Legislature

Capitol Ideas: The dollars and sense of managed care

State hopes Medicaid privatization will add predictability

Enrollment information for managed-care organizations, including Amerigroup, in Iowa's Medicaid privatization plan, photographed in Cedar Rapids on Friday, Dec. 18, 2015. (Liz Martin/The Gazette)
Enrollment information for managed-care organizations, including Amerigroup, in Iowa's Medicaid privatization plan, photographed in Cedar Rapids on Friday, Dec. 18, 2015. (Liz Martin/The Gazette)

DES MOINES — Iowa policymakers have ventured into the vast unknown of privatized Medicaid care with the lure of $110 million in savings for a fiscal 2017 state budget that can use all the help it can get.

Three private managed-care organizations — Amerigroup, AmeriHealth and UnitedHealthcare — officially took charge Friday of handling the medical and health needs of up to 560,000 of Iowa’s most vulnerable citizens who rely on federal and state dollars for assistance.

The dollars and cents — some lawmakers use the term “sense” instead — of Gov. Terry Branstad’s decision to go statewide with privatization that had been applied successfully to some elements of Iowa’s government-run Medicaid program is an iffy proposition because forecasting utilization and participation oftentimes is dependent on the state’s economy, weather and even flu seasons.

Another factor that feeds unpredictability into Medicaid costs is the federal government and its reimbursement rates that often penalize states such as Iowa that have better economic and health care conditions.

To build in some predictability and the prospects for positive outcomes for consumers, providers and taxpayers, Branstad turned to a process of seeking bidders willing to contract with the state to take over management of a fee-for-service program and assume the risks of a fluctuating health care environment.

That’s what holds part of the attraction for Rep. Dave Heaton, R-Mount Pleasant, co-leader of the House-Senate health and human services budget subcommittee.

“They take the risk,” said Heaton, who is finishing work on a supplemental appropriation of about $67 million to bridge the gap for the current fiscal year between the budgeted Medicaid amount and the state’s actual cost experience.

However, legislators such as Senate President Pam Jochum, D-Dubuque, and Rep. Lisa Heddens, D-Ames, who have children dependent on Medicaid services, see first hand the deficiencies and gaps already evident in the new system’s provider networks, transportation services, claims processing, and communication of vital information to members struggling to navigate the new managed-care universe.

“It remains to be a bumpy path, a lot of unknowns,” said Sen. Amanda Ragan, D-Mason City, Heaton’s counterpart on the budget subcommittee that is looking to boost Medicaid funding by about $40 million in fiscal 2017 based upon a full-year’s projected savings of $110 million.

Ragan said the estimated savings don’t add up for her, given the new MCO contracts build in an expected 12 percent administration cost in the $500 million range — compared to the state’s current cost to administer Medicaid in the 3 percent to 4 percent range. She is concerned that will mean a squeeze on services to consumers and reimbursements to providers that has occurred in other states to ensure profits for the private companies or demands to revise upward the state’s contracted rates.

Senate Democrats have pushed for increased state oversight that includes capping yearly contract rate increases at 3 percent, monitoring MCO administrative costs and profits, and keeping periodic tabs on payments, claims and services.

Heaton said House Republicans plan to come with a less-expansive oversight approach that will protect consumers while preventing situations in which MCOs shrink services or seek more state funding.

“Our whole purpose here with our oversight bill is to ensure that the consumer will receive the services they are entitled to, and in many cases they will be better,” Heaton said.

“When you say, ‘Well, they’ll cut back on services so they can make money,’ it ain’t going to happen. If they can’t cut it and comply with the contracts that they’ve signed — goodbye. They will not be cutting back on our services so that they can continue to exist. We will make sure that that won’t happen.”

Sen. Joe Bolkcom, D-Iowa City, likened the launch this past Friday of privately managed Medicaid care to “a shotgun wedding.”

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“The governor has married these three MCOs and now we’re getting to know them,” Bolkcom said. “I don’t think we’d be here privatizing Medicaid had he not unilaterally done this, so we’ve been thrown together and we’re going to have to develop a working relationship to make sure the health care needs of Iowans are met.”

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