When Medicaid is big business, people suffer

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Hawaii’s governor, the first Democrat elected in eight years, has publicly defended his decision to segregate the state’s Medicaid population as second class citizens.

Like Obama, Neil Abercrombie rode to victory last November on a great tide of hope for the future. And like Obama, he has apparently decided to side with Big Business against the civil rights of his voters.

There is something called “Federal Supremacy.” Federal law is the “supreme law of the land”, and states cannot limit legal rights defined by federal law.

One practical result is that children as well as adults with disabilities have the ability to appeal life-threatening denials of medically necessary services by their Medicaid plan. The majority of cases that reach this level involve children of all ages with disabilities, fighting for the right to live at home rather than in institutions. These home medical services are expensive, although less than what the state would pay for institutionalization.

In May, the White House unexpectedly pushed through an amicus (“friend of the court”) brief with the Supreme Court, taking the position that the protections of Federal law do not extend to Medicaid beneficiaries.

Disability law experts like Sara Rosenbaum and Simon Lazarus immediately warned of the potential “spill-over effect” if beneficiaries of the country’s “safety net programs” like Medicaid were suddenly denied the protections of the court.

Governor Abercrombie’s comments were made during an August 22 meeting called to explain why he signed a piece of legislation eerily similar to that amicus brief.

Hawaii’s S.B. 1274, signed by the Governor in July, accomplishes exactly what Lazarus warned of: it carves out the state’s entire Medicaid population (270,000) and denies them access to the protections of federal law.

The Governor openly admitted the purpose of SB 1274 was saving the state’s Medicaid contractors money on legal fees. Patterns of Medicaid providers violating federal regulations (and civil rights) he dismissed as mere “glitches”. (More information about SB 1274 as well as a link to a recording of the Governor's comments can be found here.)

The crux of SB 1274 was to repeal a state law enabling patients to challenge health insurers’ denials of care, and to be represented by an attorney in the process. The law required health insurers to pay the legal costs of the patient’s appeal when the company refused to approve medical treatments ordered by a doctor.

Seventy percent of Hawaii’s Medicaid budget is paid out to two publicly traded contractors, Unitedhealth and Wellcare. The two share a lucrative $1.2 billion a year contract to provide services to 40,000 children and adults with disabilities. Premiums are calculated individually, and because these contracts are specifically to cover home services for people with disabilities, monthly premiums can range as high as $27,000 for, say, a medically fragile child.

Publicly traded Medicaid (and Medicare) HMOs make shareholder profits by not spending premium money on medical expenses. Since the size of the Medicaid pie is the same it was before they bought the contract, services have to be cut twenty to fifty percent to support corporate profits.

State contracts with Medicaid providers like Unitedhealth and Wellcare must be approved federally (through CMS, the Centers for Medicare & Medicaid Services, part of DHHS). They mandate compliance with all state laws. Unitedhealth and Wellcare knew about Hawaii’s healthcare laws when they signed the contract, but apparently did not realize what they would cost them.

Only one thing is accomplished by deleting a state law requiring insurance companies to reimburse patients’ legal bills in disputes over medical care. It allows the company to slash services in order to increase profits, without worrying that patients have the ability to challenge them effectively.

In Hawaii, it got the publicly traded companies out from under the mounting legal bills incurred defending against life-threatening cuts in services, most of them victimizing children and seniors.

In April, Unitedhealth’s Hawaii attorney openly told a TV reporter that SB 1274 needed to be passed because the state’s "existing process is expensive, time-consuming and burdensome... just adds to the cost of healthcare when we [Unitedhealth] can ill-afford it."

What she failed to add was that her client, Unitedhealth had over a dozen cases pending against it at the time. As of this writing, she and Unitedhealth have lost every case ever filed against it under the same patient rights law she said needed to be repealed.

What is happening here in Hawaii is only the tip of the iceburg.

By the end of this year, publicly traded companies will own about 30% of Medicaid, up from 19.6% two years earlier.

Remember when Congress had to approve TARP giving the banks $700 billion back in 2008? In the end the price tag was $245 billion, almost all of which has been paid back by now.

The privatization of Medicaid and Medicare has gone from $105.3 billion in 2009, to $113.7 billion in 2010, and already stands at $65 billion for the first half of 2011. Not a penny of that $284 billion needs to be repaid.

The political hot potato neither Republicans nor Democrats are talking about is who determines how much of that money actually needs to be spent. Or even if any of this nice federal and state funding has actually been spent on real medical care for people who need it.

The amicus brief and state laws like SB 1274 clear the way for these publicly traded companies to increase profits without worrying about federal regulatory interference. Unitedhealth and Wellcare are only two of about ten publicly traded health companies together splitting about $11 billion every month in federal and state revenues for Medicaid and Medicare.

The morning after last November’s elections, Public Citizen published a study of the link between “party-shifting contests” and “unregulated third-party spending.” Twenty-two of fifty-eight new Republicans were in seven of the eight states that just settled with Wellcare for criminal Medicaid fraud claims. Unregulated third party spending in those seven states came to $11 million, of the $54 million tracked.

Eighty-five percent of the total was spent in states where six publicly traded corporations (Unitedhealth, Wellcare, Wellpoint, Centene, Amerigroup and Molina) own Medicaid contracts. Unitedhealth alone operated either Medicaid or Medicare HMOs in 28 of the 33 states where Republicans beat Democrats, and was bidding on new contracts with a 29th state at the time.

On August 5, the White House took another swipe at federal protections for people on Medicaid, and particularly those with disabilities. CMS sent a letter out telling states how to auction off their Medicaid contracts without worrying about inconvenient federal safeguards. The legal work-arounds that CMS proposes specifically target what is called “maintenance of effort.” New Medicaid contracts/programs cannot restrict existing access to program benefits.

Now they can.

The politics of Medicaid/Medicare corruption override party membership. Greed trumps ideology, apparently.

You see it as far back as 2002. That’s the year a group of Wall Street financiers bought Florida’s biggest Medicaid HMO, a little known company named Wellcare. George Soros, head of the group, was known for donating to Democrats. The financiers’ hand-picked CEO was a Bush fundraiser.
Between taking the company public in 2004 and selling out before the very public FBI raid in October 2007 (the last shares were sold only weeks earlier), the original investors turned $70 million into almost $900 million.

The whistleblower complaint that led to a dawn raid by 200 FBI agents was not unsealed until last summer, almost three years later. Reading it, however, makes it very clear that the criminally fraudulent practices that generated such excessive profits traced back to the change of ownership in 2002.

Wellcare almost appears to have been structured from the get-go as a financial experiment in how to get rich from Medicaid and Medicare.

One of the last Board Members whose involvement could be traced back to 2002 only stepped down in early 2010. It took until the fall for the company to finish getting around to suing former executives whom, it claimed, had hid their criminal actions from the Board.

In October, it was learned the company had become one of Florida’s largest political contributors between 2004 and 2007, reporting a total of $2.6 million to the state Republican Party as well as individual Republican candidates. According to a report in Health News Florida, “Tampa attorney Barry Cohen …said today the contributions were pennies on the dollar compared to the money the HMO saved in Medicaid fines -- and the profits it made.”

In November, industry analysts were predicting that “WellCare’s strong Medicaid HMO position in multiple states will enable it to grow the upcoming Medicaid expansion that is part of the new health law.”

In late April, the White House apparently backed a federal settlement with Wellcare letting the company off the hook forever. The final settlement was for about $137 million, of up to $600 million estimated embezzled from federal and state funds.

Since January, Wellcare has been outperforming the S&P 500 by up to 35%. Quarterly net earnings reported in June are 7.64% of gross premium revenue, up from 1.62% in June 2008. Quarterly gross premiums are down $160 million (from $1.64 billion to $1.49 billion) while net earnings have grown from $26.6 to $113.5 million.

There’s an old saying that you can’t know where you’re going unless you know where you’ve been. Wellcare’s first financial success was defeated because they got caught stealing. The emerging federal “hands-off” policy towards Medicaid means they, and all the other publicly traded companies feeding off the backs of our most vulnerable citizens, will no longer have to worry about getting caught. Nobody will be looking.

Medicare already 45% privatized, Medicaid could reach 30% by year's end

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The privatization of Medicaid could hit 30% by the end of 2011. Medicare's privatization has already reached 45%.

The so-called Republican war on Medicare and Medicaid was already won a couple of years ago, and the battles waged so publicly now are, in large part, a public relations diversion.

What the Republicans, and apparently the President, don't want us to see is is the amount of government health care funds - between $2 billion and $5 billion every month - that this privatization has diverted to shareholder profits.

That money could be used instead to fund anywhere between 400,000 and 1 million full time jobs in local communities across the country. Every time one of these publicly-traded companies cuts the benefits it pays out, it means jobs have been lost as nurses, home attendants, adult day care, and a host of other local companies that provide equipment and services to the disability community. Meanwhile states have been able to cut their accounting, social work, quality control, regulation monitoring and other positions when the HMO takes over these jobs as part of its contract.

Figures published by the Commonwealth Fund, combined with Securities & Exchange Commission (SEC) filings, show the percentage of people receiving Medicaid who are signed up through publicly traded HMOs has gone from 19.6% in 2009 to 27.1% as of June 30, 2011.

New contracts coming into play this year will add at least 1.7 million new people, bringing privatization to 29.8%. The Affordable Care Act is expected to raise Medicaid enrollment by 16 million by 2019, and the Commonwealth Fund concluded that "given recent patterns in state contract awards to managed care plans, it is reasonable to anticipate that plans operated by publicly traded companies will enroll the majority of the expanded Medicaid population."

Of the 47 million signed up for Medicare, 21 million are enrolled in publicly traded HMOs. When compared against the total population of just Medicare's managed care and stand-alone drug benefit, that 21 million becomes 71% of the total number of enrollees in those programs.

We obviously cannot count on our elected officials to stop this insidious process by themselves. They aren't even telling us about it. Please sign our petition demanding legislation to take private profits out of Medicaid and Medicare.

Poll: Should Medicaid and Medicare be auctioned off to for-profit HMOs?

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The disability rights, civil rights, womens rights, family rights, senior rights and healthcare rights advocates need to unite to stop Medicaid and Medicare being sold off to for-profit HMOs. Please take our poll: should Medicaid and Medicare be sold to for-profit HMOs?

Unfortunately, the process has already been underway since the Bush days, reaching almost $11 billion a month in government revenues paid to for-profit HMOS. That amount is growing, for some companies as fast as twenty percent within six months.

I'm the mother of a beautiful and loving soon-to-be 12 year old who is at 24/7 risk of death from epilepsy. Hannah's life was auctioned off to one of these companies (Unitedhealth) in February 2009 so I see every day the impact of its spectacular earnings growth on her daily life. There is a huge disability community on the internet, and I see the impacts there as well. They are intensifying as more and more states are requiring Medicaid recipients with disabilities to join these for-profit HMOs.

They have taken away from us the right of choice.

The companies aren't cutting services to our children because "the budget" has been cut. In fact, if you live in Hawaii, New York, Florida, Georgia and a few other states, your for-profit Medicaid HMO got a premium raise from your state. That's an increase to the budget, not a decrease.

What's getting cut is how much of the premium your Medicaid HMO is being paid for your child that is actually being spent on medical care. The health insurance industry calls it the "Medical loss ratio," I think of it as the "Patient loss ratio", some companies are reasonably straightforward and call it the "health benefits ratio."

If you google "medical loss ratio", you will see that this little number is playing a large role in Washington politicking. I've uploaded a number of articles about it here. The point is, it represents the amount of the premium spent on actual medical costs as a percentage of the premium. If a company reports an 80% MLR to federal regulators, it means they spent only eighty percent of the money allocated for the care of our children (for example), and saved the rest by denying medically necessary services and treatments.

A twenty percent "patient loss ratio" is what these companies brazenly report to the SEC. Federal investigations have revealed companies fraudulently inflating costs by up to 299%, and so a 50% PLR estimate could be conservative.

These companies are stealing from our children, our grandparents, and our communities' most vulnerable populations.

We can't change something we don't know about, so please help us spread the word.

Obama's $1 trillion handout to big business insurers, Part 2

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Once you start following the money rather than the rhetoric, you can start seeing how the Medicaid/Medicare reality has little do to with big business insurers' PR campaign.

Myth 1:  We need to find a good way to reduce costs; rising costs of services is  the problem.

Reality:  When private insurers create HMOs for Medicaid and Medicare, the company is paid by the government a set amount per month per person. With little to no regulation let alone enforcement of minimum spending requirements, reducing costs just gives the company higher profits. 

I've been puzzling for over a month now over an article by Paul Krugman. He states, "Yes, Medicare has to get serious about cost control; it has to start saying no to expensive procedures with little or no medical benefits, it has to change the way it pays doctors and hospitals, and so on."  He compares US Medicare with Canadian health care, which is "less open-ended and more cost-conscious."

The Canadian public health system probably doesn't have a corporate middleman who slips twenty to fifty percent of premiums into his back pocket every month.

Myth 2: Health care companies are making money because people can't afford to spend their deductibles.

Reality:  Unitedhealth sold this line to the Wall Street Journal after last year's earnings figures came out.  It was apparently deemed successful enough that the PR department used it again in May with the New York Times.  This time they brought out some commercial policy holders to interview who substantiated their claim.

In the past three years, Unitedhealth's commercial premiums have increased by only $334 million a month.  Government revenues paid by Medicaid and Medicare are up almost $1.5 billion a month.  Corporate profits from not spending government-paid premiums are up 67%, while the premium revenues themselves are up only 51%.

Unitedhealth's soaring profits are more accurately represented by the family who has been denied hospitalization, or medications, or home care services for their child or grandparent with a disability.

We don't make as good a PR statement, however.

Death by Medicaid: the Republican dream of unbridled profit-taking at work in Florida and Hawaii

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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.

If you had a company, would you hire back an employee who had stolen $40 million from you?

Because that's what our federal government has done, awarding a national Medicare contract to a company that has just paid $80 million in restitution and penalties to Florida for defrauding their state Medicaid plan, $10 million to the SEC for something else, and even $120,000 to the Florida Election Commission for ""questionable campaign contributions." Wellcare states on its website that the company provides managed care services exclusively for government-sponsored healthcare programs, focusing on Medicaid and Medicare. Some of the states where WellCare is providing Medicaid managed care services are Hawaii, Ohio, Georgia, Florida, Arizona, New York, Louisiana, Texas, Indiana, Illinois and New Jersey. This company that has paid out over $90 million just in the past five months to various federal and state authorities also reported that second quarter 2009 net income was 236% higher than it was in second quarter 2008. That represents a jump from $11.1million in April-May-June 2008 to $37.0 million in the same three months of 2009. Another way to look at WellCare's profit is that the company spent $1.5 billion on medical benefits and receieved $1.8 billion in revenue from premiums. How much of that $300 million profit (just for 3 months) could have been directed back to Medicaid services if these services were not administered by a for-profit company? UnitedHealth Group operates public sector health care programs (i.e., Medicaid and Medicare) in 23 states, under a variety of names. UHG's revenue from premiums for the second quarter of 2009 was $19.7 billion, of which 83.6% was spent on medical services. That's a handy profit for three months of $3.23 billion. That isn't breaking out employee plans from state plans, but in this particular economy, that kind of profit isn't something to be sneezed at. Just in 2009, UnitedHealth Group has paid out over $1 billion in fines to New York, California and Missouri, plus another $62 million in the two preceding years. For profit companies such as WellCare and United Health should not be allowed to administer federally funded programs where their company profits are literally taking necessary medical services away from babies. Decisions on issues such as "medical necessity" should not be left up to a profit-driven company. I live in Hawaii, where our Medicaid program, including EPSDT, is run by WellCare and UnitedHealth Group.