or administrative error.

Vermeer said OptumInsight also has a process to help identify “upcoding” in which a provider, often unwittingly, claims reimbursement for a more expensive service than was actually provided.

For example, she said, some claims to treat respiratory distress syndrome in newborns were actually services to assist the child with less serious breathing problems.

Vermeer said the company also helps ensure claims paid by Medicaid are for medically necessary procedures. One review determined that some chiropractic services for children under age 5 were not necessary, resulting in successful paybacks.

Total first-year savings exceed OptumInsight's three-year contract in the first year alone and also exceed the $20 million first-year target set by Iowa Medicaid.

Previous year savings under a contract with a different vendor were about $8.6 million.

Vermeer said the main difference is a redesigned structure of the contract and scope of work.

“This was the most aggressive target that any state has set for its vendors,” she said.

Steve Puleo, spokesman for OptumInsight, said the company has contracts in other states, including Illinois, Michigan, Washington, Alabama and Kentucky.

Because the scope of the contract differs for each state, Puleo could not offer an “apples to apples” comparison, but said Iowa's savings rank high.

Kathy Horan, executive director of Aging Services Inc. in Cedar Rapids, said she supports efforts to control the costs of Medicaid, but noted there is another side to the story.

Aging Services, a not-for-profit human service agency that serves frail and at-risk seniors, saw its Medicaid reimbursement rate cut to 2.5 percent below the agency's actual costs and frozen in 2009.

“Providing a service that requires an agency to take a financial loss every time the service is provided is not a sustainable business model,” Horan wrote in an email. “When agencies can no longer continue to provide a service, it is our seniors who need that service who suffer.”