Medicaid Privatization Starts Today

Apr 1, 2016

At midnight this morning, Iowa's Medicaid system transitioned into the hands of three for-profit corporations. Gov. Terry Branstad says the move will contain costs, but critics say privatization leaves many patients without services. 

At the McDonough home in Cedar Rapids, shower day for seven-year-old Carson can be tricky.  That's because he breathes through a tracheal tube.

"While he's in the shower, he's actually off the ventilator, because you don't want to get a ventilator wet when they cost $20,000," says Carson's dad, Chris McDonough. "He's currently breathing on his own."

Carson was born with a type of muscular dystrophy called Namaline Myopathy, and it causes such severe muscle weakness that Carson can’t even clear his own throat. Since Carson's can't use his ventilator, a machine instead sucks phlegm out through Carson’s trach hole, which he needs done roughly once a minute during the shower.

Thanks to Medicaid, the McDonoughs ideally have two nurses come into their home every day.  This allows Brandy and Chris to work fulltime. But under privatization, the McDonoughs say they can’t count on that level of care. 

Gov. Branstad says Medicaid costs are eating up the state’s budget, and private healthcare companies, called managed care organizations, claim they do a better job coordinating patient care, which saves money. Additionally, some say the old Medicaid delivery model of fee-for-service was dysfunctional and wasteful.

"If I could turn back the clock and deliver those services to my family member, that we'll provide Iowa Medicaid members, I would be thrilled," says Kim Foltz, head of UnitedHealthcare's Iowa Plan, recalling her personal experience with Medicaid. "The coordination of care, the access, the commitment to that person centered care, which I can attest that my family member struggled with."  

UnitedHealthcare along with AmeriHealth Caritas and AmeriGroup are the three companies now in charge of Iowa Medicaid. Each MCO says it's committed to providing Iowans with high quality care, while also being good stewards of taxpayer money. 

But critics say MCOs don't so much manage care, but rather find ways to deny it. This may be a flat out refusal, or a systematic squeezing out of providers, which is what the McDonoughs say happened to their old nursing provider, CarePro.

"Normally Medicaid will pay us, for example, $40 an hour for that nurse to be in the home, and we are only able to bill the hours that the nurse is in the home," explains Michelle Jensen, CarePro CEO. "At the end of the year they allow us to do a cost report."

Jensen says the retrospective cost settlement report takes in to consideration all additional expenses like training, payroll, or rent. If the report finds it actually costs CarePro, say, $42 an hour to provide in-home nursing, Medicaid makes up the difference. 

"Our understanding is the MCOs would not honor doing a cost report, so right from the beginning we know we would lose money if we continue to provide that business," says Jensen.

The McDonoughs say they eventually found a replacement for CarePro, but the new company doesn't have as many nurses available. So if one of Carson’s main nurses gets injured, or resigns, the McDonoughs say Brandy will have to quit her job, and that loss of income would mean they wouldn’t be able to pay their mortgage.

"We're just waiting for the next bomb to drop," says Chris McDonough. 

The Iowa Department of Human Services confirms it is not requiring the MCOs to provide retrospective cost settlement for in-home nursing. All three MCOs say they are reimbursing providers at rates set by DHS, meaning they won't reimburse CarePro retrospectively for supplemental costs. 

The MCOs do say they want to contract with as many Medicaid providers as possible, since healthy people cost less money, and the way people say healthy is to identify health problems early.  Iowa DHS says it’s not in Iowa’s best interest to support businesses that aren’t feasible under a managed care model, where the focus is on health outcomes. 

"There are always going to be unique situations that just don't fit the box of a new program or a new service delivery method," says DHS spokewoman Amy McCoy. "We had those every day, even with the fee-for-service program." 

Other states that have privatized their Medicaid systems have produced varying results. Experts say ultimately it comes down the quality of oversight. So far Iowa’s House and Senate can’t agree what should look like.