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State auditor says more Iowans have been improperly denied medical services under privatized Medicaid

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A report released by the state auditor's office found improperly denied medical claims increased under the state's privatized Medicaid program.

A new report by the State Auditor’s Office has found the number improperly denied appeals for medical care and services increased under the state’s privatized Medicaid system.

The audit looked at a time period from July 2013 to August 2019, approximately three years before and after the state privatized its Medicaid system in April 2016.

It found the number of member appeals denied by the state’s Medicaid program then overturned by an administrative law judge, an independent judge overseeing the program, greatly increased under the privatized system.

"Comparing privatized Medicaid to non-privatized Medicaid, we have seen an 891 percent increase in judges overturning care denials, meaning that care denial for one reason or another was illegal," said State Auditor Rob Sand.

Sand said the report also found an "substantial" decrease of 72 percent in the judges' upholding the denial of appeals.

He said the findings of the report conclude that the privatization of the state's system is not benefiting Iowa taxpayers as promised.

"I compare it to the work that I did at the attorney general's office at a prosecutor," Sand said. "If I'm going to court and my losses are increasing by 891 percent, while my wins are decreasing by 72 percent, I would not be doing a very good job.”

Iowa's transition to a privately-managed Medicaid system has been controversial. The system has been plagued with controversy and turnover since private companies started managing the program under former Gov. Terry Branstad.

Since April 2016, two managed care organizations, AmeriHealth and United Healthcare, have left the state.

In early 2020, the state announced it was withholding $44 million from Iowa Total Care, which joined as an MCO in July 2019 following United Healthcare's departure several months prior, for claims payment issues.

State officials reported earlier this year that they have released the funds back to the company and will be seeking a third MCO to join the state later this year.

Former state Medicaid Director Mike Randol, who was hired at the end of 2017, stepped down in August of last year. His position sat vacant for 10 months until current director Elizabeth Matney assumed the role last June.

This audit is the fourth Medicaid-related report released under Sand's office.

"What we're trying to do is figure out whether or not Iowa taxpayers are getting what we're paying for with the MCOs. The answer pretty clearly is that we're not," Sand said.

The report's time period, which ends in August 2019, covers just two months of Iowa Total Care's involvement with the state. The company started its contact with Iowa on July 1, 2019.

Sand said the Department of Human Services was able to review an advanced copy of the report and was not concerned with the timing.

"I think if they had had a concern with that they would have addressed it in their response," he said.

However, DHS officials released a statement calling the entire report "incorrect and flawed."

Matney, the current state Medicaid director, said the department attempted to work with Sand's office to compare the different appeals processes, which have changed under the privatized system.

She called the report an "apples to oranges comparison."

"The process is not the same, so making a comparison without factoring in the improvements we built into the MCO appeals process prior to ever seeing an administrative law judge (ALJ) is just wrong,” Matney said in the statement.

“Under managed care, most appeals can be resolved without an ALJ, allowing them to focus on more complex cases.”

DHS Director Kelly Garcia said she is "proud" of the work the state's Medicaid is doing.

"Over the past couple of years, my team and I have made many good faith efforts to demonstrate transparency and integrity with the Auditor of State, which is why this is so disappointing," she said.

At a press conference on Wednesday, Gov. Kim Reynolds said she supported DHS and believed Sand's team failed to do a fair comparison.

"He made the decision to disregard the information that they provided for him," she said. "And so I stand by Medicaid and I believe that we're still doing the right thing."