When Medicaid is big business, people suffer

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Hawaii’s governor, the first Democrat elected in eight years, has publicly defended his decision to segregate the state’s Medicaid population as second class citizens.

Like Obama, Neil Abercrombie rode to victory last November on a great tide of hope for the future. And like Obama, he has apparently decided to side with Big Business against the civil rights of his voters.

There is something called “Federal Supremacy.” Federal law is the “supreme law of the land”, and states cannot limit legal rights defined by federal law.

One practical result is that children as well as adults with disabilities have the ability to appeal life-threatening denials of medically necessary services by their Medicaid plan. The majority of cases that reach this level involve children of all ages with disabilities, fighting for the right to live at home rather than in institutions. These home medical services are expensive, although less than what the state would pay for institutionalization.

In May, the White House unexpectedly pushed through an amicus (“friend of the court”) brief with the Supreme Court, taking the position that the protections of Federal law do not extend to Medicaid beneficiaries.

Disability law experts like Sara Rosenbaum and Simon Lazarus immediately warned of the potential “spill-over effect” if beneficiaries of the country’s “safety net programs” like Medicaid were suddenly denied the protections of the court.

Governor Abercrombie’s comments were made during an August 22 meeting called to explain why he signed a piece of legislation eerily similar to that amicus brief.

Hawaii’s S.B. 1274, signed by the Governor in July, accomplishes exactly what Lazarus warned of: it carves out the state’s entire Medicaid population (270,000) and denies them access to the protections of federal law.

The Governor openly admitted the purpose of SB 1274 was saving the state’s Medicaid contractors money on legal fees. Patterns of Medicaid providers violating federal regulations (and civil rights) he dismissed as mere “glitches”. (More information about SB 1274 as well as a link to a recording of the Governor's comments can be found here.)

The crux of SB 1274 was to repeal a state law enabling patients to challenge health insurers’ denials of care, and to be represented by an attorney in the process. The law required health insurers to pay the legal costs of the patient’s appeal when the company refused to approve medical treatments ordered by a doctor.

Seventy percent of Hawaii’s Medicaid budget is paid out to two publicly traded contractors, Unitedhealth and Wellcare. The two share a lucrative $1.2 billion a year contract to provide services to 40,000 children and adults with disabilities. Premiums are calculated individually, and because these contracts are specifically to cover home services for people with disabilities, monthly premiums can range as high as $27,000 for, say, a medically fragile child.

Publicly traded Medicaid (and Medicare) HMOs make shareholder profits by not spending premium money on medical expenses. Since the size of the Medicaid pie is the same it was before they bought the contract, services have to be cut twenty to fifty percent to support corporate profits.

State contracts with Medicaid providers like Unitedhealth and Wellcare must be approved federally (through CMS, the Centers for Medicare & Medicaid Services, part of DHHS). They mandate compliance with all state laws. Unitedhealth and Wellcare knew about Hawaii’s healthcare laws when they signed the contract, but apparently did not realize what they would cost them.

Only one thing is accomplished by deleting a state law requiring insurance companies to reimburse patients’ legal bills in disputes over medical care. It allows the company to slash services in order to increase profits, without worrying that patients have the ability to challenge them effectively.

In Hawaii, it got the publicly traded companies out from under the mounting legal bills incurred defending against life-threatening cuts in services, most of them victimizing children and seniors.

In April, Unitedhealth’s Hawaii attorney openly told a TV reporter that SB 1274 needed to be passed because the state’s "existing process is expensive, time-consuming and burdensome... just adds to the cost of healthcare when we [Unitedhealth] can ill-afford it."

What she failed to add was that her client, Unitedhealth had over a dozen cases pending against it at the time. As of this writing, she and Unitedhealth have lost every case ever filed against it under the same patient rights law she said needed to be repealed.

What is happening here in Hawaii is only the tip of the iceburg.

By the end of this year, publicly traded companies will own about 30% of Medicaid, up from 19.6% two years earlier.

Remember when Congress had to approve TARP giving the banks $700 billion back in 2008? In the end the price tag was $245 billion, almost all of which has been paid back by now.

The privatization of Medicaid and Medicare has gone from $105.3 billion in 2009, to $113.7 billion in 2010, and already stands at $65 billion for the first half of 2011. Not a penny of that $284 billion needs to be repaid.

The political hot potato neither Republicans nor Democrats are talking about is who determines how much of that money actually needs to be spent. Or even if any of this nice federal and state funding has actually been spent on real medical care for people who need it.

The amicus brief and state laws like SB 1274 clear the way for these publicly traded companies to increase profits without worrying about federal regulatory interference. Unitedhealth and Wellcare are only two of about ten publicly traded health companies together splitting about $11 billion every month in federal and state revenues for Medicaid and Medicare.

The morning after last November’s elections, Public Citizen published a study of the link between “party-shifting contests” and “unregulated third-party spending.” Twenty-two of fifty-eight new Republicans were in seven of the eight states that just settled with Wellcare for criminal Medicaid fraud claims. Unregulated third party spending in those seven states came to $11 million, of the $54 million tracked.

Eighty-five percent of the total was spent in states where six publicly traded corporations (Unitedhealth, Wellcare, Wellpoint, Centene, Amerigroup and Molina) own Medicaid contracts. Unitedhealth alone operated either Medicaid or Medicare HMOs in 28 of the 33 states where Republicans beat Democrats, and was bidding on new contracts with a 29th state at the time.

On August 5, the White House took another swipe at federal protections for people on Medicaid, and particularly those with disabilities. CMS sent a letter out telling states how to auction off their Medicaid contracts without worrying about inconvenient federal safeguards. The legal work-arounds that CMS proposes specifically target what is called “maintenance of effort.” New Medicaid contracts/programs cannot restrict existing access to program benefits.

Now they can.

The politics of Medicaid/Medicare corruption override party membership. Greed trumps ideology, apparently.

You see it as far back as 2002. That’s the year a group of Wall Street financiers bought Florida’s biggest Medicaid HMO, a little known company named Wellcare. George Soros, head of the group, was known for donating to Democrats. The financiers’ hand-picked CEO was a Bush fundraiser.
Between taking the company public in 2004 and selling out before the very public FBI raid in October 2007 (the last shares were sold only weeks earlier), the original investors turned $70 million into almost $900 million.

The whistleblower complaint that led to a dawn raid by 200 FBI agents was not unsealed until last summer, almost three years later. Reading it, however, makes it very clear that the criminally fraudulent practices that generated such excessive profits traced back to the change of ownership in 2002.

Wellcare almost appears to have been structured from the get-go as a financial experiment in how to get rich from Medicaid and Medicare.

One of the last Board Members whose involvement could be traced back to 2002 only stepped down in early 2010. It took until the fall for the company to finish getting around to suing former executives whom, it claimed, had hid their criminal actions from the Board.

In October, it was learned the company had become one of Florida’s largest political contributors between 2004 and 2007, reporting a total of $2.6 million to the state Republican Party as well as individual Republican candidates. According to a report in Health News Florida, “Tampa attorney Barry Cohen …said today the contributions were pennies on the dollar compared to the money the HMO saved in Medicaid fines -- and the profits it made.”

In November, industry analysts were predicting that “WellCare’s strong Medicaid HMO position in multiple states will enable it to grow the upcoming Medicaid expansion that is part of the new health law.”

In late April, the White House apparently backed a federal settlement with Wellcare letting the company off the hook forever. The final settlement was for about $137 million, of up to $600 million estimated embezzled from federal and state funds.

Since January, Wellcare has been outperforming the S&P 500 by up to 35%. Quarterly net earnings reported in June are 7.64% of gross premium revenue, up from 1.62% in June 2008. Quarterly gross premiums are down $160 million (from $1.64 billion to $1.49 billion) while net earnings have grown from $26.6 to $113.5 million.

There’s an old saying that you can’t know where you’re going unless you know where you’ve been. Wellcare’s first financial success was defeated because they got caught stealing. The emerging federal “hands-off” policy towards Medicaid means they, and all the other publicly traded companies feeding off the backs of our most vulnerable citizens, will no longer have to worry about getting caught. Nobody will be looking.

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

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

Dear Governor Abercrombie:

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

You said yesterday that:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The crux of SB 1274 was to repeal a state law enabling patients to challenge health insurers’ denials of care, and to be represented by an attorney in the process. The law required health insurers to pay the legal costs of the patient’s appeal when the company refuses to approve medical treatments ordered by a doctor. Back in April, Unitedhealth’s attorney openly told a TV reporter that SB 1274 needed to be passed because this "existing process is expensive, time-consuming and burdensome... just adds to the cost of healthcare when we [Unitedhealth] can ill-afford it."

What she failed to add was that her client, Unitedhealth had over a dozen cases pending against it. As of this writing, she and Unitedhealth have lost every case ever filed against it under the patient rights law she said needed to be repealed.

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

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

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

There have been no calls. Just another glitch?

Abercrombie betrays public trust by pandering to big business health insurers

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My first career as a social anthropologist taught me a lesson that has stayed with me for almost forty years: what people do tells you a lot more than what people tell you they do. It is the difference between perception and reality, something that can be grotesquely distorted when enough money is spent.

Governor Abercrombie's action in signing SB 1274 yesterday is a good example of how this lesson applies to real life. Governor Abercrombie was elected, simply put, for his verbiage about helping Hawaii's children and most vulnerable citizens.

Questions began to arise in the disability community when the Governor's office released an ad for respite care that frivolized its purpose.

A swipe of the pen yesterday stripped 270,000 people of their right to an external appeal when their insurance carrier denies treatment ordered by a doctor. Last week's federally published regulation removed the entire purpose of SB 1274, which was to meet a July 1 deadine. The deadline was extended to the end of the year, with the feds saying they would let states know by the end of July if their current state programs needed any tweaking.

The action says more about the Governor than his words, because the only possible reason left for him to sign the bill was plain old pandering to big health insurance companies. They are tired of wasting corporate profits on lawyers defending the indefensible: cutting medical services just to cut costs. The fact it's the companies that keep losing these appeals is why Governor Abercrombie signed SB 1274.

It is the same sort of pandering to the same ten for-profit "pure-play and multiproduct plans" going on now in New Jersey, Florida, Texas, Georgia, New York, and thirty-five or so other states.

The Commonwealth Fund recently published an issue brief "Assessing the Financial Health of Medicaid Managed Care and Quality of Patient Care They Provide."

While the number of Medicaid members in publicly traded plans is still lower than the number in non–publicly traded plans, the total number in publicly traded plans has been increasing. From 2004 to 2009, the total Medicaid members enrolled in publicly traded plans rose from 5.6 million (32 percent of total Medicaid population) to 9.8 million members (41 percent of the total Medicaid members).

According to figures submitted to the SEC by the ten companies included in the Commonwealth study, that figure has grown fifty-one percent to 14.8 million as of March 31, 2011. All in all, about 40 million Americans with Medicaid, Medicare or Trinet (US military) are receiving their healthcare from publicly traded companies.

The rate at which Americans are being herded unknowingly into for-profit Medicaid managed care plans is growing faster than Medicaid membership itself. The DHHS 2010 Actuarial Report predicted a 5.6 increase in Medicaid membership between 2009 and 2010. Just in the six months between September 30, 2010 and March 30, 2011, Medicaid membership in for-profit companies grew ten percent. That ten percent growth in enrollment resulted in a thirty percent growth in Medicaid revenues to the same companies.

Couple that increase with the newly emerging White House position supporting the restriction of appeals rights for everyone on Medicaid, and the Republicans won't need to life a finger to destroy and privatize Medicaid. President Obama and compliant pro-big-business governors like Neil Abercrombie are doing the job for them.

The oddest part of all is that Nero is fiddling, Rome is burning, and the major media aren't noticing. Perhaps the very loud and boisterous Republican attack on Medicare has distracted them from the guerilla warfare launched against Medicaid.

Once more, it is an issue of perception versus reality.

Please sign our petition to stop this destruction of human rights.

New federal ruling means SB 1274 can be vetoed now

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The July 1 deadline that supporters of SB 1274 have been using as the excuse for passing the bill quickly, yesterday was extended to January 1, 2012.

There is no reason now for Governor Abercrombie not to veto SB 1274 immediately. His health policy expert admitted on Tuesday that the state had yet to seek any federal guidance on whether the bill was even necessary.

Here is the news from Rafael del Castillo:

Yesterday, the Federal government released new “technical guidance” relating to state external review processes and what was alleged by our Legislature to be preemption. SB1274 has an effective date savings clause extending its effective date to no later than 1/1/2012 if the feds postpone the deadline. Note that this is due to pressure from the insurers at the national level because they don’t want any external review at all. Note also that the title is “working with states” which has never happened so far with Hawaii.

I have a cadre of lawyers and law professors analyzing it and will get back to you as to that analysis. Here is the release from the DHHS Center for Consumer Information and Insurance Oversight discussing the technical guidance:

Affordable Care Act: Working with States to Protect Consumers

The Affordable Care Act establishes common-sense consumer protections and requires insurers to operate in a more transparent manner. Fair rules and transparency help create a more level playing field between consumers and insurers. The law also empowers States by putting them in the driver’s seat in implementing many of these new consumer protections.

On July 23, 2010, the Departments of Health and Human Services, Labor, and the Treasury issued an interim final rule regarding internal claims and appeals and external review processes for group health plans and health insurance issuers offering coverage in the group and individual markets. This rule works to give people in most plans better information about what their rights are and why their claims were denied or coverage rescinded. Under the rule, consumers have the:

*Right to information about why a claim or coverage has been denied. Health plans and insurance companies have to tell you why they’ve decided to deny a claim or chosen to end your coverage – and how you can appeal that decision.

*Right to appeal to the insurance company. If you’ve had a claim denied or had your coverage rescinded, you have the right to an internal appeals process, a process in which you ask your insurance company to conduct a full and fair review of its decision. If the case is urgent, your insurance company must speed up this process.

*Right to an independent review. Often, insurers and their policyholders can resolve disputes during the internal appeals process. If you can’t work it out through the internal appeals process, you now have the right to take your appeal to an independent third-party for review of the insurer’s decision. This is called “external review.” This way, the insurance company no longer gets the final say regarding your benefits, and patients and doctors get a greater measure of control over health care.

These protections and standards are an important step forward in reforming the health care system to make sure it works for consumers, not just insurance companies.

Amended IFR: State Flexibility and Transition to 2014

Today the Departments are amending the July 23, 2010 Interim Final Rule. Amendments to the IFR maintain the unprecedented consumer protections provided in the Affordable Care Act while reflecting comments from stakeholders and give States the flexibility they need to implement the law.

The July 2010 IFR set forth 16 minimum consumer protections based on the Uniform Health Carrier External Review Model Act written by the National Association of Insurance Commissioners (NAIC) that, if provided by a State external review process, will result in the States’ process applying in lieu of a Federal external review process.

Many States have made progress in meeting the minimum standards laid out in the July 23, 2010 IFR. To give States a reasonable opportunity to continue to implement these important consumer protections the amended IFR extends the transition period for State external review processes to January 1, 2012.

During the transition period (until January 1, 2012), at a minimum, plans and issuers are expected to follow their State laws and processes for external review in the States in which they are operating. Plans and issuers in States and territories where the HHS-administered Federal external review process already applies as of the date of this guidance are expected to continue their participation in the Federally-administered external review process until HHS determines otherwise.

In addition, separate guidance being issued contemporaneously with the publication of this amendment announces standards under which, until January 1, 2014, a State may operate an external review process under Federal standards similar to the required consumer protections outlined in the July 23, 2010 IFR. Under this guidance, if HHS determines that a State has neither implemented the required consumer protections nor implemented a process that meets the Federal standards that are similar to the required consumer protections, issuers in the State will have the choice of participating in either the HHS-administered external review process or contracting with accredited Independent Review Organizations. This guidance also phases in the use of multiple Independent Review Organizations for the plans that use them starting next year as a way of ensuring that the external review is unbiased.
HHS is adopting this approach to permit States to operate their external processes under standards established by the Secretary until January 1, 2014 to avoid unnecessary disruption while States work to adopt the consumer protections set forth in the July 2010 regulations. Starting in 2014, the appeals process will be more closely aligned across all types of plans.

Additional Amendments to the IFR:

The amended IFR released today includes details of all of the changes made from the original IFR. You can find the text of this amended IFR here.

Additional guidance issued contemporaneously with the publication of the amended IFR can be found here.

The filing in its entirety is here.

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.

Hawaii Medical Association Asks Governor to Veto SB 1274

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The Hawaii Medical Association has issued a strong letter to Governor Abercrombie, asking him to veto SB 1274.

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

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

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

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

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

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

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

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

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

Also announced in the quarterly report,

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

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

Yesterday's Hawaii Medicaid briefing featured wrong information about SB 1274

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During yesterday's state wide hearing on upcoming changes in Hawaii's Medicaid program, a question was asked regarding Senate Bill 1274, which was passed by our legislature and currently sits on the governor's desk awaiting signature. The bill is strongly opposed by healthcare advocates, and has only been pushed by healthcare industry lobbyists.

Dr. Kenneth Fink, Hawaii state Medicaid director, responded to the question. He stated, extremely clearly, that "to the best of his knowledge" there was only one case that had made its way through the external review process and been found against the health insurer. "Only one" was stated more than once.

I asked Rafael del Castillo about Fink's statement, since he is one of the people in the best position to know how accurate Fink's number is. Here is his response:

I was unable to attend yesterday's conference concerning the future of Medicaid. I understand that Administrator Fink responded to questions concerning SB1274 and the exclusion of Medicaid members from the protections of Hawaii's external review statute that, to the best of his knowledge, there had been only one case by a Medicaid member decided in the external review, and it was decided against the patient.

As usual, intentional or not, Fink's statement is patently false and constitutes an abuse of his office in light of the fact that he is a public servant believed to be knowledgeable about the facts, whose comments are given extraordinary weight. I have no doubt that Fink provided similar false information to legislators in lobbying for SB1274 to the detriment of the people he is charged with protecting. In fact, although he has told officials he wants to know about cases involving problems with Evercare, he also declines to discuss or assist in cases and his people are actively engaged in holding services over the heads of members to persuade them to dismiss their cases.

The facts are these: There have been an unprecedented number of cases in the external review by Medicaid members, more than against any other provider, many decided, and many pending. The score is as follows:

Decisions:
Patients 3, HMSA QUEST 0. 1 case pending, heard this month.

Patients 1, Alohacare 0 - settled when filed.

Patients 1, Kaiser QUEST 0 - resolved without a hearing

Patients 2, Ohana 0 - one decided, one settled, none presently pending but several resolved before request for review filed.

Patients 1, Evercare 2 - both on appeal (1 split decision with hearing officer voting against Evercare, one failure to heed expert opinion); two cases resolved without a hearing; two will be dismissed, one because DHS immediately reversed Evercare's ridiculous decision, one because patient pre-deceased hearing; several cases filed, will be heard before June 30.

These are verifiable facts. I can provide details about each and every case, and the Medicaid members involved will be only too happy to confirm those facts.

Rafael del Castillo

After the insurance celebrating is over.....

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Insurance lobbyists celebrate passed version of SB 1274

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Rafael del Castillo reported yesterday that "the health insurance lobbyists burst into applause and were high fiving and slapping each other on the back in the overcrowded conference room for several minutes" after the committee passed SB 1274.

While del Castillo was denied a copy of the bill, he writes that the jubulent reception by the health insurance lobbyists means "that the Baker bill that is going to the floor of each house for a vote repeals our consumer protections and segregates the health care consumer populations for experimentation."

Why are we allowing health insurance company lawyers anywhere near state legislation, let alone legislation that restricts civil rights by benefiting shareholders at the expense of policyholders? Evercare and Ohana get paid about $100 million a month by Hawaii. If the current state law is costing them millions of dollars in legal fees, they make a better profit if they can find a way to eliminate those costs.

How much of their monthly capitation income is being spent on legal fees? How much on actual services? Has anybody considered that if the companies would stop violating federal Medicaid regulations, their legal fees could be reduced substantially?

SB 1274 is literally going to be giving the insurance companies a license to kill.

How much of a raise did Hawaii give Evercare and Ohana?

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Wellcare reported in their 2010 year-end SEC filing that the "Hawaii program rate increases, which we believe have improved the stability of the program, also were effective July 1, 2010."

The "also" referred to "net increases of approximately 2.5% to 3.0% in Florida effective September 1, 2010 and 1.5% to 2.0% in Georgia effective July 1, 2010."

The company directly blames its $254.3 million in litigation-related costs for 2010's net annual loss.

For the year ended December 31, 2010, the net loss was $53.4 million compared to $39.9 million of net income for the same period in 2009. Excluding investigation-related and litigation-resolution costs of $167.6 million and $86.7 million, net of tax, net income would have been $114.2 million and $126.6 million for the years ended December 31, 2010 and 2009, respectively.

Hawaii Senate Bill 1274, which is openly back by health insurance companies like Wellcare, UnitedHealthcare, HMSA and others, will help get Wellcare out from under some of those exhorbitant legal expenses.

My question is why are we allowing a state/federal contractor to divert $254,300,000 in taxpayer funds away from medical care to fighting federal allegations that the company is stealing from those same taxpayer funds?

It's taken since October 2007, but in March Florida finally issued federal indictments for Medicaid fraud against five former Wellcare employees. The investigation and indictments cover criminal fraudulent scheming and theft between 2003 and 2007.

According to the March 3, 2011 story from Associated Press in Florida, Wellcare, "which is one of the state's largest Medicaid providers, spent $2.4 million on political contributions in the 2004 and 2006 elections."

More than 95 percent of it went to Republicans, who pushed forward a nationally watched plan that funnels more state and federal Medicaid spending than ever through private companies, which profit most by providing the least care.

The fact the company still has legal expenses in the $254 million range would seem to imply other investigations are ongoing. Somewhere.

SB 1274 just keeps getting better for the health insurance companies

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New amendments added to SB 1274 yesterday benefit the health insurance companies while segregating everyone currently receiving Medicaid into an experiment in civil rights.

According to Rafael del Castillo, who attended Thursday's brief meeting, "Senators Baker and Green have sent amendments to the House committee members proposing to segregate Medicaid members from the external review population with the supposed purpose of “studying” whether your welfare suffers if you are limited to the DHS process, in which you have to pay for the services you receive if you lose your case, and you will not get legal help unless you pay for it or qualify for legal aid."

As someone who has had personal experience with the "DHS process", I can say this logic is based on the mistaken assumption that DHS provides some sort of oversight over the health insurance companies.

CMS has been reviewing complaints for months that DHS is providing any sort of oversight at all. Twice I'm aware of State Medicaid Director Ken Fink has responded to these federally-filed complaints by writing the enrollee the insurance company has done no wrong.

The state has never acknowledged publicly that they had to place Evercare/UnitedHealthcare under a corrective action plan a year ago for on-going violations of federal Medicaid law. The families who were victimized were never notified.

The state has never acknowledged publicly that federal regulators recently began looking into potential Medicare fraud involving Evercare.

Evercare regularly refuses to authorize medications for my daughter, either new ones or ones that she has been taking for years. Complaints filed with Patti Bazin go nowhere. Every time, the only way I've been able to get Hannah's medications filled is by emailing CMS.

From my experience, DHS provides no oversight and in fact appears to collude in the health care insurance companies' strategy of essentially meaningless terrorism against families. The state gave the companies a premium increase last summer, so it is not for lack of funds.

I am one of so many families right now where a child or loved one is alive because of our current external review law.

SB 1274 needs to be killed. Please email the following representatives now to let them know they have to stand up against the insurance companies.

repmizuno@capitol.hawaii.gov
repkeithagaran@capitol.hawaii.gov
repyamane@capitol.hawaii.gov
replee@capitol.hawaii.gov
repherkes@capitol.hawaii.gov

State is sweetening contracts with Evercare and Ohana with SB 1274

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SB 1274 is the only way that Hawaii's Medicaid bureaucracy can help their insurance buddies get rid of a lot of nasty legal costs from people appealing their decisions.

Hawaii's external medical decision review panels are a mandated part of Hawaii's contract with CMS (the Centers for Medicare & Medicaid) for the 1115 waiver. As a result, they are also a mandated part of Hawaii's contracts with both UnitedHealth and Wellcare, the only companies who hold provider contracts under that waiver.

Presumably, the feds would never give Hawaii written permission to delete an entire section of the contract dealing with consumer appeal rights. The only way to get UnitedHealth and Wellcare out from under that burden would be a law that repeals the law creating the reviews in the first place:

S.B. 1274 is repealing H.R.S. 432E-6, the law that defines the external review process.

Rafael del Castillo has had thirty cases go through the insurance commission reviews over the past decade, and has eleven cases sitting there now. Ten of them are appeals against UnitedHealth. That seems to imply that the problem isn't the review system, it's UnitedHealth's medical decision making process.

There was a funny rumor going around in January that state employees were working on how to make the contracts with Evercare and Ohana "above federal law." Specific sections of the contract, dealing with appeals and grievances, were being focused on. I provided the information to CMS in mid-January.

Checking my notes, the rumor had to do with the same part of the contract that will be invalidated once SB 1274 goes through.

What a coincidence?

In fact, Evercare was put under a Corrective Action Plan by the state a year ago, for ongoing violations of federal regulations. By and large, these were federal regulations related to mandated procedures for appeals of insurance decisions, grievances, and complaints.

CMS has been receiving documentation of Evercare's ongoing violations of multiple federal regulations for months. CMS has also been receiving documentation of the state's failure to provide the required oversight of Evercare's operations. Letters from Dr. Ken Fink, Hawaii state Medicaid Director, just echo UnitedHealth's corporate line. I reported earlier that Fink's salary is more than twice that of his predecessor, and have not heard that Governor Abercrombie has taken any steps to reduce it.

The agreement between the state and CMS clearly gives federal regulators the ability to step in if the waiver program is no longer in the public interest or there is on-going non-compliance.

Both conditions seem met, which means only federal regulators or attorneys can step in to help us if SB 1274 is passed.

Del Castillo says health plans gaining greater control over future of SB 1274

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Insurance company meddling in Hawaii state law has worsened, according to patient rights attorney Rafael del Castillo. Castillo says he is "concerned because Sen. Roz Baker is doing the drafting and I believe she will enlist the assistance of the health plans lawyer, Ellen Carson, as she did once before on SB1274. Carson is going to see to it that our consumer protections are repealed. The health plans are ADAMANT that we shall lose those protections and rights."

We need to ask ourselves who benefits if SB 1274 is passed. The obvious answer is all the health insurers in Hawaii who provide Medicaid coverage to 264,000 people.

But who has the most to gain from the passage of SB 1274? The answer to that is the two for-profit companies that between them gobble up almost seventy percent of the state's Medicaid budget.

Passage of SB 1274 will allow Evercare (UnitedHealth Group) and Ohana (Wellcare) unfettered permission to make life and death medical decisions based on profit margin rather than medical need. The current "retroactive" clause in the bill will save UnitedHealth up to $500,000 by dismissing all the currently pending review cases. Speaking to the media on behalf of the bill, UnitedHealth attorney Dianne Brookins openly admitted these legal costs "just adds to the cost of healthcare."

Companies like UnitedHealth and Wellcare keep shareholders happy by keeping something called the MLR, or Medical Loss Ratio, as low as possible. When the government is paying them a guaranteed monthly fee for every Medicaid or Medicare enrollee, the MLR is kept low by not spending as much of that fee as possible. Across the country, over 13.5 million people are having their Medicaid decisions made by for-profit health insurers.

This video has been released by the opponents of SB 1274, to show the human toll when for-profit health insurers have life and death power over the families of Hawaii's disabled population.

For Uncle Neil and Uncle Barak on SB 1274

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UnitedHealth's News Comment on SB 1274

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The local reporters here tried to break the embargo on Rafael del Castillo; he was interviewed on a piece that aired Friday night at 10pm on KITV.

I cannot find the story on their website, but luckily we were able to get a copy of it. The quote from UnitedHealth's attorney spokesperson, Dianne Brookins, is the most interesting part.



Ms. Brookins states the "existing process is expensive, time-consuming and burdensome... just adds to the cost of healthcare when we can ill-afford it."

Who is we? Is she speaking on behalf of Governor Abercrombie, whose office originated SB 1274? If so, then her referral to ill-affording the added cost would refer to the state.

Or is she talking about UnitedHealth? The same company that showed a net earnings increase between 2009 and 2010 of 21%? The same company that lowered its Medical Loss Ratio by two percent, to less than 80% in the fourth quarter of 2010?

If this corporation can "ill afford" the legal cost of these reviews, and considering Rafael del Castillo's comment that he wins about eighty percent of his cases, then perhaps UnitedHealth should stop putting their shareholders before their enrollees when making decisions about medical necessity.

I have met Ms. Brookins personally. She attended, on UnitedHealth's behalf, the "hit squad" attack at my home on February 18. If the company can "ill-afford" to fly her so many times to Kauai then perhaps it should stop violating federal regulations governing denials, appeals and grievances.

Action Alert for Opponents of SB 1274

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Rafael del Castillo sent out an action alert this morning for opponents of SB 1274. People are being asked to email Congresswoman Colleen Hanabusa, who was a Hawaii State Senator when the current consumer protection law was enacted.

Del Castillo is suggesting the following text be included in your email:

Please help us stop Senate Bill 1274 HD3 which repeals longstanding and highly effective consumer protections against health insurance abuses.

Our Legislature and Governor Abercrombie have been unable to get assurances from the DHHS Center for Consumer Information and Insurance Oversight (CCIIO) that federal regulations do not require us to throw out our very successful consumer protection law, enacted while you served in the Hawaii Senate.

I ask you to intercede on our behalf with the CCIIO. If the CCIIO cannot give us an answer in the next 10 days while SB1274 is in conference committee, then we need a 1 year extension on the July 1, 2011 due date to resolve this issue without harming Hawaii consumers. The federal government has no legitimate interest in requiring us to repeal a law consumers strongly support and replacing it with one we strongly oppose.

Only the health insurers in Hawaii support SB1274, and that is because in its present form, it will destroy the considerable power Hawaii consumers now have to avoid and, when necessary, reverse bad and even selfish decisions by health plans in denying life-saving medical care, thank to the wisdom of your legislature in 1998.

Health insurers are using our $ and taxpayer subsidies to fight to repeal our rights and protections. Please help us defeat that effort.

Mahalo!

I added some personal information into my email to the Congresswoman. If you are uncomfortable with her secure email system you can also fax her at (202) 225-0688.

You need to know the four-digit extension of your zip code to sign in on Congresswoman Hanabusa's website.

DHS backing "separate but equal" rights for Medicaid enrollees

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With no apparent regard for the change in political party at the governor's level, Hawaii's Department of Human Services is openly backing the health plans' attack on patient rights via S.B. 1274.

According to the latest news released by Rafael del Castillo, "The Dept. of Human Services and the health plans, particularly Evercare and Ohana, are arguing that the Medicaid members will have equal rights even if they are separate. Those of you who are young may not remember, but many of your parents were opposed to the concept of “separate but equal” a generation ago, and the US Supreme Court finally realized that in a just society, if it was supposedly equal, there was no justification for it being separate."

So far, Speaker Calvin Say has assigned House members to the conference committee on SB1274, with Senate members not yet named. Opponents of SB 1274 are asked to please call or fax everyone on this list to let them know you want the bill killed.

Co-Chairs:
Ryan Yamane (D), Phone 808-586-6150 Fax 808-586-6151
Robert Herkes (D), Phone 808-586-8400 Fax 808-586-8404
Gilbert Keith-Agaran (D), Phone 808-586-6210 Fax 808-586-6211
Marilyn B. Lee (D), Phone 808-586-9460 Fax 808-586-9466

Members:
John Mizuno (D), Phone 808-586-6050 Fax 808-586-6051
Dee Morikawa (D), Phone 808-586-6280 Fax 808-586-6281
Kymberly Marcos Pine (R), Phone 808-586-9730 Fax 808-586-9738

Transparency in government: UnitedHealth and S.B. 1274

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Corporate health plan backing for S.B. 1274 became crystal clear on Friday. When the media needed a spokesperson on behalf of the bill, UnitedHealth offered up its local Honolulu lawyer.

UnitedHealth (or Evercare as they are known in Hawaii) could not have made their interest in the passage of S.B. 1274 clearer. The attorney they used is the same one who defends Evercare whenever a patient appeals to the external review panel the company's denial of medically necessary medications, treatments or services.

S.B. 1274 was recently amended to be retroactive to January 1, automatically dismissing all current cases. UnitedHealth is the defendant in eleven of twelve pending cases, so this amendment alone could be saving the company as much as $500,000.

The plaintiffs' attorney in all those cases is Honolulu lawyer Rafael del Castillo. Del Castillo only takes cases "on a contingency basis." That means he accepts no money from clients up front, even when actual hard costs are incurred for expert testimony. Del Castillo is only paid or reimbursed for the expert fees and other costs to the extent the Insurance Commissioner orders the health plan administrators to pay them.

Alston Hunt does not have to depend on the Insurance Commissioner for its fees. It gets paid no matter what, with our money. I wonder how many legal hours Alston Hunt got to bill UnitedHealth for strategizing how to be the best spokesperson for the bill?