Hawaii is 2% of Wellcare membership but generates 9-12 % of company revenues

According to Wellcare Health's 10-K report to the SEC, nine percent of the company's gross revenue in 2009 was generated by the two percent of its members who live in Hawaii.

Wellcare is the parent company of Ohana, one of two for-profit companies providing medical, home and community services to the state's elderly, disabled and blind population.  Ohana was recently linked to a shooting in Honolulu, when it was discovered the victim had not been able to renew his prescription medications because the company could not find him a doctor to authorize them.

Wellcare only offers Medicaid and Medicare plans, in contracts with individuals states and the Center for Medicare and Medicaid Services.  They operate Medicaid plans in seven states, and Medicare plans in twelve states (including Hawaii).

The 10-K report summarizes Wellcare's income and expenses as of December 31, 2009.  At that point in time the company had 2.3 million members, of which 1.3 million (or fifty-seven percent) were enrolled in the company's Medicaid programs.  The report makes frequent mention of the Hawaii program.

As of January, Hawaii membership in Ohana was about 22,000.  That is less than two percent of the company's total Medicaid membership (1.67%).

Page 29 of the report states that Hawaii's monthly payment to Wellcare "averages" $25 million per month.  Over a year, that comes to $300 million.  The company's total gross revenue from its Medicaid enrollees is $3.3 billion. 

In October 2009, however, Wellcare renegotiated its contract with the state of Hawaii, raising some capitation rates by as much as thirty-three percent.  Sources now tell me that the state of Hawaii Department of Services is paying Ohana closer to $1.1 million a day, which would actually come out to $33 million a month instead of $25 million.  At the rate, Hawaii's paltry two percent membership would be paying twelve percent of the company's gross revenues.

On page 27 of the report, it says the company cannot increase revenues to meet rising costs since they are locked into their contracts with the states.  Apparently this does not preclude, however, re-negotiating the contract for higher rates, as Wellcare did last October.

Page 58 of the report notes that Wellcare's revenue from state Medicaid contracts had jumped 8.9 percent from the previous year, in spite of the 8.3% decline in membership from being dropped by programs in Florida and Ohio.  The report directly attributes this significant increase in company revenues to the tiny 2% of their members in Hawaii.

Page 59 of the report blames the Hawaii enrollees for the company's drop in the profitability derived from calculating actual expenses as a percentage of the capitation fee.  For instance if direct medical costs rise from 84.8 percent of revenue from premiums, to 86.3%, then the company's profit has decreased accordingly.  These are the actual figures for Wellcare taken from the report.

We reported last week that Ohana was receiving $3,890 every month as their capitation payment for Martin Boegel, the victim of a suicide-driven shooting in Honolulu last week.  By not finding Mr. Boegel a physician, the company did not have to pay out that money for prescription medication or doctor visits.

This is how for-profit companies make more money by denying or reducing services that a doctor has said are medically necessary for an individual with disabilities to live at home rather than in an institution.

I reported earlier than the off-the-top profit Wellcare and UnitedHealth were receiving from their contracts with Hawaii was more than what the Medicaid home services cost the state for the entire year of 2008.  Those numbers were based on an eight percent profit (three percent off the top and than a 5% performance bonus) and did not take into account how much money the company was saving by simply not spending what Hawaii was paying them.