President's Perspective: Managing Medicaid

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Ted Townsend

The die is cast. On April 1st Iowa will officially transition to a “managed care” Medicaid program. The state, for all practical purposes, will exit the role of care manager and payer, handing those responsibilities over to three Managed Care Organizations (MCOs ) that represent some of the largest for-profit insurers in the country. 

The program has been sold on the basis of cost savings to tax payers and better access and quality care to the 560,000 citizens on Medicaid. It is a massive transition, perhaps the largest in scope and speed of any of the thirty-nine states that have transitioned all or part of their Medicaid management from state employees to these managed care “experts”, and it is unprecedented in Iowa for handing such a huge, $4.2 billion in annual state expenditures, over to outside contractors, all through administrative fiat versus vigorous public policy debate.

That debate is raging now, but it is too little too late. Whatever one thinks of the change, good or bad, the reality is that while Iowans argue endlessly over tenths of a percentage point of budget increases to schools, there was no debate at all ahead of the governor’s decision to make this multi-billion dollar change as an abrupt surprise. I say “surprise” because he went out of his way not to tip his hand ahead of time. As Chair of the Iowa Hospital Association in 2015 I headed a delegation of hospital CEOs that met with the governor in December of 2014 just before the start of the 2015 legislative session and, surprisingly, this topic never came up. It was a very pleasant meeting. The governor was going to put a rate increase for Medicaid into his budget. He was going to support that increase, which was a pleasant surprise after a tough battle two years before to expand the Medicaid program under the Affordable Care Act. The decision to convert was announced less than a month later, with a deadline to make it all happen by January 1.

Determining state policy is not the role of hospital CEOs. I get that, and I can understand the state may want to get out from under managing a healthcare entitlement for the poor, but I am concerned that this approach will come back to bite us all. Politically, this approach may have been the only way to make such a dramatic change actually happen. The potential gridlock of our current national and state legislative branches does make compromise and common sense sound quaint, but in the end there are real people, who are going to be impacted by this and it will not be for the good.

The saddest part to me is that as a state we were doing so well. Our per capita costs for Medicaid were among the lowest in the nation. Our administrative overhead was running roughly four percent, meaning that ninety-six percent of that $4.2 billion dollars was paying for actual care of Iowans. While we can expect the MCOs to cry poverty forever, the reality is that their administrative costs are projected to run between ten and fifteen percent. They are allowed an additional twelve percent profit. That means we’ll have a quarter less to pay for actual care than we have today. That’s before we get to the extra costs as providers of now having to deal with three sets of constantly changing MCO rules versus the single State of Iowa Medicaid rules. I could go on, but I won’t.

Our job now is to continue to take care of these Iowans. UnityPoint Health, from the very beginning, said it is not our job to set state policy, but to work with it, and we are. We have signed contracts with all three MCOs. We are assuring we’ll provide our fair share of folks covered by Medicaid starting first with our existing Medicaid patients. We can only hope other providers in our community do the same. We will continue to support the work of our community’s federally qualified health center (Eastern Iowa Health Center) and the Community Free Clinic. We will step up to the challenges of improving care coordination, using medical homes, and finding new ways to make healthcare outcomes better and more affordable. We were doing that anyway, for everyone.

And we will continue to support looking for appropriate oversight of the Medicaid program at the state level, though we wonder who will be left to monitor their performance after the state dismantles much of its historic infrastructure. For our part we will focus on providing the care first and monitoring the monitors second. It will not be without some bumps in the road, but since adversity is the mother of invention, I suspect some positive innovation as well. We will manage.