The Iowa Medicaid Modernization: Powers That Be?

This is a follow-up post to the Iowa Medicaid Modernization post and the steps The University of Iowa Hospitals and Clinics are taking to keep staff informed about what’s happening. Today was the first of 4 scheduled fora to help us stay abreast of the rapid changes in the state Medicaid program, which will introduce for-profit managed care organizations taking over the 4 billion dollar program.

After some opening presentations there was opportunity for questions from the audience. I just made it to the forum along with a very interested Family Medicine resident, Dr. Luei (Wern) Ong, MD (who is a member of Physicians for a National Health Program); the psychiatry consultation service was pretty busy in the morning. I’ve suggested to the trainees that learning more about this would be an important and practical exercise in one of the Core Competencies, Systems-Based Practice. I asked a question that I’d sent to the Medicaid Information Center here early this morning:

“I’m very concerned about the University of Iowa decision to sign a contract with WellCare and I would like to know why we’re doing that. Recently, Dr. E. Fuller Torrey, MD, wrote a  report, “Fraud, Waste and Excess Profits: The Fate of Money Intended to Treat People With Serious Mental Illness,  (see Section IV Excess Profits, starting on pg 27, discussion of WellCare starts pg 30) on the high level of fraud and waste of state mental health funds. He summarized it in the November 2015 issue of Psychiatric Times. One of his points is well taken, “Perhaps the largest amount of state-controlled mental health funds, however, is being lost through excess profits taken by for-profit managed care companies. Such companies have proliferated since the 1980s when most states assigned health care responsibilities for Medicaid recipients to them.”

Torrey goes on to warn us about WellCare:

“WellCare is an example of such a company. It began in 1985 with a contract for the managed care of Florida’s Medicaid patients. Under what is known as Florida’s 80/20 law, WellCare was required to spend 80% of the Medicaid premiums on mental health services but could keep the remaining 20% for administrative costs and profits. According to court documents, WellCare “allegedly set up a subsidiary to hide money from Florida regulators and falsified information on payments to doctors and mental health centers.”7,8 This criminal behavior came to light when a WellCare financial analyst became a whistleblower and began secretly recording conversations with WellCare executives. One company vice president was recorded claiming that WellCare was in fact keeping 50% of the Medicaid premiums. In 2007, the FBI raided WellCare’s headquarters in Tampa, and fraud charges were brought against the company’s top executives. In a 2013 trial, 3 were convicted and sentenced to prison. WellCare has also paid over $400 million in restitution and fines. Despite WellCare’s past criminal behavior, it has continued in business, with Medicaid contracts in 9 states, including Florida.” – See more at:

In fact, an administrative law judge in Iowa, according to an Iowa Press Citizen article published on line November 26, 2015: Judge recommends throwing out 1 of 4 Medicaid contracts by Jason Clayworth, has recommended that Iowa throw out the WellCare contract because it has faced millions of dollars in fines for fraud or mismanagement in other states and last year three former executives were sentenced to prison for fraud convictions.

I have only a vague understanding of the difficulties (e.g., state budget shortfall) driving this initiative to engage with managed care organizations in this context, but is the University in a position to opt out of signing with WellCare given their bad reputation?”

The speakers acknowledged that they’d received my message and were in the process of formulating a reply. They didn’t look very comfortable with the question and the short answer was that the University is signing with all 4 managed care organizations including the troubled WellCare group in order to ensure that as many Iowans as possible will be covered.

Dr. Ong had done a search of several newspaper reports about this whole process started by Governor Terry Branstad and which doesn’t shed a very positive light on it. Excerpts from various Des Moines Register articles in September and October include:


Iowa can’t show the math of Medicaid savings estimate by Jason Clayworth in the October 14, 2015 Des Moines Register:

“A state agency says it has no documents or even a list of experts consulted to support its claim that a controversial plan to hire private companies to manage its Medicaid program would save taxpayers $51 million during its first six months.”

“Three companies that were not chosen — Aetna, Meridian and Iowa Total Care — have each challenged the process Iowa used in awarding the contracts. They say the system is riddled with nepotism, fraud or inaccurate scoring of bids. An administrative law judge is expected to review their grievances late this month or early November.”


Ex-lawmakers’ Medicaid ties questioned by Jason Clayworth in the October 28, 2015 Des Moines Register:

“The state has already acknowledged that one of the former lawmakers WellCare hired, Renee Schulte, had improper communications this year with State Medicaid Director Mikki Stier during a so-called “blackout” period designed to maintain fair competition among bidders.”

“Schulte terminated her nearly $100,000-a-year contract with the Iowa Department of Human Services on Feb. 20 — four days after Gov. Terry Branstad announced Iowa was seeking competitive bids to contract with private companies to manage its Medicaid program. Days later, she began working for WellCare.”


Serious service errors plague medicaid companies by Jason Clayworth in the September 20, 2015 Des Moines Register

“The more than 1,500 regulatory sanctions and fines listed in the bid documents were self-reported by the companies to the state. Failure to disclose the sanctions would subject the companies to bid termination, according to Iowa’s bid instructions.

The sanctions are in addition to more than $400 million in fines and penalties that the Register last month reported the four companies had paid over the last decade, mostly in settlements to states and restitution to victims who were denied service or received inferior care.”

“Amerigroup, for example, provided the state with information about nearly 800 sanctions against it and its affiliates totaling more than $4.7 million in fines, yet its raw score in that category was a perfect 3 out of 3 possible points. Of the 10 companies whose bids were scored by the state, Amerigroup ranked the best overall, with 78 out of a maximum 100 points.”

“Of the 10 companies that submitted bids for Iowa’s evaluation, three listed no fines due to sanctions against them or their affiliates: Molina Healthcare, a company with more than 35 years of managing state programs; Meridian Health Plan, with more than 17 years of Medicaid managed care experience; and Medica, which has provided services to Minnesota’s Medicaid program for 30 years. None was chosen for an Iowa contract.

“In 18 years in a $3 billion company, we have had zero sanctions and zero fines,” said Raymond Pitera, chief development officer for Meridian. “So why did we score lower” than the companies with millions of dollars in fines? “That’s a good question.”

Information is rapidly changing and it’s been challenging for The University of Hospitals and Clinics to keep up at times:

However, after the forum today, I’m confident that a concerted effort is being made to educate clinicians, patients, and other personnel about this evolution (which feels like a revolution) in the state Medicaid system. I hope that everyone realizes that, despite Governor Branstad’s statements that this is not being sprung on Iowans all of a sudden–that’s exactly how it feels to many of us. I definitely get the impression that if I were clearly getting the message that the best interests of Iowans were being upheld and that money is not the only important factor here I would feel a lot more confident about this.

I don’t think the Governor is sending that message.

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