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.

Families to Hawaii's governor: Yes, you have failed

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Families of children with disabilities have reacted strongly to the August 22 meeting with Governor Abercrombie. The letter below was written the day following the meeting.

Dear Governor Abercrombie:

We are families whose lives have benefited from Hawaii’s Insurance Commission external review system.
The format of yesterday’s conference did not enable all of us to speak. Many of us made the extraordinary effort to meet you in June, but you did not attend.

You said yesterday that:

“I think it’s fair to say that people felt that the review panel process in place kept the insurance companies in check, and on the whole they were able to get services that they wanted to have.

The two avenues available, the Department of Human Services hearing process or the 3-person panel, and I think most people went for the 3-person panel, and felt that was satisfactory. Nobody was arguing with that, least of all Suzie or Roz or myself or for that matter the professionals at DHS, that is to say those that were left after the ranks had been decimated over the last years.”

Please explain to us: if this is so, why did you sign a bill that deprives everyone on Medicaid of this process? The U.S. Dept. of Health and Human Services did not disapprove our existing process for Medicaid members, which is not an issue with the ACA. In fact, it expressly approved the inclusion of the 3-member panel option in the RFPs for QUEST and QExA (and we have not seen anything showing that DHHS approved revoking this option).

You said the denials of services that threaten the lives of our families are just “glitches.” You said the on-going regulatory violations we are experiencing are to do with the contractor. You said that if we needed a lawyer to dispute a denial, that means you are failing.

I regret to inform you that you are failing. Based on Insurance Division statistics, the number of cases filed since you took office nearly equals the number filed in the last 10 years. In fact, since you took office, over 20 cases have been filed in the external review and won by QUEST or QExA members against Evercare and HMSA QUEST. Some of those cases were previously denied by the Administrative Appeal and even had Legal Aid assistance. Apologies for failing, promises to do better, and an uncertain plan of assistance, will not help those more than twenty families as certainly as the external review did. The health plans are the only winners under SB1274.

Most of us are, right this minute, depending on a lawyer for our lives, and the lives of our children. We are in the midst of “glitches” that have spanned months, if not years. We have all experienced the failure of the DHS review system, including their failure to monitor the contractors for federal compliance.

We appreciate your intentions, but your proposals on Monday did not meet our concerns. In fact, they left us terrified for our futures and angry that you could belittle our life-and-death battles with the insurance plans as mere “glitches.” We will not rest our efforts until we have a system we can count on to prevent health plans from running over us and our children.

Son-of-a-glitch: Abercrombie defends turning state’s disabled population into second class citizens

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On August 22, Governor Neil Abercrombie admitted that the purpose of SB 1274 was to save the state’s Medicaid contractors money on legal fees. He never explained how that would benefit patients.

SB 1274 deleted part of the state’s Patients Bill of Rights, depriving Hawaii’s entire Medicaid population (270,000) of access to the protections of federal law.

The Governor suggested numerous creative alternatives to legal counsel: “civilian public defenders,” “ombudspeople”, a new commission, even getting federal money to hire a patient advocate. It was clear that no work has been done on any of the ideas to replace the lawyers who have the expertise to interpret coverage contracts and to apply the law to a patient’s individual circumstances.

Just no lawyers. Unless of course the family has the money to spend on hiring one themselves.

The meeting was ostensibly to “reassure” families and advocates for the state’s disability population, in the aftermath of his signing of SB 1274. Abercrombie stated “I am failing” if anybody in Hawaii needs a lawyer to enforce their civil and legal healthcare rights.

On August 24, a Circuit Court decision was handed down against Evercare (Unitedhealth), proving even children in Hawaii need a lawyer in order to enforce civil rights under the ADA.

This is the second time since June the Circuit Court has ruled against Evercare. Both cases revolved around Unitedhealth’s cuts in benefits to medically fragile children, where percentage savings translate into thousands of dollars per month each.

Both children were fighting for the right to live at home with their families and not be put in institutions. But for their right to have a lawyer, neither child would have won.

But all this, according to Abercrombie, is just a “glitch.” No need for lawyers.

Also on August 22, Dr. Kenneth Fink, Hawaii state Medicaid Director, acknowledged in writing to the parent of one of these children that Evercare had violated federal confidentiality laws. This is the fourth such letter parents have received from Dr. Fink in less than a year.

Meanwhile the state has been unable to produce proof of Abercrombie’s statement that it was made “explicitly clear to [him] by the United States Department of Health and Human Services that the external review process we had in place did not meet the Affordable Care Act requirements.” This was a crucial ground for signing the Bill instead of vetoing it.

Supporters of the bill had tried to argue it was necessary in order to comply with an Affordable Care Act deadline of July 1. On June 21, the Governor’s office admitting to having had no contact with federal authorities on the issue, and later that week the deadline was extended to the end of the year. Nonetheless, now the Governor says there is a letter from DHHS.

Rafael del Castillo, healthcare rights attorney, asked the governor’s office following the meeting for a “copy of the DHHS correspondence explicitly stating that our existing external review is unacceptable.”

The meeting was two weeks ago, and he has received nothing to date. A recording of the meeting can be found here.

The impact of SB 1274 has been eerily similar to that of the White House-backed amicus brief submitted to the Supreme Court in May.

There is something called “Federal Sovereignty.” This means that federal law is the “supreme law of the land”, and states cannot limit legal rights allowed under federal law.

In his analysis of the amicus brief, Simon Lazarus of the National Senior Citizens Law Center explained that “the rule endorsed by the DOJ brief, [carves]… safety net laws and beneficiaries out from the protection of [the] Supremacy Clause."

That is pretty much what SB 1274 has accomplished: carving out Hawaii’s Medicaid population from the protections of federal law.

Abercrombie painted the concept of turning everyone on Medicaid into second class citizens in rosey terms. He had to sign SB 1274, he said, in order to prevent federal regulators from reducing the state’s “flexibility” and “opportunity to experiment” with people’s lives.

Why the state suddenly needs to experiment with a healthcare appeals system that has functioned appropriately for more than a decade, was not explained.

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 refuses to approve medical treatments ordered by a doctor. Back in April, Unitedhealth’s attorney openly told a TV reporter that SB 1274 needed to be passed because this "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. As of this writing, she and Unitedhealth have lost every case ever filed against it under the patient rights law she said needed to be repealed.

By April, information surfaced that the bill was actually a way to change the federally approved contract between Hawaii and two specific Medicaid contractors, Unitedhealth and Wellcare. The current contract mandates the two companies follow state law, something they knew when the signed the contracts.

The problem with privatizing Medicaid is that, once these companies get control of the system, they can start demanding modifications in their contracts. The State is in a weak position to resist because it has gutted its social service infrastructure, essentially disabling itself. Unitedhealth and Wellcare decided they do not like being told what to do by successful patients and their attorneys, so they insist on the state finding a way to get rid of the law. That way, their Medicaid premium profits are safe from needy patients who have the power to enforce their rights because their legal fees are paid.

My daughter Hannah is another medically fragile child who has needed a lawyer to protect her from the harm caused by Unitedhealth. During the meeting on August 22, the Governor promised someone would call me about the “glitches” and “logistical problems” plaguing Hannah’s medical care.

There have been no calls. Just another glitch?

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.

Romney says corporations are people, so why aren't HMO hoodlums who steal from taxpayers in jail?

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If corporations are people, as Mitt Romney told a group today, then why aren't the companies caught defrauding Medicaid and Medicare in jail?

Romney's full statement, quoted in today's Huffington Post, is:

"Corporations are people, my friend... of course they are. Everything corporations earn ultimately goes to the people. Where do you think it goes? Whose pockets? Whose pockets? People's pockets. Human beings my friend."

"Everything ultimately goes to the people." That sure isn't the case with the big HMOs caught defrauding the taxpayers of billions of dollars intended to provide medical services to children.

I've asked before: if you were an employer and caught an employee stealing from you, would you hire that person again? And if you did and they did it again, would you hire them back a second time...a third time....?

Why is this any different from the Administration continuing to award federal subsidies to corporations already caught stealing from the government?

PR for the health insurance industry has done a great job fogging the mirror on Medicaid and Medicare. They have framed the entire debate in terms of the skyrocketing cost of medical care, the undeserving nature of recipients, and how the public budgets for these programs should be cut.

The problem is reality conflicts rather substantially with this PR "spin."

First, let's get the idea that Medicaid is for the poor or unemployed out of the way. Two-thirds of the national budget goes to keeping children and adults with disabilities, along with the elderly, out of institutions. Our country actually has a wonderful set of laws and regulations designed to keep families together, by providing medically necessary services in the individual's home. When the Medicaid budget starts getting cut, it's this two-thirds that is affected the most, and carries the highest human toll in misery and death.

Second, we need to remember that just because expenses are reported by insurance companies to federal authorities, doesn't mean those figures are accurate. The whistleblower case against Wellcare unsealed last summer reported expenses inflated by up to 299%. In Florida, investigators discovered Unitedhealth had billed the state for more than $2 million of speech therapy for children with disabilities that never took place.

Ironically, the insurance companies use these same inflated costs to justify premium increases in their state Medicaid contracts. In fact, the companies have to show they are losing money on the state contracts to get the rate increase. But if they were losing money in all the states that have awarded increases, how are they continuing to report record profits?

In its first quarter 2011 filing with the SEC, Wellcare said that "Hawaii program rate increases ... we believe have improved the stability of the program." With the company's operating profit jumping from 13.1% to 19.3% just in the past nine months, how much of the raise is being applied towards costs is in serious question.

Meanwhile, when PR flacks and industry reps talk about cutting provider rates, they forget to mention that doing so just increases the corporate HMO's profit margin. The HMO is not a "provider" in this lingo; it has replaced the state accounting and quality control bureaucracies with its own employees. The providers are the nursing agencies, pharmacies, hospitals, medical supply companies, day care centers for people with disabilities and other small businesses that provide direct services to the people needing them.

The biggest myth of all is that the issue that needs to be addressed is how to cut budgets. In essence, we are being asked to make decisions about cutting budgets without knowing how those budgets are spent. It might seem logical to equate Medicaid budgets with how much is spent on medical care, but that leaves out the twenty-to-fifty percent profit the HMO is scooping off the top of every payment they get from the government. Right now that totals somewhere between $2 billion and $5 billion a month, depending on how much fraud is going on.

As quietly as the government has been auctioning off Medicaid and Medicare to for-profit HMOs, the White House has taken steps to let these corporations know that federal regulators won't be watching too closely how these funds are actually spent.

On April 26, the Administration backed an agreement between Wellcare, nine states and the federal government, settling all the Medicaid fraud cases against them for $137 million. In return, the government agreed not to consider Wellcare a criminal and not to hold this non-criminal past against them in any future contract negotiations.

On May 6, the Administration published proposed new Medicaid access regulations that dropped jaws across Washington and the health reform movement. According to Sara Rosenbaum, Chair of the health policy department at George Washington University, "rather than being a forceful implementation of the law, the proposed rule is a model of inaction." She went on to call it "the first sign of the administration’s refusal to intervene" in state Medicaid practices, including those concerned with how government money is being spent. She calls the rule "a model of inaction," the sole remaining purpose of which is "to establish what might charitably be characterized as an information-gathering exercise."

Even this extremely watered down proposed law goes further by exempting everyone enrolled in Medicaid HMOs from inclusion in the five year information study.

Just from the year of statistics I took in college, I know any study that excludes seventy percent of the affected population has dubious accuracy.

Then on May 26, the White House took an action that could end up turning everyone receiving Medicaid into second class citizens. Defying HHS Secretary Sebellius as well as a number of health advocacy groups, Obama backed a "friend of the court" document submitted to the Supreme Court that advocates denying anyone on Medicaid the protection of federal law.

Simon Lazarus of the National Senior Center Law Center wrote:

The brief charts a path for the Supreme Court to permit federal courts to continue routinely to apply federal supremacy to strike down state laws protecting consumers, workers, retirees, bank depositors and others, alleged by business litigants to conflict with federal laws, while arbitrarily withholding identical protection from the vulnerable populations served by Medicaid and other safety net laws.

Rosenbaum warned in Politico that "there’s “no stopping point … in terms of its spillover effects” if the Supreme Court broadly restricts individuals’ access to the courts over state implementation of such a federal program."

If Romney thinks corporations are people, then Obama's actions tell us he values these corporations over the rights of the individual.

The country's most medically vulnerable population has been auctioned off to a bunch of criminal hoodlums with no regulatory strings attached.

Please sign our petition to stop this enslavement.

Obama, the Republicans, and the silent war against Medicaid

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While the Republican-driven war on Medicare is grabbing public attention, President Obama's own war on Medicaid is going largely unnoticed.

The "friend of the court" document submitted to the Supreme Court by the Department of Justice on May 26 was strongly opposed by DHHS Secretary Kathleen Sebelius. When two arms of the Administration disagree on policy, the decision goes to the President. Congressman Henry Waxman was quoted today stating the President "evidently decided to let this brief go through, and this is a serious mistake."

The brief opens the door to the Supreme Court denying almost seventy million Americans the protections of federal Medicaid law. Children, adults with disabilities, and senior citizens will be at the mercy of state bureaucrats and, increasingly, the big business insurance companies that are gobbling up state Medicaid contracts across the country.

These are the same big corporations that stand to benefit if the Republican's "Voucher Care" concept of Medicare passes. Already accused of criminal Medicaid fraud in multiple states, these are companies growing at double digit rates thanks to the Affordable Care Act, and the biggest one was linked to the Tea Party back in 2009. Profits are made by not spending the federal and states funds they are paid on actual medical care.

George Washington University health policy expert Sara Rosenbaum warned that there’s “no stopping point … in terms of its spillover effects” if the Supreme Court broadly restricts individuals’ access to the courts over state implementation of such a federal program."

Please sign our petition to the Department of Justice to have this dangerous document withdrawn.