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

Share |

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

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

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

They have taken away from us the right of choice.

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

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

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

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

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

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

Obama's $1 trillion handout to big business insurers

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. 

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.