State is sweetening contracts with Evercare and Ohana with SB 1274

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SB 1274 is the only way that Hawaii's Medicaid bureaucracy can help their insurance buddies get rid of a lot of nasty legal costs from people appealing their decisions.

Hawaii's external medical decision review panels are a mandated part of Hawaii's contract with CMS (the Centers for Medicare & Medicaid) for the 1115 waiver. As a result, they are also a mandated part of Hawaii's contracts with both UnitedHealth and Wellcare, the only companies who hold provider contracts under that waiver.

Presumably, the feds would never give Hawaii written permission to delete an entire section of the contract dealing with consumer appeal rights. The only way to get UnitedHealth and Wellcare out from under that burden would be a law that repeals the law creating the reviews in the first place:

S.B. 1274 is repealing H.R.S. 432E-6, the law that defines the external review process.

Rafael del Castillo has had thirty cases go through the insurance commission reviews over the past decade, and has eleven cases sitting there now. Ten of them are appeals against UnitedHealth. That seems to imply that the problem isn't the review system, it's UnitedHealth's medical decision making process.

There was a funny rumor going around in January that state employees were working on how to make the contracts with Evercare and Ohana "above federal law." Specific sections of the contract, dealing with appeals and grievances, were being focused on. I provided the information to CMS in mid-January.

Checking my notes, the rumor had to do with the same part of the contract that will be invalidated once SB 1274 goes through.

What a coincidence?

In fact, Evercare was put under a Corrective Action Plan by the state a year ago, for ongoing violations of federal regulations. By and large, these were federal regulations related to mandated procedures for appeals of insurance decisions, grievances, and complaints.

CMS has been receiving documentation of Evercare's ongoing violations of multiple federal regulations for months. CMS has also been receiving documentation of the state's failure to provide the required oversight of Evercare's operations. Letters from Dr. Ken Fink, Hawaii state Medicaid Director, just echo UnitedHealth's corporate line. I reported earlier that Fink's salary is more than twice that of his predecessor, and have not heard that Governor Abercrombie has taken any steps to reduce it.

The agreement between the state and CMS clearly gives federal regulators the ability to step in if the waiver program is no longer in the public interest or there is on-going non-compliance.

Both conditions seem met, which means only federal regulators or attorneys can step in to help us if SB 1274 is passed.

Letters show Hawaii out of compliance with ARRA and CHIPRA since April 2009

On April 8, 2009, Lillian Koller sent a letter to Governor Lingle asking approval for 41 positions needed for Hawaii Medicaid to "effectively implement" new federal Recovery Act and Children's Health Insurance Act regulations.  A virtually identical letter, asking for the same positions, was sent today by Hawaii Medquest Administrator Kenneth Fink to Lillian Koller.

The implication appears to be that Hawaii has knowingly been out of compliance with the new Medicaid regulations for the past fifteen months.

Both letters state that "these programs can generate in excess of $327 million in new Federal funds for the State if we meet all the requirements".

In our current economic situation, it is difficult to understand why the State would knowingly forego $327 million in funds to benefit children and adults with disabilities as well as the elderly and blind.

Both letters cite the immediate need "to expedite State Plan Amendments and Hawaii Administrative Rules....Both of these bills generate millions of Federal dollars for Hawaii, but we need to be able to do the work in order to be able to access thyese funds.  Due to two vacancies, staff will not be able to execute the provisions of the ARRA and CHIPRA."

Both letters cite possible violation of federal regulations for Medicaid agency personnel training. "Federal financial participation (FFP) is being claimed for training costs at 50%. This office currently has a 43% vacancy rate...If the funding for this position is not approved, the State will not be able to provide the required level of training for existing andnew employees and will not be able to claim the federal funds for its training costs."

Both letters cite a 56% vacancy rate in the Customer Service Branch.  "The average number of monthly calls has dramatically increased due to QUEST Expanded Access (QExA) [QExA is omitted in June 2010 version], and is expected to only further increase as a result of the ARRA."

A recent article noted that DHS had received only 62 phone calls in April 2010 with complaints from UnitedHealth and Wellcare members.  I recently discovered, however, that DHS had no record of my complaints regarding my daughter's services, nor that anything for her had been denied, which casts some doubt on the figure quoted in the Advertiser.

The article also noted that UnitedHealth and Wellcare receive about 15,000 phone calls a month, not all of which are about "problems".  Enrollment in the two companies is only about 40,000.  These numbers may be more representative of the dramatic increase in calls to Medquest's Customer Service about the program run by UnitedHealth and Wellcare that is referred to in both letters.

The letters do not state what the cumulative cost to the state will be for the 41 positions.  I would assume, however, that it is significantly less than either the $327 million to be gained, or even the $15 million a month that UnitedHealth and Wellcare are making in net profit from premiums.

Hawaii's Medicaid money machine is a license to kill

Fourteen year old Mycal Johnston drowned from the fluid in his lungs on July 12 , 2009.  He had been discharged on June 24 from Oahu's Kapiolani Children's Hospital, with a prescription to fill at home for the one drug specialists had found that could control this life-threatening symptom of Mycal's cystic fibrosis.

The family lives in the Hawaiian Homelands on Molokai.  They took the prescription to the pharmacy, and Wellcare denied authorization.  The print-out received by the pharmacist on July 7 cites "prior authorization required" and "cost exceeds maximum" as the denial codes.

Prior authorization required Mycal to have a primary care physician.  Wellcare had never bothered to find him one on Molokai.  No primary physician, nobody to sign the forms that had to be submitted to Wellcare in order to get "prior authorization" for anything.  Meanwhile, Wellcare was receiving over $15,000 a month from the state for Mycal's care.

At the time of his death, Mycal's parents were trying to sell their truck in order to pay for the medication themselves.

In the first year after UnitedHealth and Wellcare took over Hawaii's Medicaid services for the elderly and disabled, the death rate rose 36%.  According to testimony presented at a hearing in March, the majority of deaths were due to the inability "to access services in time not to die."

A list of over 25 deaths in the first eight months after UnitedHealth and Wellcare took over is purportedly under investigation by the FBI. Mycal's is one of them, and the family was interviewed by the FBI only a few weeks ago.

A Mother's Day shooting in Honolulu was eventually tied to Wellcare's refusal to provide an enrollee with a doctor so that somebody could authorize his prescription medicine refills.  Sources tell me there have been at least two other similarly sourced crimes on Oahu.

While people are dying, UnitedHealth and Wellcare are taking home about $15 million a month in net revenue and profits.  That figure represents the difference between what Hawaii is paying them for taking care of our elderly and disabled, including children, and what they are actually spending on medical benefits.

The state, with the help of the media, has done a great "fog the mirror" job of deceiving the Hawaii public about the size of the contracts with UnitedHealth and Wellcare.  The phrase that was commonly used was the state was signing a $1.5 billion contract with the two companies.  In fact, the state signed one contract with UnitedHealth for about $1.3 billion and a second contract with Wellcare for another $1.2 billion.

Following the scheduled renegotiation of the capitation rates in October, the two companies are now jointly receiving about $2.3 million per day.  That comes to $840 million a year total (not the the $500 million a year figure that appeared in a recent Advertiser article).

According to their year-end financial reports, UnitedHealth typically spends about 82% of premiums on actual medical costs, and Wellcare reports paying out 86%.  On two contracts worth a total of $840 million a year, the savings realized from not spending the capitated payments they were receiving is about $117 million. This is in addition to the 3.0% guaranteed profit promised by Hawaii to Wellcare and UnitedHealth along with a five percent performance incentive.  That would be an additional $67.2 million a year in profits, or a total monthly take-home profit of over $15 million.

Since the Federal Government is currently reimbursing Hawaii for 67% of our Medicaid costs, then $10 million a month of that profit comes from federal funds, including stimulus money that could only be spent on Medicaid.

On March 25, Governor Linda Lingle asked the state legislature for an emergency $40 million in order to make the next months' Medicaid payments.  The Advertiser reported that the state spent about $100 million a month on Medicaid, and the $40 million from the state would be matched by $80 million from the federal government, and then they could pay the $100 million bill for April.

What the Advertiser did not mention was that seventy percent of that payment was going to only two of the companies:  UnitedHealth and Wellcare.

On May 6, the state called off its plan to save $8.8 million by closing welfare eligibility offices and laying off 228 public employees.

Prior to February 1, 2009, when Wellcare and UnitedHealth started their contracts with the state, the $15  million a month they take home in net income would have stayed here in Hawaii.  It would have provided medications and a doctor for Mycal, overnight care services for Erik Sorensen, and Martin Boegel's monthly prescriptions.  It would have paid for a lot of the state workers who have lost their jobs in order to make way for the "administrative" arm of the new insurance companies.

Hawaii is not the only state crying poor when it comes to making excuses for cutting Medicaid budgets.  On February 19, USA Today reported that "more than half the states are reducing Medicaid services and payments...this year as the recession propelled enrollments to record levels and sapped money from treasuries."  A May 20 article in the Wall Street Journal reported that

Across the country, budget-strapped states are focusing on Medicaid. Created in
1965, it is now a $379 billion program, including state and federal funds. State
spending grew an average 7.9% in fiscal 2009 as the economic crisis hit and more
people signed up for Medicaid.

What is being omitted from these stories is how much of that $379 billion contributed to the 56% rise in profits experienced by the health insurance industry in 2009.

As unemployment rises, commercial (employer-paid) enrollment in the health insurance companies is dropping.  The Medicaid market, however, is booming.  The top six managed care for-profit health insurance companies include two of the nation's largest insurers:  UnitedHealth and Wellpoint (the other four are Molina, Centene, Amerigroup and Wellcare).  All five of the top for-profit health insurance companies (UnitedHealth, Wellpoint, Cigna, Humana and Aetna) have entered into the Medicaid market, competing for state contracts.

A study released on March 25 summarized it by saying "increasingly more companies are showing interest in the Medicaid segment as a means of growing revenues."  Another article from April states the issue more bluntly:

The share of Medicaid recipients in managed care plans has risen from 56 percent to 71 percent in the past decade. That suggests states are seeing financial benefits from Medicaid HMOs. But the real attraction to states is that managed care helps them budget their Medicaid expenditures. If that budgeting was working so well — in other words, if it meant the states could drive hard bargains with private insurers — they wouldn’t be complaining that
Medicaid is eating up more and more of their revenues. And insurance companies wouldn’t be seeing Medicaid as the goose that promises to lay golden eggs.

In the case of Hawaii, there is no evidence to show that the state is saving any money from its contracts with UnitedHealth and Wellcare.  If the actuarial data Hawaii used in calculating its per person per month rates is corrected for the October 1 payment figures (the existing figures end immediately prior to the scheduled October rate increases), the numbers show that the per person per month plan was going to cost the state fifty-one percent more than the previous fee-for-service plan would have.   The January 2009 actuarial report instead reported the managed care plan would save the state 5.9% from the fee-for-service model.

On January 1, Wellcare ceased offering any Medicaid plans where they have to reimburse for actual costs incurred.  They are only offering plans where they can get a set payment per person per month, regardless of what they spend.  Wellpoint only offers Medicaid managed care plans, and I have yet to identify any UnitedHealth Medicaid plans that are not managed care.

A Medicaid system that pays the same amount per month per person regardless of actual expenditures is doomed to lead to decisions made on the basis of increasing net per person profit rather than meeting the individual's medical needs.  The Hawaii plan is cursed twice, however, by being authorized under Section 1115 of The Social Security Act rather than Section 1915.

Section 1115 and Section 1915(c) of The Social Security Act both give states the regulatory framework to provide in-home services to community members who are too incapacitated or disabled to live in their homes without these supports.  Both sets of programs allow family income and assets to be "waived", so that the individual with the chronic health need or disability is qualified on the basis of their own income and assets. The most significant difference between the two is how each calculates the "cost neutrality" component that the state must meet.

A Section 1915(c) Medicaid waiver program compares the average per person cost for home services with the average per person cost for institutional services.  Individual budgets can be flexible since it would be extremely unlikely for a single person to throw the overall average off.

For a Section 1115 Medicaid waiver program, the state must show that they are spending no more money with the waiver program than they would have if it did not exist. The budgetary cap is usually calculated either per person per month or per capita.  There is no room to accommodate medical emergencies or needs that are simply greater than originally imagined.  The individual's budget is under constant scrutiny for ways to minimize expenditures.

The combination of this "individual as profit center" approach with the natural instincts of the two for-profit companies managing Hawaii's program Is the source of the rising death rate amongst Hawaii's disabled and elderly.  Similar 1115 programs are in place or under development in Arizona, Florida, Illinois and Colorado.

The irony of the situation here in Hawaii is that UnitedHealth and Wellcare, in spite of record profits, continue to cry poor.  Federal regulators from CMS and OCR have been telling me since December that the companies were trying to get more money out of the state, or reduce what they had to cover.  That's where our battle over EPSDT has arisen here, as UnitedHealth and Wellcare are clearly responsible in their contracts for any EPSDT coverage but equally clearly did not intend to pay for any wide array of services. 

What keeps getting pushed to the side, if mentioned at all, in national stories about Medicaid cuts is the issue that these cuts can represent violations of the civil rights of people with disabilities.  Civil suits have been filed, heard or decided in twenty-one states since Obama's election.  Either the Department of Justice, the DHHS Office for Civil Rights or Federal Medicaid regulators (CMS) have openly intervened in at least eleven states with a combination of formal, informal and even criminal investigations into civil rights violations related to Medicaid cuts.

Nine of those eleven states use Medicaid managed care by a for-profit insurance company for their disability population.

UnitedHealth operates a managed care Medicaid program in 19 of the 21 states where lawsuits have been filed or heard.

All these numbers are "at least" since, with the exception of Hawaii, it is usually only possible to find out about these investigations after they are concluded and documentation shows up on the internet. It is a curious fact that the Department of Justice has publicly intervened in five states since December, citing civil rights violations against people with disabilities stemming from Medicaid cuts.

The Hawaii investigations would likely be completely secret right now if I had not been involved directly with CMS and OCR.  How many other states have similar ongoing investigations is unknown.

In Hawaii the investigations are centered on our managed care Medicaid plans run for the disabled.  All but two of the states where cuts have resulted in law suits have for-profit managed care for their Medicaid populations.

The states are in trouble over Medicaid, but how much of that trouble is directly related to the obscene profits being paid out to for-profit Medicaid insurance companies is incalculable.  Certainly here in Hawaii, the profits collected by UnitedHealth and Wellcare are enough to make up for the vast majority of cuts, and return state workers and home healthcare providers to their jobs.  If the plans are not only not saving the state money, but actually cost more than paying actual medical costs incurred, then why is Hawaii not ditching these two companies and keeping the money here?

The 1115 managed care plan was the brainchild of our current Governor and her team.  It does not speak well of how lives are prioritized against corporate profits in what used to be called "the Health State."

Death by Medicaid: Turning 21 can be a killer

Erik Sorensen died because he turned 21.

An accident in 2008 left him paralyzed from the neck down.  He was completely dependent for every movement, every bodily function, on the help of others.  He was enrolled in one of Hawaii's 1915(c) Medicaid waiver programs, and in February 2009 was transferred into the state's new 1115 Medicaid program operated by UnitedHealth and Wellcare.

In June, he turned 21.  Five months later Wellcare (Ohana in Hawaii) told him they were cutting his home health services by fifty-five percent, from 17 hours a day to less than 8 hours a day.

It took more than three hours for Erik's helpers to get him out of bed, into the bathroom, showered and dressed every morning.  Meals took an hour and a half each, and he couldn't be left alone since he was in constant danger of choking to death.  It took half an hour to get him into his wheelchair van (which he could not drive), and another half hour to get him out, with a total of four transfers per trip.  With only eight hours of services, it was going to be impossible for Erik to leave the house.  (A detailed description of a day in Erik's life can be found here.  It is very graphic.)

It also meant he would have to left at home alone for hours on end.  If he needed to cough, if his catheter bag needed to be emptied, if the spasms in his legs threw him onto the floor, if the house caught fire, he could die before anyone got home.

The cuts in services would take effect in less than two weeks.  Erik's case coordinator from Wellcare told him the insurance company wouldn't pay any more for his home services than it would cost them to put him in an institution.  That, the case coordinator said, cost only $6,000 a month, while his current services were costing the company $11,000. 

What had actually happened was that when Erik turned 21 he moved from have a disability code of AM15 (19-20 year old males) to the disability code of AM16 (21-39 year old males).  Under Hawaii's capitated rate agreement with Wellcare, the company was paid $11,840.27 a month for an AM15, but only got $5,398.71 for an AM16.  The level of services he had been receiving was costing Wellcare $10,431.20 a month.

In fact, Wellcare had a financial incentive to try to get Erik into an institution.  The capitated payment they would have received for him every month was not $6,000 but somewhere between $7,000 and $16,000 (island dependent).

I worked with Erik and his family, and while the appeal process was going on his services could not be cut.  Meanwhile, Erik was finally in a position to look forward.  He planned to attend a special program for quadriplegics on the mainland that was designed to enhance independence, he got his GED, and he signed up for classes at the local community college.

In Erik's eyes, all of that would be doomed if Ohana carried through on their threat of institutionalizing him.  In January 2010, Erik signed a formal declaration that was filed in Hawaii District Court, stating he felt coerced and threatened with institutionalization by Wellcare. When Erik later had a chance to get 24/7 service coverage (so he could be covered all night), he turned it down.  As his mom says, "we were both scared to death what Ohana would do" if they took the increased schedule.  The stress on Erik from the ordeal did not stop just because the appeal was over.

Sometime during the night of March 23, Erik vomited and breathed the acid liquid into his lungs.  Aspiration pneumonia set in immediately and his lungs became so filled with fluid the oxygen supply to his brain was severely reduced.  He died on March 25 from the complications of brain death.

There is no reason that the home care of a 21 year old individual should be half of what they were at age 20.  It is as if the system is saying that the life of a 21 year old is only worth half if what is was the day before their birthday.  It is a problem happening across the country, however, and what has become known as the "aging out [of EPSDT]" issue is being tested in the courts.  Decisions have been coming in supporting the ADA rights of the plaintiffs.

In Erik's case agaust Wellcare before the Hawaii State Insurance Commission, the February 25 decision criticized Wellcare for decision to cut medically necessary services that were "unreasonable from the standpoint of procedure and statutory compliance.

Respondent [Wellcare] made a coverage decision without undertaking the required statutory medical necessity analysis.  Respondent did not consider the recommendations of the Petitioner's treating physicians.  Respondent either did not know that Petitioner might have autonomic dysreflexia or disregarded information to that effect in contradiction to notes on a medical record.  Respondent relied heavily upon Home and Community Based Services Assessment Tool which has not been validated as a prevailing standard of care in the medical community.  Respondent did not have all relevant medical records at their disposal in making their decision.  This metholody does not indicate a high degree of diligence or care.

Diligence and care just means spending money.  The lower your cost to premium ratio, the more profit you get.  This is how capitated payment systems run by for-profit health insurance companies are diverting hundreds of millions of dollars in each state away from health services for people with disabilities and into the profit margins of the health insurance companies.  I've already written about the disproportionate profits Medicaid contracts are generating for the companies. Wellcare's recent abandonment of any program where they pay actual medical costs incurred implies it must be much more profitable to receive capitated payments.

The lives of children and adults with disabilities should not be put into the hands of companies that have such a financial inducement to base services on profits rather than medical necessity.

Please, if you're the parent of a kid with special needs, read this

For the first time in my history as the mom of a kid with disabilities, we parents have the ability to get our kids all the home and school support services, technology and therapies that their doctors think are medically necessary. We can go straight to the source, rather than wait around for our local Department of Education or Voc Rehab to get their paperwork together. All you need is a prescription, the evaluation and a letter of necessity, and you turn it over to your Medicaid case worker. Better yet, some of the corporations such as Dynavox, handle all the paperwork for you. The timing is perfect. The government has dumped over $28 billion into state coffers that can only be spent on Medicaid, with more on the way. Schools have been given more money as well, with a particular emphasis being given to using it on assistive and augmentative technology. The percentage of a state's total Medicaid budget which will actually come out of state accounts is somewhere between 10-35%. I did a rough calculation, and for a state paying the highest percentage, for every $10 million of its own money the state does NOT spend, the state loses about $28 million in immediate jobs and services. The only problem is, in too many states, nobody knows what happens to those stimulus bucks once they disappear into some new, very deep coffers. If your state is continuing to cut medicaid services for your child, if your school is trying to cut service hours from the IEP, then there's a good chance there are some questions about how your stimulus tax dollars are being spent (and even if they are at all). Last week, the Government Accounting Office issued a report focusing on how states are using their stimulus funds. The report called into question the "quality and reliability" of data that the states are giving the feds about how and on what they're spending their stimulus bucks. Meanwhile, Department of Health and Human Services Kathleen Sebelius released an additional $600 in stimulus funds to the states just between September 17 and 30, 2009. Nobody in the media, nobody in the government, is paying attention to the mystery of how states are spending their stimulus dollars. CMS refers all calls on the subject to its Baltimore headquarters. Three states are under some sort of federal investigation for violating federal Medicaid law and the Americans with Disabilities Act, and 7 more have civil suits filed or in preparation alleging similar violations. A friend of mine with disability law experience and I have put together a group called Children's Disability Rights Education Association. Our role is to help parents and caregivers take greater control over their child's health and education. As CDREA we have a petition up, calling on DHHS to require complete accountability from the states, and to ensure priority is given to restoring Medicaid service budget cuts made since July 1, 2008. These cuts have unfairly targeted children as well as adults with disabilities who need skilled care to live at home with their families. Similar problems are plaguing state stimulus funding received for education. I just found this source, but the correlation between what's happening with money for both special education and medicaid home support systems is an atrocious example of discrimination against children, as well as adults, with disabilities. Please consider signing our petition, and forwarding it to your friends.