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

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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

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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

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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

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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

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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

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

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

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

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

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

Please sign our petition to the Department of Justice to have this dangerous document withdrawn.

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

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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.