Iowa DHS: Medicaid director's private email 'improper'

Iowa’s Medicaid director had improper communications with an insurance company consultant and former lawmaker during a critical review period that ended with the for-profit company being selected to help privatize the state’s $4.2 billion annual Medicaid program, the state acknowledged in court Monday.

Iowa Department of Human Services Director Chuck Palmer insisted in court that those communications with former Rep. Renee Schulte — some via private, non-state emails with Medicaid Director Mikki Stier — had no bearing on Iowa’s selection of four companies that are in line to manage the state’s Medicaid program.

And state attorney Diane Stahle described the issue as “a rabbit hole.”

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But the three companies challenging the state’s selection — Aetna, Meridian and Iowa Total Care — say it’s just one of many examples of nepotism, improper review and even illegal actions taken by the state in a flawed and “haphazard” process. They are asking Administrative Law Judge Christine Scase to rule against the state’s process, which could force Iowa to start the privatization process over.

“If this is a rabbit hole, it’s the size of the Grand Canyon,” Mark Weinhardt, an attorney for Aetna, said about Schulte’s involvement.

Schulte, a Cedar Rapids Republican, worked as a paid consultant for Iowa’s Department of Human Services starting in January of 2013, soon after she lost re-election. She terminated her nearly $100,000-a-year contract with the state on Feb. 20, four days after Gov. Terry Branstad announced Iowa was seeking competitive bids to contract with private companies to manage its Medicaid program. Days later, she began working for WellCare.

Schulte posted a response to social media shortly after the state selected the winning companies stating that she helped WellCare with its bid, which raised questions about whether she provided the company unfair or insider information.

Schulte and Stier communicated via Stier’s private email account during a so-called blackout period where people involved with the bid process were to communicate only through a designated contact officer, evidence submitted as part of the case shows.

Schulte went from consultant for WellCare to the company's director of clinical behavior on Sept. 21. She referred comment Monday to WellCare spokeswoman Crystal Warwell Walker, who said the company is re-emphasizing training with all its consultants to ensure such communications do not happen again.

"These limited communications did not include any state employees involved in the scoring process," Warwell Walker added.

Emails presented Monday in court say that Stier told Schulte that WellCare had been one of the companies selected roughly five days before the decision was publicly announced. Palmer said that, if that email is accurate, he would consider that communication to have been inappropriate.

Palmer additionally testified that it was entirely his decision to hire Schulte in 2013, which was done without a competitive selection process or job posting.

"It was no one else's idea. It was no one else's decision," Palmer said when questioned in court about whether Gov. Terry Branstad had suggested or directed that Schulte be hired by the state.

The hearing, which is scheduled to last all week, involves the single-largest set of publicly bid government contracts in the state’s history. If the contracts are approved by the federal government, for-profit companies will manage Iowa’s Medicaid program, which serves roughly 560,000 poor or elderly Iowans, starting as early as Jan. 1.

The four companies selected by the state — Amerigroup, WellCare, UnitedHealthCare and AmeriHealth — have faced accusations of fraud or mismanagement and some have resulted in hundreds of millions of dollars in fines. The companies have also collectively been cited with more than 1,500 founded services errors, investigations published by The Des Moines Register show.

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Thirty-three attorneys introduced themselves at the start of Monday’s hearing, which Stahle described as an “unprecedented” number.

Some of the attorneys for the four companies selected to take over Iowa’s Medicaid generally described Iowa’s process as fair and concise. The three companies challenging the state’s process outlined Monday some of the flaws they will explore later this week. Among them:

• PENALTIES OVERLOOKED: Why some companies with no record of fraud or mismanagement scored lower than winning bidders who have paid hundreds of millions of dollars in fines or penalties.
• CRIMINAL DISCLOSURE: Whether WellCare’s initial failure to disclose its past fraudulent behavior in Florida that resulted in CEO prison sentences broke bidding rules.
• FLAWED REVIEW: That a committee of four reviewed the bids in such a way that widespread inaccuracies and summaries skewed the results with little or no consideration for what’s best for the state beyond a numeric review that critics say is flawed.

Scase said she plans to draft a proposed decision within two or three weeks following this week’s hearings. Any party, including the state, can appeal, which means the issue could go to District and the Iowa Supreme Courts.

The hearing will resume  at 9 a.m. Tuesday. It is open to the public at the Iowa State Bar Association building, 625 E. Court Ave., in Des Moines.