It's all about the privatization of Medicaid and Medicare. Along with CHIP, together they churned more than $887 billion in state and federal funds directly into the American economy in 2009, and private insurance companies saw a gold mine waiting to be exploited.
In 2010, just nine private health insurers reported getting their hands on more than $111 billion of it, up 35% over 2009. The companies have put together a self-serving body of research demonstrating how converting state Medicaid enrollees into privatized Medicaid contract policyholders saves the state money while proving better service. All of these plans are managed care.
The state and the insurer agree on a table of "risk" values and apply it to each policyholder. That amount, which can vary between $200 and $29,000 a month (based on individual medical needs), is called the capitation payment. Every Medicaid policyholder has an personal, individual budget that the contractor is paid monthly by the state, using a combination of local and federal funds.
How much of the capitation payment is spent on actual medical costs is called the Medical Loss Ratio (or Health Benefits Ratio). Private insurance companies make their money by not spending the money that they are paid in premiums.
If you are paying your private health insurer $250 a month for your coverage, you likely are not keeping track of how much of it is spent. If you suddenly develop a serious or life-threatening condition, you know the insurer will keep paying the costs (at least up to a point) regardless of how much it exceeds your $250 per month payment. The company is taking all the $250 per month payments from tens of millions of members, and there is always plenty left over to take care of higher needs here or there.
The perspective should be a little different, however, when the insurance company is being paid $29,000 a month to keep a medically fragile child at home with their family, anywhere from two-thirds to three-quarters of which are federal dollars.
Even if there were stringent regulations in place (which there are not) as to how much of these federal and state funds have to be spent on actual medical costs, it would make no difference. An FBI sting operation against health insurer Wellcare "videotaped a meeting of top executives in January 2007. Florida Medicaid officials had demanded an accounting of WellCare's behavioral health spending, and the company knew it was only about half of what the state believed. The solution: simply double every charge." The former Wellcare employee who wore video cameras and microphones to work every day estimated that the fraud against Florida Medicaid ranged in the $400 to $600 million range.
What somehow remained unmentioned was the fact that this type of Medicaid fraud, which Hellein's tapes show is openly shared between companies such as Wellcare, Amerigroup and UnitedHealth Group, is ongoing. Fines and Deferred Prosecution Agreements do not really seem to put a dent into it, in fact. Wellcare was paid $890 million by Florida for the same Medicaid contracts in 2010, and got a 2.5% to 3% rate increase in September. They claimed to spend 87% of that on actual medical costs, but Hellein's audiovisual evidence makes it clear these figures easily have little relation to reality.
Besides, they made around $600 million from their Hawaii contract, before getting a raise last summer. The Hawaii contract does not stipulate any minimum Medical Loss Ratio. The individual policyholders are all elderly, blind and/or disabled adults and children, so are not likely to be keeping track.
Hawaii, in fact, is an excellent example of how Republicans envision Medicaid functioning. Hawaii created two Medicaid populations: a small one of about 40,000 "aged, blind and disabled" adults and children who had special medical needs; and a bigger one for the other 267,000 people signed up for regular Medicaid. The small one gets more than seventy percent of the state's total $1.7 billion annual Medicaid budget, which is divided between two contract holders: UnitedHealth Group and Wellcare.
Former Republican Hawaii Governor Linda Lingle was responsible for moving the state's "aged, blind and disabled" population overnight from a fee-for-service system to a privatized managed care plan operated by two out-of-state for-profit corporations. Sworn testimony was videotaped last year stating this group had experienced a 36% increase in deaths within the first year after UnitedHealth and Wellcare took over.
While Wellcare's SEC filings bemoan the company's high Medical Loss Ratio, UnitedHealth celebrated its lowest rate in five years in the fourth quarter of 2010. Company wide, they got it down below 80%.
Apply that to their 2010 Medicaid premium earnings from Hawaii, also about $600,000,000, and it means $120,000,000 in operating profit was generated for the company. Wellcare would have cleared at least another $75,000,000, and there is no good reason to assume their MLR here would be as low as it is on contracts like Florida's where it has been stipulated.
For Wall Street, this was very good news. For the forty thousand or so elderly and children, as well as adults with disabilities, it was very bad news. Their service budgets were cut by that amount. Life-saving medications they had been taking for years were suddenly denied. Home nursing services were abruptly slashed.
To look at this another way, the State of Hawaii could hand over those two Medicaid contracts to local, non-profit corporations, keep services at the current level, and cut out the middleman profit of about $195 million a year. Sure, a portion would have to be paid out to hire back 200 - 300 state workers who have lost their jobs directly or indirectly from the privatization, but that would be funds going right back into the state economy.
But even with a new Democratic Governor, Hawaii's privatized Medicaid system for the "aged, blind and disabled" population is remaining privatized. UnitedHealth and Wellcare both have numerable complaints pending against them with federal regulators, and as recently as yesterday continue brazenly to violate federal regulations. The state is looking to save $100 million from Medicaid over the next two years. Why isn't even our Democratic governor trying to cut big business profiteering out of Medicaid?
In part, that seems to be because the national winds supporting Medicaid's privatization are so subtle.
Florida's new Republican Governor was the CEO of a healthcare corporation found guilty of the biggest Medicare fraud in US history. He is a strong believer in the privatization of Medicaid. In February, Governor Rick Scott announced a plan "to transfer Florida's Medicaid recipients into privately run managed-care programs. Doing so would save the state nearly $4 billion over the next two years, he says."
As of June 2009, almost a million Floridians already received their Medicaid from "privately run managed-care programs." These programs had earned the state a reputation as the "Medicaid fraud capital of the world", and FierceHealthIT said last summer that "Medicare and Medicaid fraud might as well be the state sport of Florida." In July the Florida Attorney General's office announced it had received permission to mine Medicaid claims to find fraud. Two months ago, Florida's Medicaid and Public Assistance Fraud Strike Force "estimated Medicaid fraud costs taxpayers more than $2 billion a year. That's about 10 percent of the $20 billion Medicaid budget, which happens to be the fastest growing segment of Florida's $70 billion budget."
If Florida has a $20 billion annual Medicaid budget, and two-thirds of it goes to help children, the elderly and people with disabilities (which is an approximate national average), and 56% of the Medicaid population is enrolled in privatized managed care run by for-profit corporations, and they are averaging an 85% Medical Loss Ratio, then somewhere around $1.1 billion is being skimmed off the top of the contracts as operating profit.
Governor Scott now says the state Disability Division is $174 million in the hole, and he's making it back by cutting home services to the state's disability population. Individuals are expected to see cuts ranging between fifteen percent and forty percent.
Profits to the big providers are not being touched, because that is not the "free enterprise" way. As Florida's recently elected Republican Congressman Allen West said, free enterprise is the solution to healthcare reform and what he calls "the bureaucratic nanny state."
Apparently taking money that is given away by the bureaucratic nanny state is OK, as long as it is not spent.
Please sign our petition to stop handing federal and state Medicaid dollars over to companies who won't spend it.
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