EXCLUSIVE: Feds’ tab could hit $225 million to help Medicaid firms cover Iowa losses – DesMoinesRegister.com

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In April 2016 three for-profit companies took over management of Iowa’s Medicaid program. Gov. Terry Branstad says the program is saving the state money but the companies say they are losing money. Critics worry about a loss of services.
Zach Boyden-Holmes/The Register

Iowa’s decision to help Medicaid managed-care companies shoulder deep financial losses would only cost the state government about $10 million, but it could cost the federal government up to $225 million, state officials say.

Much of the federal money would come via the Affordable Care Act, which Gov. Terry Branstad opposed but which his administration has repeatedly tapped to pay for health care for poor Iowans.

The state’s recent agreements to help the three private management companies mop up their red ink were disclosed Friday in response to an open-records request from the Des Moines Register. The “risk-corridor” agreements would help the companies make up for an estimated $450 million in losses since they began running Iowa’s Medicaid program, which is jointly financed by the federal and state governments.

The Iowa Department of Human Services estimated last week that the state’s share of the new agreements’ cost would be roughly $10 million, payable after June 2018. Department spokeswoman Amy McCoy said then that she didn’t have an estimate of how much federal officials would be expected to contribute. But after another Register inquiry, she said Tuesday that experts in her department estimated the federal share of the risk-corridor payments to the private companies could be as much as $225 million.

Last April’s shift to private management of the giant health-care program has been hotly controversial. Supporters, led by the Republican governor, contend it is saving money by encouraging more efficient, effective care for more than 500,000 poor or disabled Iowans. But critics doubt the savings estimates, and they say the shift has mainly caused hassles for patients and service providers.

State Sen. Liz Mathis, a leading critic of private Medicaid management, expressed shock Tuesday evening after learning the size of the expected federal payments to the private management companies under Iowa’s risk-corridor agreements. She said she wasn’t comforted by the fact that the money would come from Washington, D.C. “It’s still tax money,” she said. “I know we don’t have to take it out of our state budget, but if you’re paying state taxes or you’re paying federal taxes, you’re still footing the bill here.”

Mathis, who works for a mental-health treatment agency when she’s not at the Statehouse, reiterated her worries that increased public money going to the for-profit management companies would not lead to higher and faster payments to community service providers. Many of those providers have complained about being pushed to the brink of insolvency under the private management system.

Under risk-corridor arrangements, government agencies agree to help the private companies if they incur deep losses. In return, the companies agree to send rebates to the government if they make large profits. The three companies managing Iowa’s Medicaid program have complained of “catastrophic” losses in Iowa, which they blame on faulty projections from a state contractor of how much health care poor Iowans would need.

Branstad spokesman Ben Hammes noted Wednesday that federal officials have encouraged states to use risk-corridor agreements to protect Medicaid management companies against unexpectedly high health-care costs of new Medicaid members and to protect taxpayers against having to bankroll unexpectedly large profits to the companies in good times. Many other states have implemented the agreements, and private Medicaid management companies have had to send billions of dollars of rebates when they have made large profits, according to the federal report Hammes cited.

Hammes reiterated Branstad’s contention that the overall project is benefiting the state. “Medicaid Modernization has saved taxpayers $110 million. It will be $232 million next year,” the spokesman wrote in an email to The Register. “We are improving the health of our Medicaid population and protecting taxpayers.”

The federal Affordable Care Act, also known as Obamacare, provides the means for Iowa to tap a much larger share of federal than state money to help the private Medicaid management companies make up for their deep losses here.

Most of the Iowa Medicaid participants included in the risk-corridor agreements are about 150,000 poor adults who joined the program after it was expanded under Obamacare. Under that 2010 law, the federal government agreed to bear almost all of the cost of such Medicaid recipients. Branstad opposed the overall law, but agreed in 2013 to accept hundreds of millions of extra federal dollars to expand the state’s Medicaid program, with some tweaks.

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Jamie Campbell’s in home care has been more than cut in half since Gov. Branstad’s Medicaid privatization went though.

McCoy said Tuesday that federal Medicaid officials had not yet signed Iowa’s new “risk-corridor” agreements, but she said they were aware of them and expressed approval. A spokeswoman for the federal Centers for Medicare and Medicaid Services declined to comment.

In a news conference Monday, Branstad stressed that the state’s share of the risk-corridor payments would not have to be made until fiscal year 2019, meaning they wouldn’t affect the tight budget legislators are working on for fiscal year 2018, which starts this July 1. He expressed support for the new agreements, noting that they could lead to rebates to the government if the managed care organizations’ Iowa operations turn profitable. “We’re partners in this and we’re going to continue working with the MCO’s with regard to what makes the most sense going forward,” Branstad told reporters Monday.

A related cost increase could come soon, as a result of negotiations between the three companies and state officials over the base rates that the companies are paid for covering Iowa Medicaid recipients. The companies are expected to seek large increases. If they succeed, the increased Medicaid spending could further pinch the state budget.

U.S. Rep. Dave Loebsack, the state’s sole Democrat in Congress, released a statement Wednesday reiterating his call for federal officials to withdraw permission for Iowa to use private Medicaid managers. “The privatization of Medicaid in Iowa has been nothing but one pitfall after another and it is clear that this hasty and ill-advised experiment has failed,” the statement said. “On top of a bailout from the state, insurance companies are now expecting an additional $225 million in taxpayer funds from the federal government. The fiscal incompetence surrounding this switch appears to be never ending.”

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