Medicaid At Center Of Iowa Governor's Race

Nov 1, 2018

Ads are flooding screens and mailboxes in Iowa calling the state’s move to privately-managed Medicaid a failure and a health care crisis. Some feature Tucker Cassidy, a quadriplegic man from Waterloo, who says the program forced him to move to a nursing home.

“Three days before Christmas, I get an email from my health care agency saying, ‘We are not going to be able to provide you anymore services. Happy Holidays,’” Cassidy says in a video ad.

Democratic candidate for governor Fred Hubbell has made this the centerpiece of his campaign to unseat Republican Gov. Kim Reynolds, who admits that mistakes were made in the beginning. 

“And I’ve spent the last 16 months working every day to sustain this program, to stabilize and sustain it,” Reynolds said in an October interview with IPR.

Medicaid has taken center stage in the Iowa governor’s race, as Democrats criticize Reynolds for her handling of ongoing problems since management of the program was privatized. But how did we get here?

Medicaid is a government-funded program that covers health care for low-income people and people with disabilities, and it pays for many births and nursing home stays. The state in 2013 expanded the program, and now about one in five Iowans rely on Medicaid.

In 2016, former Republican Gov. Terry Branstad handed management of Iowa’s Medicaid program to three for-profit insurance companies without lawmakers’ approval. 

“The costs have gone up dramatically, but the health care outcomes have not,” Branstad said at the time. “And that’s what our goal is, to improve health care outcomes.”

He also claimed it would save the state millions each year.

Medicaid managed care in Iowa

The program start was delayed by federal regulators. Then complaints started mounting from patients who were denied services, and care providers who were taking financial hits from delayed payments and higher administrative costs.

“It seems like the state really did botch the rollout and has been playing catch-up ever since,” says Joan Alker, a research professor at Georgetown University and national Medicaid expert.

When Branstad left for China in 2017, his lieutenant, Kim Reynolds, took on the governorship and the year-old Medicaid managed care program. She hired a new Human Services director, who in turn hired a new Medicaid director.

In the meantime, six Iowans with disabilities sued the state, saying managed care took away their right to live safely in their own homes. Then one of the Medicaid companies left Iowa because it was losing money, shifting about 215,000 patients to a different insurance company in the span of a month.

2017 ended with a report from the managed care ombudsman describing hundreds of complaints from people who said their services had been denied, reduced or terminated.

Alker said Iowa seems to have failed to learn lessons from the nearly 40 other states that already had managed care.

“I would say that anytime a state moves to managed care in Medicaid, problems will emerge,” Alker said. “But Iowa’s problems seem to be especially severe.”

What the candidates are saying

Reynolds said she will not accept ongoing problems with health care providers not getting paid on time by the for-profit companies.

“We’ve put financial penalties in the contract if they don’t pay in a timely manner,” Reynolds said. “We have oversight that the legislature passed last year.”

A Department of Human Services spokesman confirmed the state can withhold payment to the insurance companies if they don’t comply with contract terms, and said an independent third-party audit is underway to evaluate payments to health care providers.

But some providers have already closed their doors. A rural hospital in eastern Iowa is suing the insurance companies alleging underpayment, and some families are stuck in lengthy appeal battles as companies try to deny services.

In response to criticism, the Reynolds campaign has an ad featuring a woman named Katie who says her young son has had health issues since birth.

“My family relies on this Medicaid system, and when I look at Fred Hubbell’s plan for Medicaid, it’s government-run health care,” Katie says in the video.

Medicaid is a government health care program. But Katie adds Reynolds is working to make the system sustainable for the future, a point the governor frequently highlights. 

Medicaid officials say managed care is saving the state money, but questions about that claim have led the Republican state auditor to look into the issue. Alker said this uncertainty is not surprising.

“There really isn’t good evidence to suggest that Medicaid managed care has saved money. And we’ve had managed care around for many years, so this isn’t news,” Alker said. “And certainly the state should’ve been aware of that.”

The state agreed to pour millions more into the program this year, which Reynolds says is because Iowa now has more accurate cost estimates. A recent Medicaid budget report showed per-member costs are rising faster under managed care.

Hubbell says Reynolds hasn’t done enough to fix these problems, so one of his core campaign promises is to bring Medicaid back under state control.

“We can start on day one when the next administration takes over. But you can’t do it fast,” Hubbell says. “You have to do it gradually and only change over to the new system as people are ready for it and the systems are there, so you can do it without creating too much chaos in their lives again.”

He doesn’t want to return to the old, fee-for-service model. Hubbell is considering an approach that’s more customized for different kinds of Medicaid patients. 

“We’re going to focus on the quality of the outcome for the individual balanced with the cost, rather than focus on the profitability of the managed care organization, which is going on now,” Hubbell said.

Reynolds says the state won’t be able to afford Hubbell’s plans without raising taxes.

Alker said one state has gotten rid of Medicaid managed care. But she says states really need to take a more active role in overseeing these for-profit insurance companies.

“And making sure that these taxpayer dollars are spent wisely, and that kids and people with disabilities and others are getting the services they need,” Alker said.

Some Iowans may be thinking about who is most likely to make that happen when they vote for the next governor.