Medicaid managers report millions in Iowa losses
Two of the three private companies managing Iowa’s Medicaid program say they’ve lost tens of millions of dollars so far, new reports filed with the state show.
AmeriHealth Caritas reported last week that it ran a $42.6 million deficit on its Iowa operations in the first six months of 2016. Amerigroup reported it lost $66.7 million. The third Medicaid management company, UnitedHealthcare, did not break out its Iowa results in its report.
The three companies took over administration of Iowa’s $4 billion Medicaid program on April 1. Gov. Terry Branstad, who pushed through the change, has predicted it will save the state millions of dollars over time. But critics fear the companies will demand higher payments from the state after incurring early losses in Iowa. "That's been the scenario in other states," said state Sen. Joe Bolkcom, an Iowa City Democrat who is a fierce critic of the shift to private Medicaid management.
Amerigroup spokeswoman Denise Malecki said she wasn't prepared to get into specifics of her company's report. But she suggested Amerigroup lost more than it anticipated. "As for expectations, it is common to encounter losses during the initial rollout of a new statewide Medicaid managed care program, but our data indicates higher costs than projected by rate development methodology," Malecki wrote in an email to the Register.
“...This report details our health plan’s revenues and expenditures during implementation and the first quarter of participation in the Iowa Medicaid managed care program,” Malecki wrote. “The report indicates that Amerigroup has made a nearly $200 million investment to serve the Iowa Medicaid program, which is a testament to our commitment to ensuring quality, member-centered services, and working collaboratively to enable the long-term success of the Iowa Medicaid program.”
Amerihealth spokesman Scott Bluebond declined to say if his company's Iowa losses were larger than expected.
“Our more than 30 years of experience implementing Medicaid managed care has taught us that during the initial phase, plans often incur start-up and related expenses that exceed revenues for that period,” Bluebond wrote in an email to the Register. “…We remain strongly committed to the health and well-being of Iowans. We look forward to working with Iowa (Department of Human Services) and other stakeholders to ensure that IA Health Link helps make Iowa an even healthier state,” he wrote, referring to the official name of the new Medicaid arrangement.
Bluebond said “it is not appropriate” to discuss his company’s financial report in detail.
A UnitedHealthcare spokeswoman did not respond to a Register request for Iowa-specific financial numbers. An insurance division spokesman said the UnitedHealthcare division in question, which serves four states, was not required to file Iowa statistics.
Bolkcom, the Democratic senator, predicted the management companies will challenge state experts' 2015 estimates of how much care would be used by the 560,000 poor or disabled Iowans covered by Medicaid. "I think they're going to want to renegotiate the contracts if they're losing that much money," he said. In the meantime, he said, he fears the management companies will respond to the financial losses by clamping down on what services they'll cover. Many care providers already are complaining that the companies are being tightfisted and slow to pay, which the companies deny.
Amy McCoy, a spokeswoman for the Department of Human Services, suggested the companies' reports show expected expenses.
"These insurance filings capture only a very short time period, during the first couple months of managed care implementation, where (managed care organizations) are making long-term investments in the Medicaid program," she wrote in an email to the Register. "Iowa Medicaid and our partner MCOs remain focused on helping members become healthier through better care coordination efforts, and on creating a more efficient and sustainable Medicaid program."
Brad Wright, a health policy professor at the University of Iowa, said the financial reports suggest Iowans using the new Medicaid plans are sicker, and using more health care, than experts predicted.
“I suspect the result of that will be that Iowa does not save the money that Gov. Branstad touted when he first proposed the move to managed care, because these losses are not sustainable,” Wright said. If the losses continue, he said, the state will have to pay the companies more or see them deny more care or decide to leave Iowa.
Wright, who reviewed the filings at the Register’s request, noted that on top of the $109 million in losses so far this year, AmeriHealth and Amerigroup spent more than $83 million in Iowa last year. He also noted AmeriHealth’s reported administrative expenses were 6 percent. Amerigroup’s were about 8 percent. Those figures are lower than some critics predicted.
The new filings show early results, Wright said, but they seem to echo problems in other areas of health care. For example, he noted some private insurers are pulling out of markets in which they sold subsidized policies to moderate-income Americans under Obamacare. Unexpectedly high health-care costs also are part of the reason for the collapse of several new health-insurance co-ops, led by Iowa’s CoOportunity Health.
National analysts have said Medicaid managed-care companies sometimes try to renegotiate rates after landing initial contracts with states.
In a January call with investors, the chief financial officer of Amerigroup’s parent company, Anthem, estimated that close to $50 million in 2016 losses could be attributed to its work in Iowa.
The leader of a fourth Medicaid management company, which initially was awarded an Iowa contract, was candid last year about his financial expectations. “We are thrilled to have won this business because we expect and are confident that after a rough 18 months, which is informed by our experience with other new start-up managed Medicaid plans, this will be a very profitable piece of business as we deliver value to the Medicaid beneficiaries in Iowa,” Kenneth Burdick, WellCare’s chief executive officer, told investors last November.
WellCare’s contract wound up being cancelled in December after an administrative law judge ruled the company should have disclosed information about an “integrity agreement” with the federal government following convictions for fraud in 2014 of three of the company’s former executives.