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Iowa Officials Increase Payment To Medicaid Management Companies By 8.6 Percent

iowa capitol
John Pemble/IPR
More than 600,000 Iowans have health insurance through Medicaid, which costs more than $5 billion in federal and state funding.

The state of Iowa has agreed to pay an additional $386 million in state and federal dollars to the two private insurance companies that manage the state’s Medicaid program for low-income and disabled residents.

It’s a total 8.6 percent increase, more than the 8.4 percent agreed upon last year.

The state alone will pay a 6.5 percent increase to the managed care companies, or about $115 million more in state money compared to last year. The state’s portion paid to the insurance companies is a smaller percentage increase than last year, but it’s a bigger dollar increase than last year’s $103 million.

“Included in that contract is increased fees for our providers, increased access for mental health, and increased accountability,” Gov. Kim Reynolds said Wednesday. “So all that was taken into consideration. It’s a little bit higher than it was last year, but not a lot.”

State Medicaid Director Mike Randol told the Council on Human Services on Wednesday that legislative requriements and program and policy changes accounted for some of the increase.

"I don’t like to characterize increases or raises to the managed care organizations as we set rates," Randol said. "More than 92 percent of those dollars are going to go out to the providers who deliver those services to our members."

More than 600,000 Iowans have health insurance through Medicaid, which costs more than $5 billion in federal and state funding. 

When former Republican Gov. Terry Branstad announced plans in 2015 to transfer the state-run program to private management, he said that move would save the state money.

Asked about that promise, Reynolds said she is not Branstad. She said she aims to keep the Medicaid system sustainable for the future.

But the system has seen turbulance since its inception. Two MCOs have left the state in the past two years -- including United Healthcare last month, and some Iowans have complained that they've seen services cutunder the privately-managed program.

“The outrageous contracts with two out-of-state corporations are more evidence that privatized Medicaid in Iowa is unsustainable, unaffordable and unpredictable,” said Senate Minority Leader Janet Petersen, D-Des Moines.

Petersen said Republican lawmakers can’t back up their claims that privatizing Medicaid management would save the state money. She said the state-managed system costs grew an average of 5 percent each year in the 10 years before privatization.

Natalie Krebs is IPR's Health Reporter
Katarina Sostaric is IPR's State Government Reporter