Iowa's estimated savings from Medicaid privatization keeps changing, without explanation

Editor's note: This story has twice been updated to reflect the state's clarification and re-clarification of the information it previously provided.

The question of exactly how much Iowa is saving by privatizing its Medicaid system became more muddied this week, as state officials repeatedly changed their estimates.

The Iowa Department of Human Services provided no details of how it came up with a new estimate of $140.9 million in state savings, which it released Thursday afternoon.

A one-page letter containing that estimate described it as a "projected annual range." On Friday, a department spokesman said the figure wasn't an annual estimate, it was actually a "cumulative" amount since April 2016.

Then, late Friday afternoon, the same spokesman said the $140.9 million estimate was for the current fiscal year.

The new figure is three times the savings the department previously estimated Iowa taxpayers would save this fiscal year from having private companies run the state's $5 billion Medicaid program.

The fluctuating savings estimates come amid continuing controversy over that change and other issues with the two-year-old privatization.

Supporters, including Republican Gov. Kim Reynolds, say the shift is leading to more efficient, effective care for the 600,000 poor or disabled Iowans covered by the program.

But critics say the shift to private management has led to cuts in services for Medicaid members and to unpaid bills to the agencies providing their care. They are skeptical that private management of the program is saving taxpayers money.

Last December, the department estimated Iowa would save $47 million for the current budget year, which runs through June. That was an 80 percent decline from the $232 million in state savings former Gov. Terry Branstad predicted for the current budget year.

David Hudson of Windsor Heights, who leads an official advisory committee on Iowa's Medicaid program, expressed frustration after reading a letter from the department to a legislator who asked for the savings estimate.

"It's so extremely simplistic that it answers nothing," he said. "This letter doesn't provide any clarity about how much we've saved."

More:How privatized Medicaid is systematically denying hundreds of disabled Iowans the medical equipment their doctors say they need

The new savings estimate was offered Thursday in a one-page letter from the Department of Human Services to state Sen. Pam Jochum, D-Dubuque. Jochum has been a blunt critic of Iowa’s 2015 decision to hire private Medicaid managers.

She recently asked the department for a current savings estimate, as did the Des Moines Register. A department spokesman responded to the newspaper’s request by sharing a copy of the letter the agency sent to Jochum.

The letter was signed by Merea Bentrott, who is the department’s liaison to the Legislature. Bentrott told Jochum the department estimates the state is saving $140.9 million in “cost avoidance” over what it would have spent on a publicly run Medicaid program.

“I believe Iowa is experiencing similar success as any other state that has implemented managed care to the degree in which Iowa has done,” Bentrott wrote.

Bentrott's letter labeled the savings as a "projected annual range." But department spokesman Matt Highland said Friday afternoon that Bentrott's letter was mistaken, and that the estimated savings were "cumulative" figures stretching back more than two years. Then, late Friday afternoon, Highland said the projected savings were for the 2018 fiscal year.

Jochum told the Register Friday she was not impressed with the department's response to her request. "There is absolutely no transparency," she said. "There is no way for us to verify the information they've provided."

Jochum doubts that private management has led to a more efficient Medicaid system. Any savings seem to be coming from denials of important services to patients and delayed payments and cuts in payment rates to the agencies providing care, she said.

"If that savings is even true, I don't believe it's a real savings," said Jochum, who has an adult daughter, Sarah, on Medicaid because of a disability.

Medicaid is jointly financed by the federal and state governments. Bentrott's letter to Jochum estimates that federal and state taxpayers have saved a total of $411.4 million by having private companies run Iowa’s Medicaid program.

Thursday's letter gives no explanation of the math the department used to come up with the new figures. It also doesn’t give the basis for Bentrott’s contention that Iowa’s savings are in line with other states'.

Branstad ordered in 2015 that Iowa follow 39 other states in hiring national companies to administrate its Medicaid program. The companies are given set amounts of money per year to cover the care for Medicaid participants.

Proponents say the companies can save money by helping keep participants healthy. Branstad, who is now ambassador to China, predicted in 2017 that state taxpayers would save $232 million in fiscal year 2018, which is the current year.

The Department of Human Services' official savings estimate for this fiscal year plummeted to $47 million in a report released in late December. Branstad had said that in fiscal 2017, the state saved $110 million from having private companies run Medicaid.

New Medicaid Director Mike Randol said this January that the way the estimates were calculated was flawed. He vowed to come up with more accurate figures. Highland, the department spokesman, said the new estimate reflects that effort.

This week's unexplained $140.9 million savings estimate did not satisfy Hudson, who is co-chairman of Iowa's Medical Assistance Advisory Council.

Hudson used to work as a lobbyist for the governor's office under Branstad, a Republican who appointed him to the advisory council in 2016. Hudson has an adult son, Matthew, with severe disabilities, and their family has struggled to maintain in-home services under privatized Medicaid.

Hudson has previously asked Randol for details on how the Department of Human Services' new "cost avoidance" estimates would be figured. He said in an interview Friday it's important for Iowans to see how the privately managed care organizations are saving money.

"What costs have been avoided? Are the MCOs paying for fewer paper clips? For fewer services?" Hudson asked. "… It might be that this $141 million figure is very accurate. Maybe they're using a better rubric. I don't know."

The Register asked the department to clarify what the estimates mean and how they were figured.

Department spokesman Matt Highland responded Friday by sending this statement via email:

"These were estimates in 2015 which were projecting three years out. As stated in January, Director Randol wanted to develop a more comprehensive methodology to calculate managed care savings which looks at all associated costs, such as non-medical costs which include administrative costs, care coordination and quality improvement activities. The previous figures were based on the out-dated methodology. The department is committed to a sustainable Medicaid program to serve Iowans most in need, now and into the future."

Highland said Randol was willing to explain the savings estimates to the Register "on background." The Register declined the offer, saying such a discussion should be on the record so it could be reported to the public.

The Register asked the governor's office for comment on the new savings estimates. Reynolds' spokeswoman, Brenna Smith, replied in an email Friday morning.

"The governor remains committed to improving the quality of care provided by Medicaid modernization because it is far more proactive and patient-centered than the previous system," Smith wrote. "More importantly, the governor and the Department of Human Services are working tirelessly to provide services to underserved Iowans in the most compassionate way possible. The department’s newly released analysis reflects that our Medicaid program is the only way to ensure a responsible and sustainable program as health-care related costs continue to rise."

The issue is likely to be a major point of contention in the campaign for governor. The Democratic candidates vying to challenge Reynolds in November all have criticized the privatization of Medicaid.

The Department of Human Services has had trouble explaining savings estimates since the Medicaid privatization project started.

In October 2015, the agency's spokeswoman said there were no documents showing how administrators figured the shift would save $51 million in the first six months. Critics pounced on that admission, which came in response to a public records request from the Register.

Any Medicaid savings projections for next fiscal year would be complicated by the fact that Iowa hasn't negotiated new payment rates with the two national companies running Medicaid.

The companies, UnitedHealthcare and Amerigroup, have complained about losing hundreds of millions of dollars on the project. They want to be paid more.

A third company, AmeriHealth Caritas, withdrew from the Iowa program last fall after failing to get what it wanted from contract negotiations with the Department of Human Services.

The department is in the process of hiring one or two new companies to help manage the program starting in July 2019.