Wellcare's first quarter 2010 report noted their legal battle over the missing Florida Medicaid funds cost the company about $169.7 million between 2007 and the first quarter of 2010. Mention was also made that the company is responding to subpoenas issued by the Connecticut Attorney General's office relating to "transactions between us and our affiliates and their potential impact on the costs of Connecticut's Medicaid program."
This could be a complicated way of saying that Connecticut suspects they have been inflating prices and claims submitted or payable by the state's Medicaid department.
Wellcare is currently in what is known as a "Deferred Prosecution Agreement" with the US government. They are supposed to not commit any crimes for three years.
For all of 2009 (and the Hawaii contract was only in effect for eleven of those months), Wellcare's Medicaid segment revenue went up 8.9% to $265.6 million. The report states "the increase in Medicaid segment revenue is primarily due to the inclusion of operations for the Hawaii ABD program" which made up only two percent of Wellcare's total Medicaid membership. Since the company at the same time lost enrollees in two large states (Florida and Ohio), the contribution of the little Hawaii membership to company revenues seems extremely out of balance.
UnitedHealth's first quarter filing includes $20.8 billion in "goodwill". What is goodwill? Political contributions?
UnitedHealth introduces a wonderful "fog the mirror" phrase for cutting costs: "net favorable medical cost development."
For the three months ended March 31, 2010 and 2009, there was $490 million and $200 million, respectively, of net favorable medical cost development related to prior fiscal years. The 2010 favorable development was primarily driven by changes in previous estimates related to more efficient claims handling and processing, resulting in higher completion factors, lower than expected health system utilization levels, the H1N1 influenza outbreak being less costly than had been estimated and the mix effect of longer duration state Medicaid members who have a more favorable health status (my emphasis).UnitedHealth has also recently published a research document that shows that if the states move all the new Medicaid enrollees they will gain from the Affordable Care Act, plus all their current Medicaid enrolles, into managed care, the states will save $366 billion over 10 years.
UnitedHealth, of course, is happy to offer such medicaid managed care programs to the states to handle this influx, and has already figured out how to save the states money on their long-term care expenses.
The underlying assumption is that managed care provides coordinated care which produces better care. The logic breaks down with the first assumption, and as our experiences here in Hawaii are teaching us, the last assumption is pure fantasy.
The Huffington Post ran a story in April about how health care reform is going to encourage all the for-profit health insurance companies to inflate the possibly already inflated medical direct costs column on their spreadsheets. The new law will require health insurers to spend at least eight-five cents of every premium dollar received in the large state Medicaid programs on actual medical benefits. Companies like UnitedHealth are well below that figure currently, and when the law goes into effect next January, the insurers will be expected to refund consumers the difference.
The day that for-profit health insurers refund money to their enrolles is not likely to occur, since all the companies have to do is start re-classifying expenses as medical in order to pass. Wellpoint has apparently already been caught "reclassifying" more than half a billion dollars in other expenses as "medical" ones.