Iowa to pay Medicaid insurers additional $33 million

The state is boosting payments by $33.2 million made to the three private insurance companies that manage the Medicaid population.

Despite the increase, Gov. Terry Branstad said Monday the state still is expected to save $100 million to $110 million this year, due to higher-than-anticipated savings as fewer people enrolled in higher-cost programs than in years past.

The state handed over its Medicaid program with more than 600,000 recipients to the out-of-state insurance companies on April 1.

Iowa pays the insurers on a per member per month basis. The insurers then use those fees to pay for enrollees' health care costs.

Total Medicaid spending for fiscal year 2017 is expected to be $4.6 billion, with the state accounting for $1.7 billion, a figure that includes the $33 million increase, according to the Department of Human Services, which oversees Medicaid.

Medicaid is a state and federal partnership - meaning the managed-care organizations will get an additional $94.5 million from the federal government.

The problem, the state says, is that prescription drug rates have increased greatly while at the same time the state still is discovering the health care costs related to a new portion of the Medicaid population.

Those enrolled in the Iowa Health and Wellness plan, or Iowa's version of Medicaid expansion, spent more on health care than originally anticipated, according to a briefing from the Iowa Legislative Services Agency sent to state legislators. That's because capitation rates were developed for the Iowa Health and Wellness Program without much data on spending trends - only about six months worth because the Health and Wellness plan did not begin until January 2014.

There were about 142,000 Iowans enrolled in the Iowa Health and Wellness plan at the end of the program's first quarter, according to state data.

Rising prescription drug costs also were a factor, the state said, pointing to an increase in prescription drug spending of 32 percent per member, per month, from state fiscal year 2014 through state fiscal year 2016, according to a letter sent to Branstad from Department of Human Services Director Charles Palmer.

'In 2015 and in 2016, pharmaceutical drug costs skyrocketed at a much higher rate than in the past,” said Michael Bousselot, Branstad's chief of staff, during the governor's weekly news conference on Monday. 'So our experience will grow over time, and we'll have a better understanding of how this works.

'With the Health and Wellness Plan members, they were using drugs more often than we anticipated. So not only was the cost higher, but they'd gone to the doctor in that first year and now they were on a prescription drug plan and those costs were running more than we anticipated, (more) than our actuaries anticipated.”

The governor's office said MCO contracts allow the state to examine the rates at any time to make sure they're sustainable.

'Our actuaries underestimated in this case what the cost was,” Bousselot said. 'DHS recommended that we update these rates, so that the program was a sustainable program and reflected our experience before we handed it off.”

These are industry-wide trends that the state would have experienced under a state-run Medicaid program as well, said Amy McCoy, DHS spokeswoman.

But Senate Democrats - who have been opposed to the transition from the start - have seized upon the information, saying this is another result of a plan that was too rushed and not ready.

The legislators said the first six months of managed care have resulted in fewer services for those on Medicaid and delayed or inaccurate payments for Medicaid providers.

'We see this as a gross miscalculation by the governor that has now come home to roost,” said Sen. Liz Mathis, D-Cedar Rapids.

Mathis said senators would be asking for additional information, adding the payments will be discussed in-depth at the next Health Policy Oversight Committee meeting, Dec. 13.

Mathis said it's important to adequately fund the Medicaid population's health care but wondered if this illustrates a more long-term problem.

'Are we going to have keep increasing year after year?” she said.

Erin Murphy, Gazette-Lee Des Moines Bureau contributed to this report