Iowa's plan to privatize Medicaid is struggling
On Jan. 1, 30 days before Iowa caucus-goers cast the first votes of the 2016 presidential race, the state will gain another national distinction, but of a dubious variety: It plans to launch the most sweeping and radical privatization of Medicaid ever attempted.
In an extraordinary social policy experiment, Iowa's Republican Gov. Terry Branstad is kicking about 560,000 of the state's poorest residents out of the traditional Medicaid health care program for the poor and forcing virtually all of them to sign up with private insurers. The trend toward managed-care for Medicaid has been underway for decades and some 39 states do it to some extent. But experts inside and outside government say no state has tried to make such a wholesale change so quickly — in Iowa's case, launching the program fewer than 90 days after signing contracts with private health care companies.
Iowa is conducting an extreme test of a familiar premise of free-market conservatism: that the private sector is more efficient at management and service delivery than government. But the results so far should give pause to those who automatically make such assumptions. The transition of Iowa's $4.2 billion Medicaid program has made the rollout of HealthCare.gov look orderly.
An Iowa administrative law judge late last month recommended that Iowa throw out the contract it awarded to WellCare, one of the four companies hired to manage the new program, noting that the company failed to disclose details of its "integrity agreement" with the federal government after the 2014 convictions of three former executives involving the misuse of Medicaid money. In addition, WellCare had paid $138 million to resolve claims that it overbilled Medicare and Medicaid.
The Des Moines Register has reported that the four companies selected to operate the Iowa program have had more than 1,500 regulatory sanctions combined and have paid $10.2 million in fines over the last five years. These involved canceled appointments, privacy breaches, untimely processing and failure to obtain informed consent.
The Iowa rollout has been hampered by delays, and some beneficiaries of the program are only now getting their enrollment packets, though the deadline for signing up is Dec. 17. Health care providers complain that they are being forced to sign incomplete contracts or face a penalty, and that some contracts don't cover services that had been covered under the existing Medicaid program.
Branstad's administration has answered critics by saying the new program will save $51 million in its first six months. But he has been unable to come up with documentation to justify the cost savings.
Branstad had the authority to implement the new program without input from the state Legislature. But officials with the Centers for Medicare and Medicaid Services were in Iowa last week and will make a ruling soon on whether the plan can proceed.
"The rollout has been an absolute unmitigated disaster," alleges Democratic Sen. Joe Bolkcom, the chamber's majority whip. "CMS and the Obama administration need to protect vulnerable Iowans from this train wreck."
Branstad has implicitly acknowledged some difficulty. Last week he extended until April the "safe-harbor" in which Medicaid providers will receive 100 percent reimbursement regardless of managed-care network.
In response to my inquiry, Branstad's office sent me to the state's Department of Human Services, where a spokeswoman, Amy Lorentzen McCoy, said all is well. The state, which now has 12 percent of Medicaid recipients in managed care, would have gone this way anyway, she said, but the urgency increased with the recent Medicaid expansion (Branstad was one of the few Republican governors to accept the Obamacare expansion of the program).
As the nation's attention turns to the Iowa caucuses, Iowans will likely be witnessing either a fight between Branstad and Obama (if the federal government forces a delay in the Iowa program) or chaos (if the program is allowed to proceed). Other states, such as Kansas and Kentucky, have tried similar experiments, but they either moved more deliberately or didn't extend the private program to vulnerable populations such as the disabled.
"A lot of issues have been raised with the pace of the rollout" in Iowa, said Julia Paradise, a Medicaid expert with the Kaiser Family Foundation. "The provider networks for the plans have not yet been established. There's a lot of confusion among beneficiaries."
Branstad could recognize this, and slow things down. In failing to do so, he's relying more on dogma — faith that the private sector always does things better — than reality.
Follow Dana Milbank on Twitter, @Milbank.