Iowa Hands Over Medicaid to Companies With Troubled Histories

Critics of the privatization scheme point to other states that have handed over Medicaid to health-care companies only to watch Medicaid waiting lists grow and service dwindle.

Critics of the privatization scheme point to other states that have handed over Medicaid to health care companies only to watch Medicaid waiting lists grow and service dwindle. C-SPAN / YouTube

Iowa Department of Human Services (DHS) officials said last week that the agency had signed contracts with four companies to implement Republican Gov. Terry Branstad’s plan to privatize the state’s Medicaid program, despite the troubled history and frequently criticized lobbying tactics of the companies selected to run the program. 

Critics of the privatization scheme point to other states that have handed over Medicaid to health-care companies only to watch Medicaid waiting lists grow and service dwindle.

Iowa Medicaid Director Mikki Stier said in a statement that implementation of the program is intended to improve quality and access, promoting outcomes and accountability while creating a more predictable and sustainable Medicaid budget.

DHS officials have claimed that the program could save the state $51.3 million in its first six months. Lawmakers and critics of the privatization plan have questioned the accuracy of the agency’s estimates.

The four companies that the state has hired to manage Medicaid were announced by DHS in August. Amerigroup Iowa, AmeriHealth Caritas Iowa, UnitedHealthcare Plan of the River Valley and WellCare of Iowa will operate the state’s $4.2 billion Medicaid program.

Iowa’s DHS is working with the companies to establish provider networks in the new IA Health Link program that will serve nearly 600,000 low-income Iowans.

The four companies that the state has contracted each have troubled histories of managing similar programs in other states, according to a Des Moines Register investigation. More than $10.2 million in fines have been imposed on the companies resulting from more than 1,500 regulatory violations.

Amerigroup, the parent company of Amerigroup Iowa, in its bid for the contract, provided the state with information about nearly 800 regulatory sanctions against it, totaling more than $4.7 million in fines. Among the companies that provided bids for the Iowa contracts, no other company disclosed as many sanctions or as many fines as Amerigroup.

Amerigroup agreed to pay $225 million in 2008 to settle claims that it defrauded the Illinois Medicaid program by systematically avoiding enrolling pregnant women and unhealthy patients in the state’s managed care program, reported the Wall Street Journal.

Amerigroup was one of the three managed care companies contracted by Kansas to operate a similar Medicaid privatization program championed by Republican Gov. Sam Brownback. KanCare has been mired in controversy since its inception, and Amerigroup has been at the center.

KanCare was launched in January 2013, when the state’s traditional Medicaid program was phased out. In its place, the Brownback administration contracted three for-profit health insurance companies to coordinate health care for more than 360,000 low-income residents. Amerigroup Kansas, United Healthcare Community Plan and the Sunflower Health Plan all received contracts to operate the program.

In 2013, the three companies managing KanCare lost a total of $110 million, and in the first half of 2014 the companies lost another $52 million. Opponents of the program are now growing concerned that if any of the three companies were to withdraw from KanCare, it could cause a significant disruption in service.

There is an ongoing U.S. Department of Justice investigation into complaints about Medicaid waiting lists for disability services in Kansas.

Democrats on the state legislature’s KanCare Oversight Committee last year called for the appointment of a separate committee to investigate whether any legal or ethical boundaries were crossed when Brownback approved $3 billion in contracts with the managed care companies. Republicans on the committee blocked the proposal.

Amerigroup has been at the center of controversial lobbying tactics.

The three companies donated more than $50,000 to the campaigns of Kansas lawmakers since the KanCare program began in 2013, according to reporting by KCUR. Seven of 11 lawmakers who are members of the KanCare Oversight Committee received campaign contributions from one or more of the companies.

Amerigroup contributed more to candidates than the other two companies combined, donating more than $27,000 to lawmakers’ campaigns.

Lobbyist and staffers of Amerigroup have reportedly had private lunches with Republican lawmakers on the committees providing oversight for the KanCare program. Amerigroup co-hosted a fundraiser Wednesday for Republican members of the state senate’s Public Health and Welfare Committee.

Kansas GOP state Sen. Mary Pilcher-Cook of Shawnee, chairwoman of the committee, sat across the table from Amerigroup lobbyist Gary Haulmark during the fundraiser that was held in a downtown Topeka barbecue restaurant, reported KCUR.

Dean Lerner, former head of the Iowa Department of Inspections and Appeals, told the Des Moines Register that in light of the companies chosen by Branstad, the Obama administration should reject the state’s privatization scheme.

“This information alone—Iowa’s inability to hire a contractor that hasn’t defrauded the government—should be enough” for the federal government “to refuse to grant the state permission to privatize management of Medicaid,” Lerner said.