Iowa can't show the math of Medicaid savings estimate

A state agency says it has no documents or even a list of experts consulted to support its claim that a controversial plan to hire private companies to manage its Medicaid program would save taxpayers $51 million during its first six months.

The absence of any public data behind the estimate is significant because the Legislature relied on the projection when it approved the budget for the current fiscal year, which began July 1.

Some lawmakers now say they have doubts about whether the Department of Human Services' estimate is accurate and how Gov. Terry Branstad's administration came up with the number.

“They can’t show the math. It’s a completely bogus, made-up number,” said state Sen. Janet Petersen, a Des Moines Democrat who had previously asked the federal government to halt Iowa’s effort to privatize Medicaid management.

The disclosure by the DHS that such documents no longer exist came in response to a public records request filed by The Des Moines Register. The Register sought documents detailing the process an agency employee described during an Oct. 2 court hearing when she was asked how she arrived at the Medicaid savings estimate.

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Jean Slaybaugh, a DHS fiscal manager, testified that experts predicted that turning management of Iowa’s annual $4.2 billion Medicaid program over to private contractors could save anywhere from nothing to as much as 15 percent under the plan, which is scheduled to begin Jan. 1, pending federal approval.

Slaybaugh further testified that — at DHS Director Chuck Palmer’s request in August 2014 — she selected a midpoint of the estimates, which amounted to about 7.5 percent, or roughly $51.3 million, over the privatized program's first six months.

The Register asked for copies of the estimates Slaybaugh used to calculate the number. DHS spokeswoman Amy Lorentzen McCoy responded this week that no such documents exist.

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Lawmaker: We need to ‘trust but verify’

The state agency's inability to produce data, lists or reports used to compute the savings is at the very least an indication that Iowa's record retention laws are inadequate, said state Rep. Bobby Kaufmann, R-Wilton, and a chairman of the Legislature’s Local Government Public Records Study Committee.

Iowa law does not mandate that research or draft materials be maintained as public records. And once such materials are tossed — even data used to justify changes to a prominent social program — they are no longer considered a public record, officials from the Iowa Public Information Board said this week.

In late 2014 Kaufmann’s group recommended changes to require maintaining such records. The undocumented Medicaid estimate could be the catalyst to change the law in next year’s legislative session, he said, describing the absence of such documentation as “peculiar.”

“I don’t know if I question if it’s real, but I always like to refer to my favorite president, Ronald Reagan, when he said, ‘Trust but verify,’" Kaufmann said. “If those savings are accurate, that’s fantastic news. I’d just like to have proof of it.”

Slaybaugh told lawmakers that the estimate was based on actuarial data but, until her court testimony, key lawmakers were unaware that the number was based on a midpoint projection, state Rep. Dave Heaton, a top House Republican and advocate for human services, said this week.

“She didn’t use the term ‘midpoint’ or anything like that. It was never mentioned that there were some estimates with zero savings,” Heaton said, noting the importance of the savings to the state’s budget.

“I have $51 million” of savings planned “that I’m praying will happen so we can meet our budget,” Heaton said. “I guess all the other little details on getting that $51 million is over. The bill has passed, and the governor has signed it, and now I’m hoping we can hit the savings. That’s all I can do.”

Savings elusive in other states

Those who have opposed the privatization efforts have questioned how hiring four companies to run the program, which provides health services to 560,000 poor and elderly Iowans, would save money without reducing the quality of care.

DHS officials have insisted the savings will come from fewer duplicated services and better preventive health care.

The Register reviewed progress in Kansas and Florida, two states that recently adopted changes similar to what Iowa is considering. Kansas leaders never promised the switch would save money, but said it would, instead, slow the projected growth of costs in its Medicaid program. In Florida, Medicaid providers were granted a 7.7 percent increase this year after reporting that they were losing hundreds of millions of dollars.

Iowa’s plan has also come under scrutiny because several of the companies awarded the state contracts — Amerigroup, WellCare, UnitedHealthCare and AmeriHealth — are facing ongoing lawsuits and more than 1,500 administrative actions taken against them in other states. They have paid hundreds of millions of dollars in fines or settlements to resolve fraud or mismanagement claims.

Three companies that were not chosen — Aetna, Meridian and Iowa Total Care — have each challenged the process Iowa used in awarding the contracts. They say the system is riddled with nepotism, fraud or inaccurate scoring of bids. An administrative law judge is expected to review their grievances late this month or early November.

Gov. Terry Branstad’s spokesman, Ben Hammes, declined to answer questions about whether DHS shared specific savings data with the governor and whether the governor was previously aware that documentation that resulted in the estimate had not been maintained.

“The governor is confident the savings estimate provided by DHS and affirmed with bipartisan support from the Legislature is prudent, and believes DHS followed a thoughtful and diligent process to achieve the savings estimate,” Hammes said.