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

Share |

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.

Obama's $1 trillion handout to big business insurers

Share |

Federal hand-outs to the health insurance industry could top $1 trillion in the next five years. Between twenty and fifty percent of that will be saved off the top as net profit.

The handouts are not loans or grants or even tax breaks. They are the product of the Administration's policy supporting auctioning off state Medicaid and federal Medicare contracts to publicly traded, for profit health insurance corporations.

Based on SEC filings for the first three months of 2011, government payments to the top ten for-profit insurers were running around $10.9 billion a month, up ten percent just in the previous six months. Depending on how much fraud is going on, between $1.9 and $5.4 billion of that gets "saved" every month towards corporate profits by the company simply refusing to spend it.

Obama's willingness to concede to cuts in entitlements will probably have little influence on these payouts reaching $1 trillion in the next five years. The White House has given off too many signals in the past six months of its willingness to give private insurers a free hand in how they spend federal funds. The Administration has even gone so far as letting one company off the hook for criminal Medicaid fraud in nine states.

Just as slavery cloaked itself in the myth of the paternalistic landowner, the public war raging today over Medicaid and Medicare is using the myth of the undeserving poor to detract attention from the obscene private profits being generated with public funds.

In reality, the people whose lives are being affected the most are our country's fourteen million children and adults (including the elderly) with disabilities. Two-thirds of the nation's total Medicaid budget is allocated to paying for medical services to keep people with disabilities at home with their families, rather than shutting them up into institutions. More and more of that money is being paid out to companies more responsible to shareholders than policyholders.

What the President has auctioned off to big insurers is control over life and death of our society's most vulnerable citizens.

The new dandies of Wall Street

Ten health insurance companies control the private Medicaid/Medicare market. Four exist completely on public funding: Amerigroup, Centene, Molina and Wellcare. The other six (Aetna, Coventry, Health Net, Humana, Unitedhealth and Wellpoint) have been replacing lost corporate group business with new Medicaid and Medicare "managed care" policies.

Unitedhealth's quarterly net earnings (three-month profit before taxes) jumped from $505 million for April - June, 2008, to over $2.1 billion in the first three months of 2011. Quarterly commercial premiums were up by only $1 billion, but Medicaid/Medicare quarterly revenues were up by over $4 billion.

At Aetna, commercial revenue is down from 79% of total quarterly premiums to 74%. Its replacement with Medicaid/Medicare government funding, however, has accompanied a 22% increase in quarterly net earnings.

Among the ten, Medicaid membership is up 19%, and the mix of Medicaid and Medicare products is up 33%, from 27.7 million to 36 million policies. Both commercial membership and quarterly commercial revenues are down.

The relationship between the number of new Medicaid enrollees and the revenue they generate for the company is not a straight one to one ratio. Humana and Coventry both reported a loss in Medicaid membership at the same time as an increase in Medicaid revenue. Wellcare had a three percent increase in Medicaid membership generating a 14% increase in Medicaid revenues, and Unitedhealth and Amerigroup both showed almost a three-to-one ratio of Medicaid revenue growth to membership change.

In order to understand why Medicaid (and Medicare) contracts are so lucrative, it is best to start with what one writer has called the insurance industry's "dirty secret."


The "Patient Loss Ratio" and why it's important to Wall Street

When state Medicaid programs are carved up and auctioned off to the lowest bidder, they include a rate schedule used to determine a monthly payment per person. The insurer is paid a set amount per month per person, depending on how healthy the person is. For really healthy people, the insurer may get only $400 a month from the government; for a medically fragile child living in a rural area, the company may be getting paid $25,000 a month by the government.

For the publicly traded health insurers winning these contracts, profit derives from the simple difference between how much the government is paying to provide services for each covered individual, and how much the company spends on that person.

In the health industry, it's called the "Medical Loss Ratio": how much is actually spent per individual as a percentage of the total premium paid for that person. Since the term seems to imply that expenses are a corporate loss, the "Patient Loss Ratio" represents how much every policyholder under Medicaid and Medicare is losing of their budget to corporate profits.

For example, a medically fragile child in a rural area who is dependent on technology to breathe and eat might have a monthly budget of $25,000 to pay for equipment and care services at home. That's what the company is paid every month, and it is less than the state would pay if the child was institutionalized. When the company is reporting an MLR of 80%, it means the so-called "managed care plan" has cut twenty percent of the child's services. For instance, the child's life may now be endangered by the loss of 200 hours of home nursing services per month, and the community has lost 1.25 full-time jobs.

Minimum spending requirements for Medicaid contracts are virtually non-existent. In a single case in Florida where a contract required an 80% minimum, all eight insurers were found to have fraudulently padded medical expenses by fourteen to sixty percent (in other words, the patients were losing between 34% and 80% of their budgets to profits).

Non-profit health insurers and even for-profit corporations with US Military contracts report spending ninety-five cents out of every premium dollar on actual medical costs. Nevertheless, the Administration, in an extremely generous mood, tried to set minimum spending requirements of only 80-85% for commercial and Medicare policies through the Affordable Care Act. However, states were allowed to apply for (and are receiving) "waivers" as low as 70% on the basis the local insurance industry will be inconvenienced.


What Al Capone, the drug cartels and health insurers have in common

Money breeds crime. The more excessive the potential profits, the more pervasive is the crime.  And the analogy between health insurers and the heroine trade was made two years ago.

A whistleblower complaint against Wellcare, Amerigroup, Unitedhealth, Humana and others was unsealed last summer. Sean Hellein, an executive at Wellcare, wore a wire for 18 months as part of an FBI investigation into Medicaid fraud. This is a must-read for anyone who wants to understand how pervasive criminal Medicaid fraud is within the heath insurance industry. Some of the methods revealed included:

* inflating medical costs on 161,170 claims by 218% to 299%;
* bullying terminally ill patients and the mothers of medically fragile babies into disenrolling  ("cherrypicking");
* setting up a Cayman Islands reinsurance subsidiary to overpay themselves;
* cooperation between companies in false-billing practices, to reduce the chances of getting caught; and
* tricking federal regulatory computers into doublecounting expenses.

Hellein's testimony also reveals how incompetent state regulators are at catching Medicaid fraud. From mid-2005 to the date of the document, a Florida computer error awarded an estimated $16.8 million in overpayments for one program to Wellcare, Unitedhealth, Amerigroup, Humana and two other HMOs. Another error that was capitalized on was made by actuarial firm Milliman Consultants. The Milliman report mistakenly over-priced expenses for one program by $19.4 million over two years. Aware of the error, Wellcare fraudulently used the actuarial report to apply for (and receive) a rate increase.

In late April, 2011, Wellcare reached a settlement on criminal Medicaid fraud charges with nine states and the federal government. The White House apparently supported letting Wellcare off the hook by promising never to call them gangsters for what they had done, and not to hold their past gangster activities against them in future federal contract awards.

Would Fort Knox have hired Al Capone? As the mother of one of the millions of children victimized by this fraud, it feels tantamount to the President forcing me to hire a pedophile as a babysitter.


Federal and state funds diverted from medical care for  children and adults with disabilities can mean the difference between living at home with family, or being institutionalized; it can mean the difference between living surrounded by loved ones, and a slow, lonely and miserable death.

We need to look beyond the rhetoric on Medicaid and Medicare and pay attention to how our tax money is being spent. 

I've consolidated my document collection here. 

White House clears path for Ryanizing Medicaid

Share |

Not only has the Administration given states the go-ahead to Ryanize their Medicaid programs, the White House has sent a clear message to private managed care companies that Medicaid fraud is OK.

Actions taken by the Administration on April 26, 2011, May 6, 2011 and May 26, 2011 combine to paint a chilling picture of a newly-emerging White House policy towards Medicaid.

On April 26, the government signed a settlement agreement with for-profit Medicaid managed care provider Wellcare and nine states. In exchange for a payment of $137 million against all claims for criminal Medicaid fraud, the government agreed never to call Wellcare a crook and not to hold this information against them in any future contract awards.

On May 6, the government published a proposed new Medicaid access rule in the Federal Register. The underlying message is that the federal government will not intervene in state Medicaid matters. National health policy expert Sara Rosenbaum called the rule "a model of inaction...[that will] establish what might charitably be characterized as an information-gathering exercise." The rule exempts everyone receiving managed care medicaid from even this poorly-defined five year study, a figure Rosenbaum estimates at 70%. About one-third of that are enrolled with for-profit health insurers, and that number grew 21% just in the last three months of 2010.

May 26 was the date the Administration's friend of the court brief was submitted to the Supreme Court. In it, "the Obama administration ... has entered the case on the side of the state, arguing that the courts are closed to private individuals where Medicaid-access litigation is concerned." It was a concession as well to the big business health insurers like Wellcare, Unitedhealthcare, Amerigroup and six other major players they wouldn't need to worry about federal oversight of how state and federal money was being spent. The savings in potential legal fees defending medically indefensible denials of medical treatment is enormous, if our recent experience in Hawaii is any indication.

The Administration has given states the power to Ryanize (block grant) Medicaid, and apparently agreed not to interfere in paltry civil rights issues.

On June 9, Igor Volsky published an article whose title says it all: "Texas Follows in Paul Ryans Footsteps: House passes measure to block grant medicaid, privatize medicare."

Texas would enter a compact that would exempt the state from the federal eligibility and benefit rules in the Medicaid program and from all Medicare rules, allowing lawmakers to “possibly sweep Texas seniors on Medicare into private health insurance policies.”

New Jersey has imposed mandatory managed care on the state's disabled children and families. Two of the four private contractors are Unitedhealthcare and Amerigroup, both of which have been accused in the past of stealing money from children's Medicaid programs.

The Florida legislature accomplished the same thing recently. Wellcare told the SEC in May that new contract opportunities were opening up in Louisiana, Texas and Kentucky, while "Florida and Hawaii are also considering expansions of their Medicaid managed care programs." [This could be news to many people in Hawaii, although a state press conference held on May 10 implied this was coming.]

On June 13, twenty-nine Republican governors published their views on Medicaid reform, demanding greater flexibility in running state Medicaid programs. "States and territories are best able to make decisions about the design of their healthcare systems based on the respective needs, culture and values of each state" is number one on the Republican agenda for Medicaid.

Jonathan Cohn wrote in The New Republic back on April 4 that "Ryan confirmed that he and his fellow Republicans would propose to change Medicaid from an entitlement to a block grant--which, as I noted on Friday, means giving the states a lump sum of money, with much more freedom to spend the money as they choose."

Ryan also stated "private insurers are more efficient than government programs" in operating Medicare and, presumably by extension, Medicaid. One of the strongest proponents of that idea is Unitedhealthcare, which had its wholly owned research company (The Lewin Group) write reports to states informing them of that fact. Unitedhealthcare's Medicaid managed care contracts showed a five percent increase in membership between September 30, 2010 and March 31, 2011, during which same time the company's quarterly Medicaid revenues skyrocketed 23%. The company is not, perhaps, an uninterested observer.

The Center on Budget and Policy Priorities confirms that the hardest hit victims of Ryanized Medicaid will be children, adults as well as children with disabilities, families and senior citizens. The "Ryan Plan would likely eliminate most or all protections for Beneficiaries."

Ryan didn't have to do anything to get that accomplished; the White House has done it for him.

Please sign our petition to get this process stopped before it get codified by law and the Supreme Court.

Administration pandering to big business insurers is like hiring a pedophile as a babysitter

Share |

A proposed Medicaid regulation published in the Federal Register on May 6 takes on new ominous overtones in light of the recent Administration-backed policy brief submitted to the Supreme Court.

Sara Rosenbaum, head of the Health Policy Department at George Washington University, calls the rule "a model of inaction," a purpose of which is "to establish what might charitably be characterized as an information-gathering exercise." Writing in the New England Journal of Medicine, Rosenbaum continues

Even this information-gathering exercise is wanting. The proposed rule exempts Medicaid managed care from review, despite the fact that the access statute protects all beneficiaries, including the 70% who receive their care through managed care plans. Moreover, the proposed rule gives states an inordinately long 5 years to measure access within their residual fee-for-service programs, which overwhelmingly serve the beneficiaries with the most severe physical and mental health conditions.

Why would federal policy exclude seventy percent of Medicaid beneficiaries from any evaluation of how well a state's Medicaid program is conforming to federal law? That would be like taking a census and excluding seventy percent of the population. The proposed rule explains that managed care organizations are already covered under a different section of federal law, and that is sufficient to ensure their compliance.

Managed care contracts are being farmed out across the country to provide services to children, families, the elderly and people with disabilities. These are the people who would be unrepresented in these state evaluations, allowing for-profit corporations to continue to abuse children and steal their federal funding with impunity.

Six federal civil rights investigations, a state-issued "corrective action plan", and extensive reporting to CMS of violations of federal regulations have shown, at least in Hawaii, that managed care Medicaid insurers ignore federal laws with impunity.

Of the six federal civil rights actions, at least four have targeted one company, Unitedhealthcare, which operates in Hawaii as "Evercare." The company reported a 20% increase in quarterly Medicaid/Medicare revenues between September 20, 2010 and March 31, 2011, during which Medicaid/medicare membership only increased 5%. One quarter of the company's policyholders generate 55% of the company's premium revenues.

New Jersey has recently announced they are turning all their Medicaid families over to mandatory "managed care organizations." Two of the four providers are Unitedhealthcare and Amerigroup, both with documented histories of criminal Medicaid fraud investigations.

Wellcare reached a settlement over criminal Medicaid fraud accusations in every state in which they operated in May. They apparently have retained all these contracts, and even got rate increases of up to 3% from four of the states.

The company told the SEC that in exchange for their settlement over Medicaid fraud, the federal government had agreed "to release and refrain from instituting, directing or maintaining any administrative action seeking to exclude the Company from Medicare, Medicaid and other federal healthcare programs." Quite a "get out of jail free" card, but also in keeping with the pattern of Administration pandering to big business health insurers.

CMS, the division of HHS that administers Medicaid and Medicare, is a watchdog with no teeth: they can document violations of federal law but cannot enforce them. The only action CMS can take against a state is to withhold the federal payment share. That was tried in Alaska and backfired, creating more human misery than it alleviated.

Rosenbaum cautions at the end of her article that regardless of what form the potential regulation takes in the end,

it would not even remotely amount to the type of comprehensive federal enforcement scheme that would justify a decision by the U.S. Supreme Court to overturn generations of Constitutional precedent and foreclose access to the courts by millions of beneficiaries and the health care providers who serve them.

Would any parent in their right mind hire a pedophile as a babysitter? Why is President Obama pushing a federal policy "arguing that the courts are closed to private individuals where Medicaid-access litigation is concerned" while surreptitiously shoveling millions of medically vulnerable Americans into programs run by apparently criminal companies?

It is uncannily similar to what has happened here in Hawaii, where turning over the state's Medicaid waiver program to two for-profit corporations produced a 36% rise in the death rate within the first year. State legislation sitting on our governor's desk would deprive everyone on Medicaid of external appeals of medical denials from their health insurer. That legislation has been openly supported by Unitedhealthcare and Wellcare, the latter even admitting in court to having written a sister bill. A Unitedhealthcare attorney moaned on TV that these appeals (almost all of which are finding on behalf of the children) were costing the company too much money.

If all of this comes to pass as federal Medicaid policy, there will be no record of how badly and corruptly corporations are saving money by deciding services based on profit not need.

Please sign our petition. We have to stop this from happening.

Unitedhealth loses Hawaii court appeal

Share |

From Rafael del Castillo:

Something happened on Monday to underscore just how bad SB 1274 really is.

On September 30, 2010, the Panel in Metsch v. Evercare filed its decision. It was one of the few decisions where we knew the Panel got it wrong on the law, so we appealed to the Circuit Court. It was quite simple, really. The Panel rejected the opinion Evercare submitted by an adult epileptologist whose generic report had little to do with our child-petitioner (whom he had never seen and would not have accepted as a patient), and accepted our 2 experts’ opinions. It then turned around and decided against those opinions without grounds for doing so.

Monday, the Hon. Karl K. Sakamoto held at the conclusion of oral argument (the one I returned from DC for a couple of weeks ago, darn it, but was continued to yesterday because Evercare’s attorney could not make it), that it was correct for the Panel to base its decision on our experts, but it could not logically do so and then go against their opinions. He VACATED the September 30 decision and REMANDED for a new hearing.

He could have reversed, but has given Evercare another bite at the apple. There followed the most incredible scene I have seen in all my years of practice: Evercare’s attorney proceeded to lecture the Judge for about 3 minutes on how he was going to be reversed on appeal. Based upon its actions the past few weeks, it is clear Evercare is banking that it has SB1274 in the bag—reversing prior denials so that it won’t be stuck with an order from a panel—and thus it can do as it pleases, including reading the riot act to a judge.

This is the same company that expanded its Medicaid enrollment last year by 5% and its Medicaid revenues by 23% (how does that work??). At least our 80%+ stats are even better now, but that is not the important thing.

The importance of the Metsch case is this: panels occasionally make mistakes in applying our medical necessity criteria. It takes a lot of care and attention to detail, which, despite having a lawyer chair the panel, does not always get properly done. We have even had a couple of cases where the lawyer chairing the panel dissented in a majority opinion. One is on appeal. In the previous one, the court reversed the panel.

Under SB1274, these decisions, which often involve life-and-death matters, will be turned over to some doctor, most likely in another state, and they will be expected to apply Hawaii law properly every time. Right. Sheer genius.

The Insurance Commissioner says there will be an appeal from the IRO decision. He is wrong. With all due respect, the Ins. Commr. is not a litigator. He does not have to explain to a judge that just because the law says the IRO decision is “binding” there is still a right of appeal. I have to do that, so I know just how small the chances are of getting the circuit court and appellate courts to agree with me. I reviewed Hawaii statutes, looking at every one that says a decision is “binding.” If there is an exception for appeals, the law always expressly says so. Why? Because that is the law.

You see, there is no right of appeal from any agency decision unless the court can find an expression of legislative intent that there be an appeal. The doors of the court are only open if the legislature has said so. Besides, who are you going to find to take your appeal? You will have to pay and you could lose.

One more thing: do you really think the health insurers will agree that you have the right to an appeal? They will fight you tooth and nail just as they fought, and spent hundreds of thousands, if not more, to dismantle Hawaii’s external review law, starting back in 2002 when they launched their attack to get ERISA plan members excluded. Bit-by-bit they have torn it down. It is especially ironic that the Administration’s chief argument is that ERISA members are excluded. The health insurers won that battle so let’s concede the whole war to them? That is indefensible public policy. Let’s just all turn our wallets over to them and let them take as much as they want.

By the way, you can strike a blow against the national attack on Medicare and Medicaid:
Reversing long-standing policy which even the Bush Administration supported, the Obama Administration has submitted a brief to the Supreme Court which can only be interpreted as relegating Medicaid beneficiaries to second-class citizen status. The amicus brief filed by Acting Solicitor General Neal K. Katyal on May 26 effectively exempts everyone receiving Medicaid - including children, the elderly and people with disabilities - from the protection of federal law by denying them access to federal courts.

Please read about the issue and consider signing our petition. If this brief is allowed to become policy, it will foreclose actions against state laws that violate Medicaid federal law. Senator Waxman has said the policy expressed in the brief is an abomination.


Also, please sit down today and send another email to the Governor and send a letter to the editor of any newspaper. People are still in the dark about SB1274 and what the Administration is poised to do with our patient protections.

Obama, the Republicans, and the silent war against Medicaid

Share |

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.

The unspoken link between the Republican war on Medicare and the privatization of Medicaid

Share |

There is a strong link between the Republican war on Medicare, and the progressive privatization of Medicaid, and that is the primary beneficiaries of each: the Wall Street darlings of the health insurance industry.

Paul Krugman's piece yesterday in The New York Times describes the Republican vision of Medicare as Vouchercare, where private health insurers are paid a set fee every month per person. It would function similarly to the capitation contracts for Medicaid that these same private health insurers are gobbling up quietly across the country.

About $30 billion in Medicare and Medicaid funding was paid to nine corporate insurance companies in the first quarter of 2011, already well on the way to topping the 2010 total of $113 billion. According to published Medical Loss Ratios, more than $5 billion of that was skimmed off the top as operating profit: the difference between what the company is paid per person per month and what they actually spend on that person. With seven of the nine reporting lowered MLRs for 2010, that quarterly figure is also on the way to besting the 2010 published total of about $19.5 billion.

Unitedhealth is the leader of the pack financially. A five percent increase in Medicaid membership generated a twenty-three percent increase in Medicaid revenues just in the past six months.

Meanwhile, criminal fraud investigations have found several of these companies - Amerigroup, Humana, Wellcare and Unitedhealth in particular - artificially inflating MLRs. Florida is asking for millions of dollars to be returned, just from investigations that are already four or five years old. Wellcare, whose Medicaid/Medicare income grew nine percent in 1Q 2011 over the previous year, submitted a settlement agreement with nine states over Medicaid fraud in late April. A few days later they scooped up a new contract with one of the nine, Georgia.

The selling of Medicaid and Medicare to the private sector becomes particularly frightening in light of a recent amicus brief the Administration has submitted to the Supreme Court. Barring Medicaid beneficiaries access to the protections of federal civil rights laws can only produce an exponential growth in criminal Medicaid and Medicare fraud.

Why Medicaid is creating demonic glee on Wall Street

Share |

The Obama Administration has told the Supreme Court that Medicaid turns beneficiaries into second-class citizens. The amicus brief filed by Acting Solicitor General Neal K. Katyal on May 26 effectively exempts everyone receiving Medicaid - including children, the elderly and people with disabilities - from the protection of federal law.

The Affordable Care Act has already been driving a double-digit boost to the privatization of Medicaid and Medicare, by spawning new contracts going out to bid across the country. Katyal's brief will allow corporate insurers, many already with reputations for criminal Medicaid fraud, to continue receiving federal and state funding with no federal controls over how, or even if, it is spent.

As official Administration policy, the brief also seems to grant these health insurers immunity from anyone appealing their decisions successfully ever again. It may also raise interesting questions about the content of meetings between the President and some of these same health insurance companies that took place prior to passage of the ACA.

Corporations are already reporting to the SEC with demonic glee the profits to be reaped by refusing to spend the money they get paid every month for state Medicaid and federal Medicare contracts. First quarter 2011 Medicaid/Medicare income to Wall Street-driven private insurers was about $30 billion, already well on the way to surpassing the 2010 total of $114 billion. Companies like UnitedHealth have reported federal revenue increases of over twenty percent just in the past six months.

Many of the companies gobbling up these new state and federal contracts are already developing unsavory reputations for criminal Medicaid fraud. Private insurers like Amerigroup, Unitedhealth, Wellcare and Humana have all either been charged with criminal fraud, or are fighting/have already reached repayment agreements to avoid criminal prosecution for stealing state Medicaid funds.

If this amicus brief is allowed to stand, civil rights earned over the past sixty years will be decimated. These companies are already creating a corporate criminal culture out of Medicaid and Medicare, which can only expand if they are allowed to violate federal laws with impunity.

This is what is already happening in states like Hawaii, where at least six different federal civil rights investigations have been initiated in the past fifteen months. The investigations have all been on behalf of medically fragile children and target one of two for-profit health insurance companies, Unitedhealth or Wellcare. Together, the two collect about seventy percent of the state's annual $1.75 billion Medicaid budget, in exchange for providing Medicaid services to the elderly, blind and children as well as adults with disabilities.

Florida's legislature recently voted to force its entire Medicaid population into managed care programs operated by for-profit insurers. Hawaii's former Republican governor Linda Lingle started that process locally, and recent announcements by state officials open the door for greater for-profit corporate intrusion into Medicaid and further violations of federal civil and legal rights.

Legislation is currently sitting on the desk of Hawaii Governor Neil Abercrombie that would exempt the state's entire Medicaid population from equal access to state appeals procedures. S.B. 1274 has been heavily lobbied for by the state's Medicaid insurers, who claim they are spending too much money defending their medical decisions in current state insurance division appeals.

These medical decisions they are defending are some of the same ones targeted by the federal civil rights investigations, two of which have been opened just in the past month. Two cases that were closed last summer both found in favor of the medically fragile children who filed the appeals.


More on the amicus brief itself

The New York Times reported on May 28 that Representative Henry A. Waxman of California called the brief “wrong on the law and bad policy.”

I am bitterly disappointed that President Obama would accept the position of the acting solicitor general to file a brief that is contrary to the decades-long practice of giving Medicaid beneficiaries and providers the ability to turn to the courts to enforce their rights under federal law,” Mr. Waxman said. He said that he and other Democratic lawmakers planned to file a brief opposing the administration’s view.

The amicus brief was apparently the opposite of that requested in a letter by twelve national organizations on March 21. The letter stated that "the federal government has an interest in assuring that ... federal laws are not undermined by conflicting state laws." The letter went on to say that the right of Medicaid beneficiaries and providers "to vindicate federal Medicaid requirements further[s] the federal government's interest in ensuring that the Medicaid program provides meaningful benefits to Medicaid recipients."

On June 3 by the National Senior Citizens Law Center released an evaluation of the brief, saying it "will eliminate what is often the only practical corrective mechanism for ensuring that federal Medicaid funds actually provide the treatments and services prescribed by Congress."

The Acting Solicitor General’s argument arbitrarily carves safety net laws out from the protections of the Constitution’s supremacy clause. The brief charts a path for the Supreme Court to permit federal courts to continue routinely 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. This result hardly fits the administration’s often-proclaimed goal of promoting courts responsive to the needs of ordinary people rather than powerful interests.

If you think this amicus brief is a bad idea, you can let President Obama know by going to the White House website and emailing a comment. Your message can be as simple as:

Dear President Obama:

Please do not allow Medicaid beneficiaries to be made into second-class US citizens. The amicus brief filed on May 26 by the office of the Solicitor General needs to be withdrawn.

Hawaii's role in federal fraud settlement reveals possible double-dealing behind SB 1274

Share |

On April 26, 2011, Hawaii was one of nine states signing a settlement agreement between Wellcare Health Plans and the Office of Inspector General of DHHS, Civil Divisions of the US Attorney's office, and every state where Wellcare currently does business.

According to the company's first quarter SEC filing, Wellcare gets their federal slate wiped clean in exchange for the $137 million settlement.

The United States and the Settling States agree to release us from any civil or administrative monetary claim under the False Claims Act and certain other legal theories for certain conduct that was at issue in their inquiries and the qui tam complaints. Likewise, in consideration of the obligations in the Federal Settlement Agreement and the Corporate Integrity Agreement (as described below under United States Department of Health and Human Services), OIG-HHS agrees to release and refrain from instituting, directing or maintaining any administrative action seeking to exclude us from Medicare, Medicaid and other federal health care programs.

When did anyone plan on telling the people in Hawaii that their Medicaid health insurer, the same one that benefits from segregating everyone on Medicaid into a guinea pig herd with no access to outside second opinions, is paying the state millions in exchange for not being convicted of criminal Medicaid fraud?

In practical terms, this means that Hawaii Governor Abercrombie has been negotiating silently for the past several months for Hawaii's share of a settlement deriving from accusations of criminal Medicaid fraud. SB 1274 came out of his office unexpectedly in January. At one time, Wellcare lawyers admitted to state legislators they had personally drafted a silent companion bill.

How much of a fraud settlement is Hawaii getting? An article out of Florida expects that state to receive $23 million.

While Wellcare reported their percentage rate increases in Florida and Georgia, they did not disclose the figure for Hawaii and New York premium increases.

The nine states that settled with Wellcare over criminal Medicaid fraud allegations are Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Missouri, New York and Ohio. Wellcare currently operates Medicaid programs in all but two of those states, Connecticut and Indiana.

Also announced in the quarterly report,

On May 4, 2011, the Federal Court entered an order (the “Approval Order”) approving the Stipulation Agreement. As required by the Stipulation Agreement, in March 2011 the Company paid $52,500 into an escrow account for the benefit of the class. The Stipulation Agreement also provides, among other things, that the Company will make an additional cash payment to the class of $35,000 by July 31, 2011 (the “July 2011 Payment”). It also requires, among other things, that the Company issue to the class tradable unsecured subordinated notes having an aggregate face value of $112,500, with a fixed coupon of 6% and a maturity date of December 31, 2016. Additionally, the Company will be required to pay to the class an additional $25,000 if the Company experiences a change in control at a share price of $30 or more within three years of the date of the Stipulation Agreement.

Meanwhile, Wellcare's premium income in the first quarter (almost $1.5 billion, all of it federal/state Medicaid or Medicare funding) was up nine percent over the first quarter of 2010.

Privatizing Medicaid and Medicare is an attack on the middle class

Share |

There seems to be a general assumption that when people talk about cuts to Medicaid and Medicare, it has to do with poor people. In fact, the cuts affect middle class working families the hardest, by targeting anyone who isn't rich enough to pay for keeping a medically needy child or grandparent at home and out of an institution.

It is normal for about two-thirds of every state's Medicaid budget to go, not for people who qualify from poverty or unemployment, but to the medical care of children and adults with disabilities, whether from birth, accident, age or illness. These are middle class American families who make too much money to qualify for Medicaid; they are trying to care at home for a child, a grandmother, a sibling who qualifies for Medicaid on the basis of disability through what are called "waiver programs" (because family income/assets are "waived" in calculating eligibility).

That sixty-six to seventy percent of every state's Medicaid budget is what is up for grabs when companies like Wellcare gloat in their year-end reports that forty states are considering turning their ABD (aged, blind and disabled) population over to private contractors.

In Florida, for instance, the ABD population could be expected to account for somewhere between $12 and $14 billion, considering the $20 billion annual budget. Private contracts for ABD services were handed out to companies like Amerigroup last year. The newly elected governor of Florida, who vowed after the election to parcel out the state's entire Medicaid population to private contractors, recently announced he was filling a $174 million budget deficit by decreasing the rates paid to caregivers by 15%. Lowering reimbursement rates helps insurance companies decrease their Medical Loss Ratio thereby increasing profits. The family can either take another job to try to supplement the medical services lost, or put their family member in a hospital or institution. Again, it's the insurance company holding the state Medicaid contract for the ABD population and/or long term care who makes out.

Meanwhile Florida's state legislature is trying to rewrite Medicaid. One proposal would change the name of the Medically Needy program to the Medicaid Nonpoverty Medical Subsidy, while eliminating coverage of hospitals and medications.

What are adults with catastrophic illnesses supposed to do without medications?

Splitting up state Medicaid populations into "risk-based health maintenance organizations" will affect people who qualify because of poverty or unemployment, yes. But with two-thirds of any state's budget spent on the much smaller aged, blind and disabled population, the biggest impact is where the companies get the biggest bang for the buck saved. Capitation contracts are hard to come by, but I published Hawaii's a long time ago, verifying that individual budgets can go as high as $29,000 a month. This is not money spent on somebody because they are poor, it is money allocated to the home nursing care for someone who is so disabled they cannot live on their own.

Wasting up to twenty percent of our federal and state budgets for Medicaid and Medicare on CEO salaries and corporate profits is hurting millions of average middle class Americans whose only fault is wanting to keep their families, including their most vulnerable members, together.

Please visit this petition to put a stop to Wall Street's pillaging of Medicaid and Medicare. Every signature sends an email to Deputy Attorney General for Civil Rights Thomas Perez, Secretary Duncan of Education and Secretary Sebelius of DHHS to stop this attack on our civil and patient rights.

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

Share |

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.

Tracking Wall Street's takeover of Medicaid and Medicare

Share |

I've been tracking nine companies expansion into Medicaid and Medicare since 2009, and some as far back as June 2008. The information is taken from their quarterly and annual SEC filings.

The nine companies tracked were Aetna, Amerigroup, Centene, Coventry, Humana, Molina, Wellcare, Wellpoint and UnitedHealth Group. Federal Medicare and State Medicaid contract business generated more than $111 billion in 2010 premium revenues to these nine companies.

A health Insurance company's standing on Wall Street and with its stockholders is based on keeping an important business indicator as low as possible. Called the Medical Loss Ratio (MLR), it stands for the percentage of each monthly insurance premium received that is spent on actual medical costs. These nine companies reported MLRs between 79.4% (Coventry) and 87.5% (Aetna). That means they saved shareholders almost $20 billion in operating profit from Medicaid and Medicare premiums.

State and federal contracts pay the companies based on intricate risk levels calculated for each individual "policyholder." They may be paid $5,000 a month for a senior citizen, $12,000 a month for my daughter, or as much as $29,000 a month for someone meeting the highest risk criteria.

When a state-operated Medicaid program that pays actual bills (called fee for service) is suddenly replaced by for-profit "managed care" plans, each "policyholder's" individual budget has to be cut by that 13% to 20% margin that now goes straight to company bank accounts.

Most Medicaid contracts either do not stipulate an MLR, or when they do, companies can easily defraud Medicaid by pumping expenses. The Affordable Care Act was supposed to be imposing an 85% MLR on Medicare and 80% or 85% on employer-paid policies. An Oppenheimer analyst calculated six companies alone (UnitedHealth, Aetna, Cigna, Coventry, Wellpoint and Humana) would have owed about $1.9 billion in rebates just to commercial and individual policyholders.

The Oppenheimer study looked at state insurance records as well as SEC filings. They found that average MLRs differed widely across the country: two different Wellpoint subsidiaries in Colorado spent only 33.2 percent and 53 percent respectively on actual patient care. A UnitedHealth program had an average MLR of about 63 percent.

A Florida investigation into a single Medicaid contract that actually stipulated an 80% MLR found all eight Medicaid HMO providers (including Wellcare, Amerigroup, and Humana) owed the state refunds.

The lower the MLR, the more medical services are cut.

Back in January, the Children's Disability Rights Education Association launched two surveys to gather information on how well states are following federal Medicaid regulations specifically directed to protecting children with disabilities. While the initial survey sample is small (41), its unanimity is glaring: all 41 respondents (forty of them family and caregivers), coming from 19 states, have been the victim of one illegal Medicaid action or another.

This is what happens when profit-based companies take over Medicaid contracts and have to slash services to please stockholders and Wall Street.

CDREA's article on the survey details the impact on family life that these anonymous financial decisions can have.

If you believe that life and death medical decisions for medically fragile children, the elderly, and adults with disabilities should not be made by for-profit health insurance companies, please sign our petition.

If you believe federal and state tax dollars destined to provide care for the elderly, and children as well as adults with disabilities should not be diverted to private corporate CEO salaries and profits, please sign our petition.

Tracking the corporate penetration of Medicaid 1997 - 2010

I've put together as a collection the documentation I used to track corporate expansion into Medicaid.

There are SEC filings for Amerigroup, Centene, Molina, Wellcare, Wellpoint and UnitedHealth between June 2008 and September 2010. These filings are also interested to read in terms of their reporting on ongoing criminal and/or civil litigation.

Trade press articles lauding the profitability of Medicaid go back to 1997. Reports have been coming out fairly regularly since March 2009 on the great growth potential of the sector.

The Medicaid Money Machine: Is it creating a corporate criminal culture?

The link between well-publicized Medicaid cuts, state budget deficits, criminal Medicaid fraud and the corporate penetration of Medicaid (and Medicare) has gone largely unnoticed. There are further correlations between corporate expansion into Medicaid, and November’s congressional races where Republicans ousted sitting Democrats with the help of more than $54 million in “outside” contributions.  Eighty-five percent of those funds were spent in states with corporate Medicaid operations owned by one of six companies.

Forty-one of these turnovers (or 61%) were in states with pending or recent federal investigations into either criminal Medicaid fraud or violations of the civil right of people with disabilities not to be segregated into institutions.

Eight companies in Florida were recently ordered to pay the state back $6.8 million in Medicaid funds.  As best I can tell, they all retained their contracts.  One Florida-based company, Wellcare, paid Florida $80 million in May 2009 for Medicaid fraud and this summer tried to settle a criminal fraud whistleblower suit in Florida for another $137 million.  Wellcare’s third quarter 2010 Medicaid revenues were up five percent even though Medicaid membership was down one percent.

Florida’s new Republican governor was the co-founder and CEO of a healthcare company that pled guilty to criminal fraud charges during his tenure.  This still holds a national record for the largest Medicare settlement, paying more than $1.7 billion in fines, damages and penalties.

Is there a growing criminal corporate culture where defrauding state and Federal governments isn’t just accepted, it’s rewarded with more contracts?

If there is, it’s a culture that threatens to tear apart families at their very core, taking children from their parents, and grandparents from their children.

Who is buying Medicaid

As of September 30, 2010, more than eleven million people on Medicaid were receiving their medical care through state contracts with just six publicly traded corporations. In the previous fifteen months, corporate penetration into Medicaid for “the six” was up eleven percent while Medicaid revenue shot up twenty percent.

UnitedHealth Group, Amerigroup, Wellpoint, Wellcare, Centene and Molina (“the six”) together control almost twenty percent of the national Medicaid market. The six received a total of $19.6 billion in the third quarter of 2010 from states and the Federal government for policyholders on Medicaid or Medicare.

Market-share leader UnitedHealth (with 3.235 million Medicaid policyholders) experienced a 20% increase in Medicaid enrollment between June 30, 2009 and September 30, 2010, at the same time that commercial membership was stagnant. During the same period, the company’s gross Medicaid revenue increased 35%, and total net earnings were up 49%.

Amerigroup, 99% of whose membership is Medicaid, commented in their 2009 SEC filing that just a single state contract (with Texas) “represented approximately 25.0% of premium revenues and a significantly higher percentage of our net income.”

Wellcare’s small group contract in Hawaii represents less than two percent of the company’s total Medicaid membership but generated 18% of their Medicaid revenues, as of June 30, 2009. New rate increases went into effect in July 1 2010 per the company third quarter 2010 SEC filing, which the company credited for having “improved the stability of the program.”

UnitedHealth’s Hawaii program represents less than one percent of the corporation’s Medicaid enrollees but generates almost six percent of its Medicaid revenue.

The Medicaid market is obviously lucrative.  In order to understand why it is so profitable we have to understand the new Medicaid math.

The New Medicaid Math

Back in the old days, before Medicaid became privately owned, states paid the bills for people enrolled in Medicaid as they came in.  The state Medicaid apparatus created lots of local jobs, but the point was that that bills paid were actual bills incurred.

That is not how it works now.

Over the past years, the insurance companies have sold the states on the idea that hiring them will save the states money in both the long and short term.  They will provide managed, coordinated care, for which the state will pay them on an individually calculated flat per capita rate.

These “per person per month” rates can range anywhere from a few hundred dollars to as high as $30,000 per person per month (for a medically fragile child).  They are called “capitation payments” since they are based per capita. The insurance company receives the cumulative total of all those individually allocated amounts once a month.  It comes as a check from the state, but at least two-thirds of that money represents Federal stimulus funds that were given to the state to pay for increased Medicaid costs.

Medicare capitation checks come directly from the Federal government (CMS) and can range $3,000 to $5,000 per month per person easily.

The issue that makes these capitation payments a political hot potato is how much of each individually calculated fee paid by the state actually needs to be spent on that particular policyholder’s medical care.

The Medical Loss Ratio

The Medical Loss Ratio, also known as the Medical Benefits Ratio or the Health Benefits Ratio, is the percent of the monthly insurance premium that is actually spent on health benefits for the policyholder.  Companies report their MLRs to the SEC as a consolidated company-wide average.

Part of the Affordable Care Act was a requirement that MLRs be calculated per individual policyholder. If a certain limit is not met, the company would have to reimburse the policyholder the difference.

In late November DHHS released potential regulations to implement minimum MLRs of 80% for small commercial groups, and 85% for large commercial groups.  Last May, an Oppenheimer analyst had already calculated that if these regulations had been in effect in 2009, UnitedHealth alone would have owed commercial policyholders $867 million in rebates.

The Oppenheimer study looked at state insurance records as well as SEC filings.   They found that average MLRs differed widely across the country:  two different Wellpoint subsidiaries in Colorado spent only 33.2 percent and 53 percent respectively on actual patient care.  A UnitedHealth program had an average MLR of about 63 percent.

In July 2010, it was reported that UnitedHealth, Wellpoint, Aetna, Cigna and Humana were talking about bankrolling upcoming elections to the tune of about $20 million. 

Overall, the insurers are expected to focus on swaying about two dozen close House contests, says one source. The insurers’ goal will be to help elect members who can be allies in the all important regulatory writing process now underway to implement key parts of the health care legislation that was signed into law earlier this year.

The issue of the MLR, whether those 80 and 85% figures will hold or slide, and what the insurance companies will be allowed to count in calculating those figures, is part of what they were paying to influence.

It Gets Worse

All the hubbub right now over the MLR is focused on commercial policies.  States can set their own MLRs in Medicaid service contracts, and federal regulators assume that the states are monitoring their corporate partners for compliance.  This may be premature.

For instance, Florida required Medicaid contractors for a single behavioral health program to have an MLR of 80%.  Audits found the highest MLR at any of the eight contractors (including Amerigroup and Humana) was 66% at Humana.

Reading the whistleblower report filed by a former Wellcare employee helps to connect the dots between capitation payments, MLRs and criminal Medicaid fraud.

Sean Hellein’s False Claims Act complaint was filed against eight companies, including Wellcare, UnitedHealth, Amerigroup and Humana. It details how the companies “cooperate with each other by consciously making the same false claims” to state Medicaid offices.  Hellein told a reporter that “each uses a different technique for hiding the overcharges to make it harder for the state to catch on”.

Hellein’s complaint was also filed in Illinois, Indiana, Louisiana, New York, Georgia and Hawaii, where, according to Hellein, similar criminal Medicaid fraud schemes are being perpetrated by the named companies.  When Wellcare floated the idea of the $137 million settlement, Hellein said the actual damages were closer to $400-600 million.

Controlling Congress is going to help keep that issue under wraps as well.

Who are the victims

In 2009, seventy-two percent of people enrolled in Medicaid were there because they had special health needs due either to age or disability.  Forty-eight percent alone, more than 31 million, were children.  Just under fifteen percent (9.5 million) were on Medicaid because their disabilities are too severe to enable them to care for themselves.

The growing trend over the past year has been for states to “carve out” Medicaid coverage for their “aged, blind and disabled” (ABD) population, and put it out to bid for private contractors.  As far back as May 2009 at least forty states were considering moving their ABD populations into contracts to be auctioned off to the lowest bidders.

These are the juiciest of all the Medicaid contracts, where capitation rates can range as high as $30,000 a month for a medically fragile child.  The child’s only option is to be institutionalized in a hospital, which will likely cost the state closer to $50,000 a month.  A good percentage of that $30,000 every month goes to creating local jobs for the personal care assistants, CNAs and skilled nurses who care for the child so she can remain at home with her family.

The problem is that the child’s nursing cost $30,000 a month before the contract was turned into a profit stream.  In order for the company to maintain its standard 80%-odd MLR, it must cut the child’s services by twenty percent.

In plain English:  If a state has a Medicaid pie of $1 billion, and they turn that pie over to any one of the six companies I’ve focused on, the pie is still the same size.  It’s just that now at least seventeen percent has been subtracted to cover corporate profits.

I mentioned earlier that the six companies received $19.6 billion between July and September 2010 from state governments and CMS to cover Medicaid and Medicare policyholders.

Reporting average MLRs ranging from 80.1 % to 86.9% translates into at least $3.3 billion skimmed off the top as operating profit in that three-month period.

That $1.1 billion a month came from cutting services.  (Cutting services also means cutting local jobs, but I have not found good figures on that yet).

Anything the company may skim by reporting false expenditures is just the frosting on the cake.

Why this is tearing families apart at their core

One of the new Republican congressmen from Florida recently told NPR that “we can't focus on building the bureaucratic nanny state if we're going to pull out of this debt and deficit.”  He went on to recommend the “free market, free enterprise solutions that we can look to reform our health care system.”

Florida’s “free market, free enterprise solutions” to Medicaid are apparently riddled with criminal fraud, and have been for years.

As for the concept that we are a “nanny state”, as the parent of a child with severe disabilities I am highly incensed.

We are talking a “nanny state” where sick children, disabled children of all ages and the elderly are given the medical assistance they need to be able to live at home with their families.  Only the extreme rich could ever hope to pay for these things themselves, and the alternative is to rip people from their families and herd them into institutions.  There the government would pay even more for their upkeep, but at least we would not have a “nanny state.”

Hawaii’s ABD population was turned over to a “free enterprise” solution in February 2009.  The death rate increased 35% in the first year after UnitedHealth and Wellcare replaced our “nanny state.”

In fact, Hawaii’s Medicaid program has been under federal criminal investigation in one form or another since the fall of 2009.  The Department of Health recently admitted to Medicaid fraud in their Developmental Disability Division.  Rumor has it that Hawaii Medicaid bureaucrats actually ordained they were above federal law last year, so they wouldn’t have to keep track of complaints filed against UnitedHealth and Wellcare.

Hawaii’s former Director of the Department of Human Services, Lillian Koller, was instrumental in helping former Republican Governor Linda Lingle fashion Hawaii’s free enterprise solution to the nanny state.  She has now gone to work for South Carolina’s new Republican governor.  South Carolina recently auctioned off its Medicaid disability and children’s health contracts to Centene.

South Carolina is one of only two states (the other being Tennessee) that already had 100% of its Medicaid population enrolled in capitated payment type programs.

And so the culture of criminal Medicaid fraud spreads insidiously, with no one paying real attention.  As the House tries to vote away healthcare reform next week, we can watch as any form of control over this rampant corporate greed at any cost is legislated away.

Alert for Hawaii Evercare members

Evercare in Hawaii welcomed the new year for some Hawaii families by giving them only four days notice that home nursing services were being cut.

The victims are the families of our state's most vulnerable population: children and adults who would otherwise be locked up in institutions due to their disabilities, whether from birth, age or accident.

According to the evidence I've seen, Evercare dated the letters December 27 (Monday), and families received the letters on December 28 (Tuesday). Service providers also received notice on December 28, including the schedule showing that cuts would begin to go into effect on January 1.

Evercare told the families they could call or write (to Tampa, Florida) to appeal the decision. In at least one case I am aware of, the January 1 service cuts were implemented even though a family had telephoned in their appeal and specifically asked for services to remain in place. (That was one requirement of several imposed by the letter: that if you didn't ask specifically for your existing services to remain in place during your appeal, they wouldn't.)

The Evercare letter stated that existing services would only remain in place if five conditions were met, one of which was the appeal was filed within ten calendar days of the date on the letter (December 27). Unfortunately, that conflicts with the thirty day time period recipients were given to file an appeal,

Families who have not yet filed appeals need to do so as quickly as possible. I would recommend emailing or faxing them to your Evercare service provider if possible, in addition to mailing it to Florida. You need to be able to have a record that the company received your appeal.

If cuts have already gone into effect, you can ask for an expedited appeal on the basis that your loved one's health and safety at home are being endangered.

Once you have your appeal in place, you might want to think about enlisting your doctor's help in getting the services back, or even getting them increased if that is what is medically necessary.

I wrote an article on my other blog about letters of medical necessity and how to file them. Here is Evercare's prior authorization request form that the doctor must fill out, and fax, with the letter, to the fax number on the top.

Hawaii Medicaid joins in Evercare's "Blame the Victim" game

Back on November 29, I published a story about a threatening letter I had received from the head of Unitedhealth Group's Hawaii operation.  In my response I had pointed out that I had been following all their procedures, it was Unitedhealth that was violating them, and in so doing, harming my daughter Hannah.

On December 6, Ken Fink, Hawaii State Medicaid Director sent me his own version of the UnitedHealth letter.  Fink, whose salary is rumored to be more than twice the $113,000 received by his predecessor, again makes it sound as if the victim is to blame.

I responded to Fink's letter on December 6. Here is the text of my letter:

This email is in response to your letter dated December 6, 2010 (attached) which was received by me on December 8, 2010.

The issue is:
When a prior authorization by my daughter's physician/provider is submitted which follows all prescribed Evercare protocols, Evercare has failed to give me proper written documentation regarding the possible denials which would include information of any adverse action and my rights to appeal, thereby violating Federal law.

According to the email I received from ... CMS, DHS MQD was going to research and resolve the issue, not simply re-state Evercare's response to me. Can someone please follow Federal law and state contract and please help me and my child? Will someone please step up? I am giving you all the academic reasons as well as the Federal laws which Evercare is violating along with the statues the State is violating for lack of oversight of the MCO (Evercare).  As a mother and caregiver of a totally dependent disabled child, all I am asking is that Evercare follows the law and do their job for which Evercare receives high compensation (tax payors money).

Your letter addresses old issues and regurgitates David Heywoods' (Evercare) prior letter in content; these issues are moot as all of us (me as her mom, the therapists and doctors) followed the required processes in filling out the Prior Authorization request forms and correctly submitted the needed documentation to support the requests.

What I am claiming is the stated issue and Evercare's continuous violation in which DHS-MEDQUEST has already cited Evercare which resulted in the corrective action plan for complaints, grievances, and appeals (in which sanctions were imposed). Evercare is not following BBA requirements regarding Complaints/Grievances/ and Appeals processes.

Evercare is claiming that the member's family or MD/provider is not following required Evercare processes. This is not a true statement and is not the issue. Evercare never brought this up during all the months since the request for prior authorization was submitted in May 2010, and in fact, they contradict themselves when they verbally admitted to receiving the request and approved less than what prescribed. So the prior authorization was successfully submitted by Hannah's physician to Evercare.

I am claiming that when a proper prior authorization (PA) for services is submitted to Evercare, a phone call (nothing in writing) is communicated to the provider that the requested services are denied (not approved) and/or that a lesser amount of service is approved (deviates from theprescription). NOTHING IS PUT INTO WRITING TO NOTIFY ME OR HANNAH'S PROVIDER OF THE ADVERSE ACTION and to inform me of our rights to appeal.

How it should work is that when my daughter's physician/provider submits the documentation required for the request of service/ medication/DME and the health plan denies and/or deviates from the request (less than what is requested) it goes into a complaints, grievance, and appeal mode as required and by failing to follow this process, the health plan is in direct violation of Federal statute, B.B.A. sections.
438.424: Grievance System
. 438.400: Statutory basis and definitions;
. 438.402: General requirements;
. 438.404: Notice of action (including timeframes of notice as
contained in Sections: 438.210(d)(1); 431.211; 431.213; 431.214);
. 438.406: Handling of grievances and appeals;
. 438.408: Resolution and notification: Grievances and appeals;
. 438.410: Expedited resolution of appeals
. 438.414: Information about the grievance system to providers and
subcontractors (important related to high number of non-participating
providers who do not have formal contracts with Evercare--therefore no
requirement to meet Federal BBA requirements/ no quality oversight from
MQD/CMS or EQRO under BBA 438. Subpart E)
. 438.416: Record-keeping and reporting requirements
. 438.420: Continuation of benefits while the MCO or PIHP appeal and
the State fair hearing are pending
. 438.424: Effectuation of reversed appeal resolutions
As further consequences of direct violation of the C/G/A processes

The current situation is in regards to a PA [Prior Authorization request form] that was successfully submitted [in May 2010] ... This [lack of any written notice] constitutes an adverse action by BBA definitions as well as violations regarding lack of written notice with appeal rights, specifically BBA reg Subpart F, and member's rights violations: Subpart C.
...

I am cc'ing CMS on this matter as there is still no process for Complaints, Grievances, and Appeals and I am following the processes as set forth by the BBA. I am following the PA processes of Evercare, but Evercare is not documenting in writing the denial of my prescribed services, medications, DME (nothing in writing setting forth the denial or cuts in services) and nothing is in writing by Evercare setting forth our rights to appeal their decision.

In my opinion, Evercare's letter is considered retaliatory and your response and lack of oversight of Evercare has caused continuous harm to my daughter. In fact, in the first visit by Evercare and their attorney to my home on Kauai, Evercare's attorney made it very clear that Evercare needed to put all denials and cuts in services and supplies in writing to me and give me my rights to appeal (process).  These instructions are not happening and therefore, Evercare's failure is a clear violation of Federal law. In fact, it was agreed at that meeting that all communications in the future, even with Hannah's field supervisor, would be in writing.

I want to reiterate that these Federal laws (BBA 432) and mandated oversight of these MCOs is intended to provide required mechanisms to protect patient rights and to insure that problems are tracked, trended and resolved in a nationally accepted mode of quality standards. If there are trends identified related to continuous violations, then a corrective action is taken to ensure that no member is hurt, especially the aged, blind, and disabled; hence the purpose of the law. With documentation, there would be a mechanism to insure that no harm comes to the client and that added anxiety to the member and family and caregivers is decreased.

Again the issue is:
Even though a prior authorization has been submitted by my daughter's physician/provider which follows all of Evercare's prescribed protocols for submitting a PA properly, Evercare has twice (again) failed to give me proper documentation regarding the denials or informing me of any adverse action in writing with my rights to appeal, thereby violating Federal laws (BBA).

As of today, there have still been no official Notices of Action sent out by UnitedHealth for the items brought to the attention of the head of Hawaii's Medicaid program almost two weeks ago.

It makes me wonder, if Hawaii Medicaid is so cavalier about Evercare's constant violations of federal regulations, what else are they standing back and ignoring?  The thirty-six percent increase in the death rate of our local aged and disabled population?  Threats to tear severely disabled children away from their families and throw them into institutions if the families don't back down on their requests for services?

Over 41,000 of our state's most vulnerable citizens, our elderly and children as well as adults with disabilities, are enrolled with UnitedHealth and Wellcare.  The state pays the two companies over $100 million every month without keeping track of how much of it is actually spent on medical services.

Governor Abercrombie announced the state has a $410 million shortfall for fiscal year 2012.  It seems to me that turning our Medicaid system back into one that only pays for actual services delivered could knock what, twenty percent, off that total?  Then the state could hire back the three-hundred odd people at DHS whose jobs were transferred to employees of UnitedHealth and Wellcare.  Then our federal funding could actually to to helping the people of Hawaii, rather than just lining the pockets of two out-of-state for-profit corporations.