AmeriHealth pulling out of Iowa's controversial Medicaid management program

One of the three national companies managing Iowa’s giant Medicaid program is pulling out, officials said Tuesday.

AmeriHealth Caritas notified Iowa officials that it no longer wants to participate in the controversial project, which began last year. Its exit is to take effect Nov. 30, officials said.

AmeriHealth and the other two companies, UnitedHealthcare and Amerigroup, have complained bitterly about losing hundreds of millions of dollars in Iowa. AmeriHealth’s position was particularly tenuous, because it wound up with most of the seriously disabled Iowans who rely on the program. Their care tends to be very expensive.

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The other two companies have signed contracts to provide services through fiscal year 2018, the Department of Human Services said Tuesday. The department will look for a replacement for AmeriHealth, to start next July. In the meantime, the approximately 200,000 Iowans who now receive Medicaid via AmeriHealth will be notified by mail that they're being shifted to one of the other two management companies, state officials said. They will have a chance to switch again if they want.

The shift to private Medicaid management began under former Gov. Terry Branstad, a Republican who vowed that it would lead to more effective, efficient care and hundreds of millions of dollars in savings for Iowa.

Critics contend it has led to cuts in services, especially for people with disabilities. Critics also say the private companies have delayed or refused payments to care providers for services that used to be routinely reimbursed.

Jerry Foxhoven, director of Iowa's Department of Human Services, said the departure of one of the three management companies demonstrated state administrators were willing to demand better value and service. "If you didn't see any changes, it would mean we're not holding anybody accountable or we're not expecting any improvements," Foxhoven said at a news conference Tuesday. "We've had some bumps along the way, I know there have been some bumps. ... Our job is to constantly be looking at, 'How can we improve it?'"

But the Iowa Senate's top-ranked Democrat said AmeriHealth's departure showed the shift isn't working. “For too long, Gov. (Kim) Reynolds and Republican legislators have been telling Iowans that the privatized Medicaid experiment was a huge success. That’s nonsense!" Sen. Janet Petersen of Des Moines wrote in a statement. “Today’s announcement is more bad news for Iowans needing accessible health care, and it’s more proof that Medicaid privatization is a horrible disaster.  ... The best advice for Gov. Reynolds and legislative Republicans is this: ‘You’ve dug yourself into a hole. You need  to stop digging.’”

Reynolds' spokeswoman, Brenna Smith, indicated the governor stands firmly behind Iowa's decision to hire private managers for its Medicaid program, as 38 other states have also done. "Gov. Reynolds is committed to improving quality and access to care, promoting accountability for patient outcomes and creating a more predictable and sustainable Medicaid budget," Smith wrote in an email to the Register.  

Medicaid management companies are paid annual amounts per member to cover health-care services, which the three companies contended was not nearly enough. The companies were angling for more money for the current fiscal year, which began July 1. Starting last spring, they were involved in protracted negotiations with the Iowa Department of Human Services. The negotiations ground on behind closed doors for months after they were expected to conclude, and neither side would publicly say what was holding them up.

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Legislators worried that any agreement to pay more to the companies could cause further financial problems for a state whose budget is already suffering a deep pinch.

Foxhoven said Tuesday that UnitedHealthcare and Amerigroup were granted 3.3 percent increases for fiscal 2018, which he said represented a relatively good deal for Iowans. 

“This is a small increase when you compare it to national trends on healthcare spending. Effectively managing resources allows the department to continue providing the broad array of services available to Iowans most in need,” he said. He added that his department could make the 3.3 percent increases without asking for more money from the Legislature or making cuts in other DHS programs. He said he did not have an immediate estimate of how much more money the managed-care payment increases represented for Iowa's Medicaid program, which consumes more than $4 billion a year from the federal and state governments.

Foxhoven said the new contract language with UnitedHealthcare and Amerigroup balanced the companies' desire for more flexibility in managing care with the state's desire to ensure they cover needed services and pay care providers promptly. "We will be watching the MCO's very closely, pushing them to make sure they provide good, quality services, especially to our most vulnerable members," he said.

Foxhoven declined to give examples of how the amended contracts change the relationship between the state and the two remaining management companies. Instead, he invited Iowans to read scores of pages of official documents posted on the department's website.

AmeriHealth Regional President Russell Gianforcaro said in a news release he was proud of his company's work in Iowa.

“Our focus now is on working collaboratively with the state in providing a seamless transition for our members. We wish the state of Iowa well as it continues this important program,” said Gianforcaro.