CDREA presents results of its fact-finding investigation into Hawaii's Medicaid Managed Care program

On Thursday, the Children's Disability Rights Education Association presented the results of its investigation into Hawaii's Managed Care Medicaid system at the annual Kauai DD Committee Legislative Forum. Here are some of the highlights of that presentation. Background On February 1, 2009, about 37,000 people on Medicaid in Hawaii lost their right to freedom of choice in their medical care, as their Medicaid care changed from a "fee for service" plan to an HMO, known as a Managed Care Organization or MCO. Two for-profit, out of state companies were awarded the contracts: UnitedHealth Group operating under the name of Evercare, and WellCare under the name of Ohana. UnitedHealth is headquartered in Minnesota, and WellCare in Florida (Ohana is a subsidiary of WellCare of Arizona which is itself a subsidiary of WellCare Health Group). Economics of the transition *While Hawaii transitioned its Medicaid program to the two out-of-state corporations, the state retained 72 employees who moved from the Department of Health to the Department of Human Services (per the state's March 2009 amended budget). Rather than providing direct services, these employees are now charged with overseeing Evercare and Ohana, so overhead was not reduced. *Hawaii's Medicaid budget, which used to pay for state employees and their benefits in addition to medical payments, now pays for state employees and their benefits, all the administrative costs (salaries and benefits) of each of the two private for-profit companies that have been hired to provide Medicaid, all the administrative costs of the for-profit sub-contractors that both contractors hire to perform specialized services like medication authorizations or travel, the profit margins for each of the contractors and sub-contractors, and, with what's left over, medical payments. * The second quarter of 2009 (April, May, June) represented the first full quarter of UnitedHealth Group taking over its portion of Hawaii Medicaid. This is also the quarter that Texas fired Evercare. The company reported a profit margin for that quarter of 3.97%. *Also for the second quarter of 2009, WellCare posted a profit margin of 2.07%. *If Hawaii's current Medicaid budget was, say, $1.2 billion, and between them, UnitedHealth Group and WellCare are skimming about 3% off the top, that means about $36 million a year is heading straight out of Hawaii to Florida and Minnesota, before anyone goes to work for the day. *If, for instance, Hawaii's portion of the revised Federal matching rate (FMAP) was between 25% and 35%, depending on the program, then about $22 million of that $36 million is coming from Federal funds supplied by American tax payers, and includes Hawaii's stimulus funds. *The transition to Hawaii's two for-profit managed care companies has done wonderful things for the profit margins of both UnitedHealth Group and WellCare but is losing the state millions of dollars worth of jobs and services every month. A little about Evercare and UnitedHealth Group * Evercare was fired by the Texas Health and Human Services Commission on May 31, 2009. After receiving 1300 complaints in Evercare's first year of operation in Texas, the company was fined $630,000 earlier this year and instructed to fix a variety of service delivery and payment problems. According to the Dallas Morning News, it was "with limited success." *UnitedHealth reported its net income for the third quarter of 2009 was 13% higher than it was for the same quarter a year ago, due primarily to the growth of its Medicaid and Medicare contracts. *A December 2007 article in UHG's hometown newspaper reported the insurance megacompany had paid out $18 million just in claims-related penalties to 38 states. *In January 2009, UHG paid out settllements of $350 million to the American Medical Association and another $50 million to the state of New York . *A research company that is wholly owned by UnitedHealth, Lewin Group, is producing statistics that leaders against health reform keep citing as "independent" and "nonpartisan". *UHG paid a settlement of $895 million in a class action suit brought by its own shareholders. A little about WellCare Health Plans *WellCare, which receives 99% of all income from Medicaid and Medicare programs in 18 states, the District of Columbia and Puerto Rico and has no private policy business, reported a whopping 69% increase in its net income for the second quarter of 2009 over the same period of 2008. *In May 2009, WellCare paid the state of Florida $40 million in restitution PLUS $40 million in penalties for defrauding the state's Medicaid program, and particularly their children's Medicaid program. *Also in May 2009, WellCare paid $10 million in civil penalties to the Securities & Exchange Commission *In August 2009, WellCare paid a civil penalty to the Florida Election Commission of $120,000, for "questionable" campaign contributions Conclusions and Questions The purpose of the event on Thursday night had been to give our local disability community an opportunity to let state legislators know the problems we are all having due to the state's cutting of Medicaid services. CDREA President Summer Harrison and Vice President Linda Nuland-Ames asked our legislators the following questions: 1. Why are we allowing two out-of-state for-profit companies to gain their profits at the expense of services for our most vulnerable populations -- the elderly and disabled -- while siphoning off jobs and profits to other states? 2. The percentage of Medicaid paid by Hawaii (as opposed to the federal percentage) went from 45% down to 33%, representing a 27% cut in Hawaii's budget contribution. If Hawaii could get a 27% cut without reducing services by a dime, why has the state continued to cut Medicaid services that benefit the aged and disabled population? 3. As of October, Hawaii has received an additional $151 million in stimulus funds that can only be used for Medicaid. What is it being spent on? State Medicaid Administrator Ken Fink said that part of it was being put into the general fund, but wouldn't that be a violation of the terms of receiving the stimulus funds? 4. Will Hawaii be taking advantage of the $20 billion in Health IT grants recently announced to grow our state's high tech industry? Or are we going to pay it to the 2 out-of-state companies so they can hire more people out of state? CMS also offers free technical advice so that states can develop their Medicaid IT programs, eliminating the need to hire outside for-profit companies to administer the budget. 5. And out of all the companies that could have been chosen to supply Hawaii's Medicaid services, how did these two particular companies get the contract, especially given their less-than-stellar histories? Lawmakers attending agreed that Hawaii's state auditor should be asked to resolve the fate of the state's millions of Medicaid stimulus dollars.