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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Simon Lazarus of the National Senior Center Law Center wrote:

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

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

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

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

Please sign our petition to stop this enslavement.

Wall Street HMOs use fraud, government handouts to pad profits, outgrowing S&P 500 by 25%

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After the S&P tumbled yesterday to a year-to-date loss of 10.3%, for-profit HMOs like Unitedhealth, Wellcare, Aetna and Humana remained showing a 13.7 -19.9% gain since January 1. The economy-immune growth of these companies is entirely fueled by government handouts currently running about $11 billion per month.

We have a tendency to talk about Medicaid and Medicare as if budgets and people are the same. We talk about the people who will be affected by Medicaid or Medicare cuts, under the apparent assumption that the budgets are actually paid out to the people. That is what happens in every other country that runs a government health system. It is not, however, what is happening here in the US where our government public health programs - Medicaid and Medicare - are increasingly owned by big business HMOs.

Ten for-profit HMOs control the private Medicaid/Medicare market. Revenues from commercial (employer) accounts over the past three years have been stagnant at best, but Medicaid and Medicare revenues are accounting for 85% of the $2.7 billion per month increase in total premiums received.

The problem is, as the private HMO industry has grown, so has, apparently, criminal Medicaid fraud.

Unitedhealth Group, Wellcare, Amerigroup, and a fourth HMO now merged into Centene (Vista) were all found to be stealing taxpayer money in Florida that was destined for children's health care. According to the Associated Press, the companies also participated in the state's pilot privatized Medicaid HMO plan which, in spite of numerous consumer complaints, has now been expanded statewide.

It was possible to catch this criminal fraud because this specific contract between Florida and the HMOs required 85% of the taxpayer funds received to be spent on healthcare. (Few state contracts require minimum spending amounts from Medicaid contracts).

New bills were signed into Florida law earlier this year by Governor Rick Scott requiring everyone in Medicaid to join a for-profit HMO. The bills do not stipulate any minimum spending requirement, although they do require the HMOs to refund the state anything they make in profit over 5%.

Our experiences in Hawaii with Unitedhealth and Wellcare indicate the likelihood of Florida receiving any rebated profits is laughable. This type of fraud seems to require some sort of collusion between state Medicaid bureaucrats and the corporations, for the former to turn a blind eye to the latter's illegal actions. The potential for fraud is enhanced because there are no viable sanctions for violating federal Medicaid law. (The only sanction is for the feds to withhold all Medicaid payments to a state; CMS tried that in Alaska a couple of years ago and it was considered a debacle).

Unitedhealth testified in Hawaii federal court last year they were losing money on their Medicaid contract with the state. Rumors on the street are that the company is still crying crocodile tears over its purported losses, presumably laughing all the way to bank with (pre-tax) net earnings reaching 8.1% of premium revenue.

Personally, I find it ironic that Florida has accused Unitedhealth of stealing more than $2 million from children by forging speech therapy records, when the company has steadfastly refused to provide my daughter with such therapy since September 2009.

United and Wellcare also seem to have found a way, at least in Hawaii, to ensure audits are nearly impossible. Most of their payments from the state of Hawaii were made outside of the state's auditable medical IT software system.

Recent moves by the White House are increasing the power these HMOs have over people's lives. A "friend of the court" brief submitted by the Department of Justice to the Supreme Court recommends exempting Medicaid recipients from the sovereignty of the "law of the land." A new Medicaid access rule published in the Federal Register essentially guarantees a federal "hands off" policy towards state Medicaid programs and the corporate HMOs with whom they contract.

The end result of all this? Our government is currently paying about $11 billion every month to for-profit HMOs to handle Medicaid and Medicare, with a promise not to let nasty federal regulations interfere with corporate performance. If the HMOs want to skim twenty-to-fifty percent off the top towards corporate profits, no problem. If children and adults with disabilities, who account for more than two-thirds of national Medicaid expenditures, get sicker, have to be institutionalized or even die, no problem.

It's hard to imagine the Navy paying for a battleship and being satisfied with only half of one.

The latest round of SEC filings indicate another 1.7 million people will be herded into for-profit Medicaid HMOs in the next few months. Hawaii is getting ready to put its entire Medicaid program (220,000) up for bid, with both Wellcare and United expected to be bidding. Hawaii Gov. Neil Abercrombie is continuing his abject pandering to both corporations, regardless of the number of federal regulatory and civil rights investigations brought upon the state by the two within the past eighteen months.

This is a federal subsidy that must be stopped. Please sign our petition to put an end to President Obama's pandering to big business HMOs.

Why Medicaid is creating demonic glee on Wall Street

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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.

SB 1274 on hold while del Castillo heads to DC for answers

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Rafael del Castillo arrived this morning in Washington D.C. The purpose of his trip is to get the definitive answer on whether or not Hawaii has to dump its previous healthcare laws in order to meet a July 1, 2011 deadline imposed under the Affordable Care Act.

To understand this issue, I'm going to quote huge blocks from emails from del Castillo. As a healthcare rights attorney, I don't want to even try to re-write it.

Back on March 4, del Castillo reported

Having been lead counsel for all but two or three of the consumers who have requested external review under our present law during the past ten years, I consider myself one of the most knowledgeable persons in the State on this topic. I interrupted work on a letter to Steve Larsen, Director of the Center for Consumer Information and Insurance Oversight at DHHS, which has the assignment under the health care reform act (Patient Protection and Affordable Care Act) to review each state’s external review law and decide whether it meets all of the 16 minimum consumer protections in the interim federal regulations. After July 1, 2011, health insurance issuers will be required by the CCIIO to comply with the federal external review law in any state in which the CCIIO determines the law does not meet those minimum protections, effectively preempting the state law until it is brought into compliance. This is apparently not a well-understood concept in Hawaii. (CCIIO staff explained to me that this passive preemption is due to the fact that the PPACA is part of HIPAA (Health Insurance Portability and Accountability Act).) In any event, on February 17, Prof. Richard Miller and I had a lengthy conversation with the CCIIO staff about our situation, and we were invited to submit a letter to Mr. Larsen explaining why we believe that Hawaii law meets all of the 16 consumer protections (with one minor exception that requires a technical correction). The one element that will be in question is whether the federal minimum requiring that consumer complaints be sent to an independent review organization (IRO) is met by Hawaii’s hearing process before a local panel of three persons, including a physician, plan administrator from a competing plan, and a DCCA lawyer. We believe that is superior to an IRO and has proven to be so, but a minor amendment to our existing law could offer consumers a choice of going to an IRO or a hearing.

The problem is that by today, SB 1274 has been passed by the legislature and sits on the Governor's desk, without yet hearing back from the CCIIO. They have proved resistant to being rushed.

Governor Abercrombie has agreed to wait and see if del Castillo can get the necessary sign off on our current review system before deciding if he will sign SB 1274 into law.

Del Castillo has gone to Washington without having appointments to see the people he needs to see. On Sunday when he announced his trip, he asked supporters to email President Obama from his website to help get these appointments made and decisions reached.

I am not expecting open arms – they have their hands full with the pushback on the Affordable Care Act. Nonetheless, we are from the President’s home State. It will be a sad day if his push to expand Hawaii’s genius in health coverage to the nation results in substantial loss of rights in Hawaii.

You can urge the President to help us get an answer by contacting the White House using the form on this webpage: http://www.whitehouse.gov/contact

Sample message:

Dear Mr. President:
Greetings from your home state of Hawaii. I am writing to urge you to avoid an ironic turn of events which is potentially very embarrassing for the Affordable Care Act. Hawaii is poised to repeal its best-in-the-nation consumer protections because your CCIIO staffers refuse to say whether Hawaii law complies with the ACA regulations. Wouldn’t it be ironic if the ACA is reported to be responsible for the repeal of the law in the State that was a model for universal health care? Rafael “Del” del Castillo and many others have tried for months to get an answer from the CCIIO staff, but they refuse. Hawaii’s health plans have spent tens of thousands trying to persuade lawmakers that they should repeal our law, so Del decided to fly to Washington DC this week to meet face-to-face with the CCIIO decisionmakers.

He needs your help to get an appointment. Governor Abercrombie’s office has asked Del to bring back all of the information he can obtain to prevent the unnecessary loss of our consumer protection law. It is a no-win proposition for Governor Abercrombie if he acts to destroy our consumer protections without the information he needs. What a shame it would be to stick Governor Abercrombie with responsibility for destroying our consumer protections just because the CCIIO policymakers refuse to meet with Del for a few minutes.

Your office can reach Del at 808-782-1262. Please help him get an appointment.

Thank you for your kokua!

You can use the same page (and message) to ask the First Lady (except it is the President’s home state) if she will help (separate message, of course).

I will also appreciate anything you can do to encourage DHHS and DOL regulators to meet with me. You can email or call officials, but should do so Monday and Tuesday. I will let you know the shape of things Tuesday and what additional help I may need.

Hon. Kathleen Sebelius, Secretary, DHHS: Kathleen.Sebelius@hhs.gov Toll Free: 1-877-696-6775
Another person you can email in DHHS asking for help for me is Sadena Thevarajah because she is known for advocating for greater protections: sadena.thevarajah@hhs.gov

You can also contact the public affairs office for DHHS in this subject (a fax would be good):
Centers for Medicare & Medicaid Services (formerly the Health Care Financing Administration)
Phone: (202) 690-6145
Fax: (202) 690-7159

Sample message:

Dear ________________,

Greetings from our President’s home state of Hawaii. I have written the President, but I am also writing (calling) you to urge you to help Rafael “Del” del Castillo, who has flown from Hawaii to Washington DC this week solely to get a face-to-face meeting with the administrators in the CCIIO.

The Governor’s office has asked Del to bring back all of the information he can obtain to prevent wrong action on consumer protections. Del and others in Hawaii have tried for months without success to get an answer from the CCIIO, and we are distressed at their refusal to answer the question. Of course they are busy and we are only a small state, but we are the President’s home state, we were the model for the ACA, and wouldn’t it be ironic (and helpful to ACA opponents) if the ACA was responsible for destroying Hawaii’s best-in-the-nation consumer protections? Don’t you agree we are entitled to a meeting out of simple fairness?

Del can be reached at (808) 782-1262. Please call him and set up an appointment with the decisionmakers at CCIIO.


Hon. Hilda L. Solis, Secretary, DOL: solis@dol.gov Not toll free: (202) 693-6000
Another person you can contact is the Senior Advisor for Communications and Public Affairs Carl Fillichio, at (202) 693-4676 or
Public affairs Senior Managing Director Jaime Zapata, (202) 693-4676
The guy I really want to see is Deputy Assistant Secretary Michael L. Davis (202) 693-8300, Employee Benefits Security Administration (EBSA)

Public affairs offices are the way into the Federal agencies and they can be telephoned or faxed :

Office of Public Affairs
U.S. Department of Labor
200 Constitution Ave. NW, Room S-1032
Washington, D.C. 20210
(202) 693-4676

I will send a fax # when I get one Monday

Sample message:

Dear ________________,

Greetings from our President’s home state of Hawaii. I have written the President, but I am also writing (calling) you to urge you to help Rafael “Del” del Castillo, who has flown from Hawaii to Washington DC this week solely to get a face-to-face meeting with the administrators in the DOL EBSA.

The Governor’s office has asked Del to bring back all of the information he can obtain to prevent wrong action on consumer protections. Del and others in Hawaii have tried for weeks without success to get an answer from the ESBA, and we are distressed at their refusal to answer the question, or to even meet with Del. Of course they are busy and we are only a small state, but we are the President’s home state, we were the model for the ACA, and wouldn’t it be ironic (and helpful to ACA opponents) if the ACA was responsible for destroying Hawaii’s best-in-the-nation consumer protections? Don’t you agree we are entitled to a meeting out of simple fairness?

Del can be reached at (808) 782-1262. Please call him and set up an appointment with ESBA policymakers.

Aloha,
Rafael

Just after 5am local time, Rafael sent in his first email update.

I am here (Washington DC). Think POSITIVE thoughts! I intend to see the regulators at the CCIIO and DOL ESBA about preserving Hawaii’s existing external review law. Please let the Governor know that you appreciate his holding SB1274 until I can put our case to the Federal regulators.

If you think going to DC says “commitment” hold on to your seats. I signed up for twitter for this trip so you could follow me. I am a beginner, so have patience with me. Look for me at @Del4Hawaii

I arrived at O’Hare at 5:05 a.m. local time and left there at 6:25 bound for Reagan National Airport, where I arrived at 9:30 am local time. I immediately called Sadena Thevarajah of DHHS External Affairs, but had to leave a message on her answering machine – meetings, no doubt.

My shuttle took me over the bridge through the Capitol Mall. You can see the Washington Monument for miles around so you would have to work at it to lose your bearings in DC. With the Monument to my left, I looked up the Mall to the right, and saw the Capitol Building less than a mile away. The route to the Henley Park on Massachusetts Ave. took me across Pennsylvania at the 1400 block, but I did not see the White House. A few blocks from the Mall, less than 15 minutes from Reagan, I was dropped off at the Henley Park, my headquarters while I am staying here. I am glad I have a GPS in my phone to help me make get around quickly.

No time to spare. Follow me on Twitter (I hope) and listen to “The Conversation” with Beth Ann Koslovich on Hawaii public radio.

I just received an email from Anthony Rodgers, M.D., head of Strategic Planning for CMS. He understands the reason I am here and asked me to call. Good beginning!

Please support Rafael's efforts. I admit that I am biased and he has helped my daughter. But he also helped every other family I know of that has gone to him.

You can follow him on Twitter here.

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.