Health

Most recent Medicaid savings estimate accurate, state auditor says

No cost-savings methodology in place before privatization

The May 2018 report of savings to the state of $141 million in its managed-care program was an accurate estimate, “based on the information available at the time,” according to a new report by State Auditor Mary Mosiman. (Scott Morgan/Freelance)
The May 2018 report of savings to the state of $141 million in its managed-care program was an accurate estimate, “based on the information available at the time,” according to a new report by State Auditor Mary Mosiman. (Scott Morgan/Freelance)
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DES MOINES — Iowa Medicaid program officials’ estimate that the managed-care system is saving the state millions of dollars is accurate, according to a new state audit report.

But State Auditor Mary Mosiman’s report also chastised the state, noting the transition from fee-for-service was implemented “without establishing a reliable methodology for calculating cost savings.”

Mosiman’s report, issued Monday, indicated the Reynolds administration’s estimate of $141 million in savings attributed to the state’s switch to a privately managed Medicaid system is correct.

“The May 2018 savings of $141 million reported by the (Iowa Department of Human Services) was an accurate estimate based on the information available at the time,” according to the state auditor.

Using this methodology with updated cost and savings information, Mosiman estimates state fiscal year 2018 savings are $126 million.

“I hope that this audit report can put to rest the question of the fiscal savings generated by the move from a fee-for-service system to managed care,” Department of Human Services Director Jerry Foxhoven said in a statement.

“I can assure you that we will continue to operate Iowa’s Medicaid program in an open, transparent, and professional manner.”

Differing methodologies

Mosiman’s report is a review of Medicaid savings estimates as a result of the Department of Human Services transitioning of the Medicaid program from a primarily fee-for-service program to a managed-care program in April 2016.

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“Like 39 other states, Iowa went to a managed-care system because Medicaid was growing at unsustainable rate,” Gov. Kim Reynolds’ office said in an emailed statement on Monday. “Our state is now on a path to sustainability, and the governor is working to ensure Iowa has a program that better helps improve patient health.

“The governor has already made positive changes to the program since taking office and will continue to do so.”

Making the transition to privatized Medicaid in 2016, however, without first setting up “a reliable methodology for calculating cost savings ... resulted in various methodologies being used in an effort to satisfy requirements to report estimated Medicaid program cost savings,” Mosiman said in the report.

Mosiman concluded in her report estimates are “not as simple as comparison costs from the state’s accounting system.” Instead, it should be based on the cost of care in the year services are provided and not necessarily the year when those bills are paid.

“It would be like reporting the cost of your December Christmas expenses without including your January credit card payments,” Mosiman wrote.

Given the complexity of Medicaid, she wrote, the Legislature, the governor’s office and the Department of Human Services should have worked together to establish a savings estimate methodology.

Three estimates

The auditor’s office reviewed three estimates that were prepared using different methodologies for estimating fiscal year 2018 savings from the transition to a managed care program, but determined the May 2018 estimate was the most reliable based up on the various methodologies.

A January 2017 estimate from Reynold’s office reported $234 million in savings, and another estimate the following November from the Department of Human Services stated an estimated $47 million in savings.

The auditor said both 2017 estimates were based on data which did not account for all Medicaid program costs or costs incurred during the year — which were not paid by fiscal year end — “and, therefore, these methodologies should not be used to estimate Medicaid savings.”

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Mosiman determined the May 2018 methodology should continue to be used because the estimate was calculated based on a financial assessment of the overall Medicaid program and it applies the accounting matching principle by adjusting the raw data to align expenditures with the year in which they were incurred.

However, the state auditor cautioned that savings estimates will become less accurate the further Iowa is from a fee-for-service model “because future cost trends may or may not be representative of the annual growth rates currently used to estimate future Medicaid costs.”

In June, Iowa Medicaid Enterprises Director Michael Randol said during a public meeting the $141 million estimate was calculated by comparing actual Medicaid costs for state fiscal year 2015 — which was the last full year under the previous system — and the projected basic expenditures for state fiscal year 2018 — which was determined based on what the state spent in December 2017.

“The auditor’s work to thoroughly evaluate the cost savings estimates for the move to managed care of Medicaid provides important clarity for this program,” Sen. Jack Whitver, R-Ankeny, said on Monday.

“Senate Republicans will pursue opportunities to reform the program to ensure it provides services for those truly in need, timely reimburses providers for their services, and controls the rising costs in the program.”

Mosiman, a Republican, was voted out of office in November and her position will be taken over in January by Democrat Rob Sand.

Sand released a statement Monday saying he intended to “continue to dig into the issue.”

“I wouldn’t try to tell my wife how much money I saved by buying a particular truck if it doesn’t have an engine or wheels,” Sand wrote. “Yet this report talks cost but ‘does not examine the impact on quality or timeliness of service.’ So we have no idea what we are getting for our money, and so can’t say if we are in better shape or worse.”

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Democratic state lawmakers say they believe the audit does not answer questions they have on how much the managed-care organizations, or the private insurers that administer Medicaid coverage to Iowans, still owe health care providers for services.

Since the managed care program was implemented, providers around the state say they wrongly have been denied payments for services provided to the roughly 618,000 Iowans in the program.

Virginia Gay Hospital in Vinton has filed a federal suit seeking $91,000 in unpaid claims in 2017. Black Hawk County Supervisors are considering filing a lawsuit in an attempt to collect up to $584,000 in claims for residents at a county-operated nursing home unit for persistent mental illness.

“We remain concerned that the unexpected $100 million increase in payments to the out-of-state corporations running Medicaid will result in further cuts and delayed payments to Iowa health care providers that provide critical services to hundreds of thousands of Iowans, as well as additional cuts to education, health care and public safety to cover the additional payments to the corporations,” Sen. Pam Jochum, D-Dubuque, said in a news release.

Jochum called for the review of the Medicaid program after new savings estimates were released earlier this year without immediate clarification from officials.

l Comments: (319) 368-8536, michaela.ramm@thegazette.com; (515) 243-7220, rod.boshart@thegazette.com

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