Public health is for the public: Rafael Del Castillo for Congress

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Rafael Del Castillo is a lawyer who follows his conscience.  The Honolulu attorney has been working as much as fifty hours a week for free since January 1.

 

His clients are twelve families appealing health insurance company denials of services for their children with disabilities.  Many of the denials are life-threatening, as the children, ranging in age from 4 to 19, are medically fragile.

He is working for free because a new law went into effect that destroyed appeal rights patients had had for a dozen years which reimbursed them for any legal fees in their appeals. 

Del Castillo is running for Congress, for the seat in the U.S. House of Representatives being vacated by Mazie Horono.  His web site details his positions better than I can here, but I am writing this because I believe actions can speak as eloquently as words.

I can think of no higher recommendation for a politician than someone who will follow his conscience as Del Castillo has been doing.

My medically fragile daughter Hannah is one of Del Castillo’s clients.  Over the past couple of years, I’ve come to know some of the other families who rely on Del Castillo to keep our children safe, at home, and as healthy as possible.

The law depriving our children of a level playing field against a $110 billion a year Wall Street giant actually covers all 270,000 or so people in Hawaii enrolled in Medicaid.

The law was intended to be the final step in the effective block-granting of Hawaii’s Medicaid program.   Cutting off access to lawyers was a simple way to deny 270,000 people access to the protections of federal law.   It gave the state ultimate power over how federal Medicaid funds are spent, accomplishing overnight what the US Congress has blocked for the past thirty years.

What neither the state nor the health insurance companies planned on was Del Castillo continuing to represent his clients, whether he would be paid or not.

The law was introduced by Hawaii’s first Democratic Governor in eight years, and passed within his first seven months in office.  In a meeting with the families last August, the Governor admitted the law was intended to save the insurance companies money on legal fees.

The company saving the most from the law immediately was Unitedhealth.  At the time, Del Castillo had over a dozen cases just against that company, and a record of winning 90% of all cases.  By May 2011, Del Castillo was estimating Unitedhealth’s legal costs defending its unreasonable denials of care at around half a million dollars for the year to date.

Ironically, Unitedhealth’s Medicaid and Medicare operations in Hawaii had been under some form of federal or state oversight since April 2010 for violating the legal rights of these same children. Federal Medicaid and Medicare laws were broken every time Unitedhealth denied services to the children that their doctors had prescribed as “medically necessary.”

So the Governor knew Unitedhealth was violating federal regulations by cutting services for our kids when he told us point blank that he was “a failure” if any of us needed a lawyer.

The Governor was also aware the services are not being denied because the state lacks the money to pay for them.  They are being denied so Hawaii’s two for-profit Medicaid managed care companies can sustain twenty percent operating profits.

After all, what does a $9.4 billion “savings” from its federal Medicaid and Medicare contracts mean to Unitedhealth compared to a few hours of nursing care here, or a speech therapy session there?

Del Castillo has been so busy working for our children for free that he has done little fundraising for his Congressional campaign.  That was one of the reasons cited by Hawaii’s biggest media outlet in their refusal on Friday to include Del Castillo in their upcoming Congressional debate.

For years, the media has blackballed Del Castillo.  Over a decade ago he was told the health insurance companies had linked pulling their advertising with news coverage of Del Castillo’s work on behalf of patient healthcare rights.  Unlike, apparently, the Governor, he is not willing to play ball with one of the state’s biggest federal contractors.

Government needs to be taken away from the corporations and given back to the people.  Public health funds need to go to the public, not Wall Street.

This is why I support Rafael Del Castillo for Congress.

Hawaii leads in national attack against people with disabilities

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The first argument the Supreme Court will hear when it begins its new term on October 3 could determine if this country’s entire disability population will be denied the protections of federal law.

We have until then to let our government know we do not support selling off "the 'social contract' that provides a decent, functioning society" to Wall Street so shareholders can make bigger profits.

Families like mine stand to lose the right to stay together, even when a child’s disabilities are so extensive the only alternative is a cage crib in a hospital somewhere. It was the Bush Administration that supported extending the social contract to children with disabilities by granting them legal rights to medical care in 1989.

Giving Wall Street corporations already caught embezzling hundreds of millions of federal dollars the ability to embezzle hundreds of billions more is insanity. But removing federal oversight now gives states the ability to restrict rights granted under federal law. The state can then legislate away the ability to appeal these corporation’s decisions, for instance, saving the companies money on legal fees while supporting increasing corporate earnings.

That is what has been happening in Hawaii, where Unitedhealth and Wellcare control two-thirds of the state’s Medicaid budget.

Last month Governor Neil Abercrombie admitted the purpose of Act 230 (formerly SB 1274) was to save Hawaii's private Medicaid contractors money on legal fees.

Act 230 goes into effect on January 1, 2012. At that time everyone enrolled in Medicaid loses the right to legal help in fighting life-threatening denials of medical services.

Last month he admitted the purpose of Act 230 (formerly SB 1274) was to save Hawaii's private Medicaid contractors money on legal fees.

Act 230 goes into effect on January 1, 2012. At that time everyone enrolled in Medicaid loses the right to legal help in fighting life-threatening denials of medical services.

With legal decisions coming down against the state only two days after the governor's "I am failing" speech, Unitedhealth continues until then to wrack up significant legal bills.

Now Abercrombie has found a way to save Unitedhealth money before January 1: by denying reimbursement for expert witnesses that testified on that child's behalf. The state has abruptly reversed a ten year old policy upheld by two previous administrations.

Honolulu attorney Rafael del Castillo represents my daughter Hannah, and five other families of my personal acquaintance. We are all fighting Unitedhealth's on-going denials of medically necessary services on behalf of our children with disabilities, services the state is paying them to provide.

The company is refusing to provide these services because they would cost too much money and that would have a negative impact on shareholder earnings. The services in all cases have been prescribed by our children's doctors.

Del Castillo asks for no money from his clients, even to pay advance costs for expert witnesses. H.R.S. 432E-6 is the state law that makes health insurance companies in Hawaii responsible for the fees incurred by the patient in appealing medical care denials, regardless of who wins the case. Del Castillo takes the chance he he will win in order to get paid. He is up to over 90% wins the last I heard.

Act 230 repeals H.R.S. 432E-6. Del Castillo says last week's move to prohibit reimbursement for expert witnesses goes "as far as the Administration could possibly go to repeal the law before the repeal takes effect on January 1."

When sister legislation to SB 1274 was introduced earlier this year, it turned out to have been drafted by attorneys for Wellcare, the other contractor for the state's disability services program. Interestingly, it would have made enrollees responsible for the legal fees of the insurance company, even when the insurance company lost.

Later the state legislature tried to make SB 1274 retroactive to January 1. Since there were twelve appeals cases pending, it was estimated at the time the measure would save Unitedhealth alone about $500,000.

Del Castillo is representing the person with disabilities in all twelve of these cases.

According to Del Castillo, "the Abercrombie Administration knows that it is making pending patient rights cases ... virtually impossible to win unless one of two things happens: The patient pays for any experts who cannot afford to work for free, or I pay for them. The Abercrombie Administration knows ... that I will have to pay for the experts out of my own pocket or lose the cases. "

It is more than beginning to look a lot like retaliation and harassment, both of which are prohibited by the Americans with Disabilities Act.

One of the questions that has to be asked now is whether Abercrombie's anti-Medicaid actions have become sufficiently blatant that our major Honolulu media will break their years-old black-out on news concerning Rafael.

Years ago he was told the insurance companies threatened to pull their media advertising if any story involving Rafael was run. When Rafael ran for Congress in 2010, neither major newspaper nor any of the TV stations mentioned it when he came in third.

The Honolulu media ran a single story in seven months concerning SB 1274. It was a television piece that aired late at night, and was a major embarrassment for Unitedhealth (their attorney told the reporter Unitedhealth was spending too much money on legal fees).

As a result, more than a quarter million people are unaware they are losing major civil rights on January 1.

What is happening now in Hawaii is symptomatic of the political power wielded by these publicly traded Medicaid contractors. The state first "disables itself", in del Castillo's words, by decimating the employment infrastructure that supported the previous fee-for-service Medicaid program. The contractors are being paid public funds to provide "managed care", so state employees become redundant.

The Medicaid contractors eventually become "too big" to fail; or more accurately, "too big to take down for criminal activity." That can be the only explanation for why companies caught stealing children's Medicaid money not only get new contracts, but get premium raises in the states from which they have embezzled funds.

State contracts to provide Medicaid services to the local disability community are extremely lucrative. They are calculated on a monthly per person basis, depending on the "risk" of the company incurring significant charges for that individual. Unitedhealth is likely receiving somewhere between $12,000 and $27,000 per month for each of Rafael's clients.

These so called "abd" contracts ("aged, blind and disabled") have an enormous impact on shareholder profits. In just under three years, Unitedhealth's Medicaid membership increased about 50%, while Medicaid revenues were up 135%, and net quarterly earnings up 318% (that is not a typo).

At least six Federal civil rights investigations have been opened in Hawaii since February 2010. The four children represented were all facing cuts in home nursing services. Between the ages of four and ten, all are medically fragile, to varying degrees technology dependent, none can eat by mouth, one is completely immobile, none of the others can walk by themselves, and three are too medically fragile to attend school with other children.

You see, our nation has a most enlightened policy towards children with disabilities. Medicaid law gives children (under 21) a legal right to services prescribed as "medically necessary" by their doctor or other provider. These become civil rights when those services involve ensuring that children can live at home with their families.

These legal and civil rights are a mandated part of any state's Medicaid program. They are expensive and they are comprehensive. The disability population may only represent twenty-eight percent of all Medicaid beneficiaries, but are allocated two-thirds of the national budget. Less than fourteen percent of the budget is spent on healthy, working age adults.

It is called the Early Periodic Screening, Detection & Treatment program, or EPSDT. While federal Medicaid regulations also mandate family education about EPSDT, the unfortunate truth is that most states are violating those regulations. Few families know what is available to them.

It is relatively easy to embezzle public money intended to provide services for children with disabilities. The kids themselves are frequently not in a position to speak up on their own behalf, and parents are often in a state of "shell shock" from caring for a child in danger of dying 24/7.

Unitedhealth, Wellcare and the state of Hawaii Department of Human Services Medicaid division have been under some sort of federal scrutiny for violating the rights of people with disabilities almost continuously since September 2009. That is less than six months after they started their $100 million per month contract with the state. In March 2010, legislative leaders were caught on tape reacting to sworn testimony that the death rate among enrollees jumped 36% in the first twelve months.

The public in Hawaii has heard nothing of any investigation into that horrendous assertion. Far more interesting, the relatively unknown governor of Hawaii is accomplishing "a de facto move toward the block-granting of Medicaid", exactly as predicted by Simon Lazarus of the National Senior Citizen Law enter three months ago.

Block-granting Medicaid, according to the Kaiser Foundation, means "that the federal government
gives states a fixed amount of money and each state decides who to cover and what services to pay for."
Sixty percent of respondents to a Kaiser poll rejected block-granting in favor of leaving the current system unchanged, whereby it is the "federal government guaranteeing coverage and setting minimum standards for benefits and eligibility."

Reagan tried to block-grant Medicaid in 1981 and failed. Clinton vetoed similar legislation that Congress had passed in 1995. Nobody has had to vote on anything to accomplish block-granting of Medicaid in Hawaii.

Even now, Hawaii is accepting bids for new state Medicaid contracts, and Wellcare and Unitedhealth are expected to be bidding. The Governor acknowledged last month knowing of the mounting list of complaints filed with federal regulators (CMS, the Centers for Medicare & Medicaid Services) against the State as well as Unitedhealth. He blamed the contract, which he inherited (true), while turning the entire Medicaid appeals process over to the same state bureaucrats already caught lying to federal regulators.

This is not over-dramatizing. CMS has caught DHS lying to them about my daughter at least twice. Rumors have it that Unitedhealth even lied to the state about losing a circuit court appeal that was actually won by one of the medically fragile children.

At the beginning of the year, CMS investigated DHS and Unitedhealth for Medicare fraud in Hawaii. The company was targeting what are called "dual eligibles", adults with disabilities who qualify for both Medicaid and Medicare. Every time the company signs up a new individual for Medicare, they are paid a bonus. A company employee made an appointment to see a severely disabled young man on Kauai, as a representative of Unitedhealth Medicaid. He was actually from Unitedhealth Medicare, and never explained to the family the purpose of the paperwork he had them sign. They only discovered it when prescriptions and services began to be denied, leading to such a severe deterioration in his condition he now requires dialysis three times a week.

It is not just Hawaii. Florida has passed legislation mandating the state's entire Medicaid population enroll into the same publicly traded companies already found embezzling from the state. Texas is also on the verge of mandating everyone on Medicaid join a managed care organization, among which will be the top publicly traded corporations.

Parents of children with disabilities in New Jersey recently received letters requiring them to sign up for Medicaid from one of four companies. Two of them were Unitedhealth (they also do business as Health Net of New Jersey), and a third was Amerigroup, another publicly traded company caught stealing from children.

The companies themselves make it difficult to track membership and revenues. Several companies do business under different names, with Unitedhealth needing thirteen pages in their year end SEC filing to list all the company aliases. I found the same publicly traded companies reporting themselves to CMS under two different categories (commercial or non-commercial), making official Medicaid statistics somewhat unreliable.

In last week's $150 million Medicaid fraud settlement, Tony West, assistant attorney general of the civil division of the U.S. Department of Justice, stated “This type of fraud uses patients as pawns in a game of corporate greed that puts cash over care, running up the bills on the very people our public health care programs are supposed to benefit."

Wellcare's $137 million Medicaid fraud settlement announced in May has not yet warranted a DOJ press release, let alone such passionate rhetoric.

In June, 29 Republican governors signed a letter to Congress asking for increased control over Medicaid budgets, supposedly to help balance local state spending.

An August letter from CMS to State Medicaid Directors contained the White House response. The governors had demanded a way to get out from under Medicaid access and participation ("maintenance of effort") requirements established first under the Recovery Act and then under the Affordable Care Act. The CMS response provided detailed instructions in how states could ignore these inconvenient regulations, removing one of the last obstacles to block-granting Medicaid out to publicly traded corporations.

Should these companies be considered "too big to fail"? How do you weigh shareholder profits against how I felt after waiting ten years for Hannah to give me my first hug?

Please sign our petition, take our poll, send a letter to your newspaper and congressional representatives. This enslaving of our country's most medically vulnerable people to corporate profits needs to end.

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.

New Administration policy tells states how to auction off local Medicaid programs to for-profit HMOs without violating regulations

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ADAPT, a national grassroots disability advocacy group, announced today its outrage over the Administration's latest attack against the human rights of America's medically vulnerable children, adults and senior citizens.

The policy was outlined in a letter sent to State Medicaid Directors by CMS (the Centers for Medicare & Medicaid Services, the federal regulatory agency for both Medicaid and Medicare) on Friday, August 5.

Reading between the lines, one purpose of the letter is to outline how states can sell off their Medicaid contracts to for-profit HMOs without violating any pesky federal regulations. Specifically, the letter addresses Medicaid issues only as they relate to the infamous "maintenance of effort" (MOE) regulation imposed under the Affordable Care Act.

At one point, the policy instructions are very explicit:

As detailed in our May 20, 2010 State Medicaid Director Letter, there are a variety of mechanisms available to States to rebalance their long-term support systems for persons with disabilities to achieve compliance with the ADA.

One of the points in the May 20 letter was to laud the "service delivery model" of managed care. These are the managed care contracts auctioned off to the growing for-profit HMO industry. The link to CMS' technical manual for running an honest managed care program does not appear to work any longer.

Government revenue for Medicaid and Medicare is already boosting some of these companies 23% higher for the year than the S&P 500. Unitedhealth, for instance, has successfully mislead both the Wall Street Journal and the New York Times into writing that their specular profits are related to performance in their commercial (employer) division.

Over the past three years, Unitedhealth's monthly income from commercial accounts increased by $300,000,000 while their monthly revenue from the government for Medicaid and Medicare increased by $1 billion. Which sector seems more likely to have produced a 313% increase in net earnings?

Last week's Medicaid policy statement is only the latest in a series of events evident of the Obama Administration's extreme pandering to big business HMOs.

Please help us stop this terrible mis-use of public funds.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Simon Lazarus of the National Senior Center Law Center wrote:

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

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

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

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

Please sign our petition to stop this enslavement.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

HMO spends $627 million in public funds defending against Federal criminal fraud charges

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A company whose income derives entirely from taxpayer funds has spent $627.4 million of our money defending itself against federal criminal fraud charges. The figures are reported in Wellcare's SEC filings between January 1, 2009 and June 30, 2011.

Yet, while the S&P 500 is down 10.34% year to date, Wellcare's stock remains up 16.74% even after today's spectacular plummit.

Wellcare is not the only for-profit managed care company continuing to show significant year to date growth. Unitedhealth Group is up 16.44%, Humana up 19.93%, while Aetna, Coventry, Wellpoint, and Centene are all higher year to date.

Ironically, growth in all these companies has been fueled by federal and state tax-payer money. Total Medicare and Medicaid payouts to for-profit HMOs are running almost $11 billion per month. Life and death decisions for more than 33 million Americans, most of them medically vulnerable, have been sold off to these publicly funded HMOs, whose decision making is based more on shareholder profit than medical need.

The Affordable Care Act has tried to put in place minimum spending requirements of 80 to 85% for commercial and Medicare HMOs. Few states require any minimum spending on Medicaid contracts. Limited regulation and an absence of any effective enforcement of how taxpayer money is spent has led to fraudulent reporting of actual medical costs by up to 299%.

Somewhere between $2 billion and $6 billion a month is saved from government-paid premiums for Medicaid and Medicare by the HMOs simply refusing to authorize needed services.

Which brings us back to Wellcare's $627 million in taxpayer money spent defending itself against charges it has been stealing from us taxpayers.

Am I the only person who has a problem with this?

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. 

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.

Abercrombie signs SB 1274

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My apologies. Governor Abercrombie did not sign SB 1274 until the last possible day in July. This post was based on a phone conversation.

Governor Abercrombie today signed SB 1274 into law.

I will have more information to report tomorrow.

This is disastrous for the 270,000 people in Hawaii on Medicaid.

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.

A second letter from a mom to Governor Abercrombie about S.B. 1274

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This is the letter that Hannah M.'s mom brought yesterday for the Governor:

I am here today on behalf of my daughter—and, indeed, my entire family—to respectfully request that you veto Senate Bill 1274. If you allow Senate Bill 1274 to take effect, it will be devastating to Hawaii families with disabled persons. I am begging you, please, don’t take away the only rights we have to help our disabled children and community. I ask you to look into your heart—not just at budgets-- for the implications of this proposed bill. Please take the wise and humane course of action.


If SB 1274 is not vetoed, it will have a profound impact on my entire family. By allowing SB 1274 to pass, you will be endangering my daughter’s life as well as the lives of many others like her in the state. Vetoing SB1274 will harm no one whatsoever. Allowing it to become law most certainly will. We--our daughter included--are being stripped of our current rights--this from an insurance division and a Legislature that are supposed to be responsible for overseeing the safety of the Hawaii citizens they are sworn to protect.

Please allow me to tell you about my daughter, Hannah. She is a five -year old girl who has a life-threatening seizure disorder known as Lennox Gastaut Syndrome. There are some days that she has had over 1,000 seizures per day. Despite these inhuman challenges, she struggles with all her might every day to learn to walk and to communicate, and she is unfailingly appreciative of the help she receives. Our daughter has numerous physicians who have provided her health care plan with prescriptions and letters of explanations for why she needs 24/7 skilled nursing care. Her health care plan was reviewed by a physician on the health plan’s staff and denied. The part of this that is so concerning is that the health care plan’s physician who provided the denial is not even a neurologist; nor has he ever seen our daughter as a patient; nor is this physician familiar with her care plan.

The health plans told us that, if our daughter needed 24/7 care, then the most “cost effective” place for her would be placement in an institutional setting. We feel strongly that such a move would be the most inhumane choice for a five -year old child; it would amount to banning her to an institution away from her family forever, and depriving her once and for all of the hope of a meaningful and fulfilling life. We worry that such a move would send a horrible message to her brother—a message that family does not matter and that children can be thrown out like used Dixie cups.

We exercised our right to appeal what we think is a medically and morally bad decision, and so far, our daughter has the care she needs to remain with her family, school, and community. Evercare seems so sure that you won’t veto SB1274 that they have decided again to cut my daughter’s life-saving nursing. They have conveniently chosen the date of July 1 to start the reduction, and that just happens to be the first day that we will lose our consumer rights. They know that we won’t have any recourse after June 30. Do you believe that Evercare is looking out for my daughter’s best interests by doing this or looking out for their pocket books? I need you, Mr. Governor, to help me to look out for my daughter’s—and other sons’ and daughters’--interests.


Does institutionalizing a little girl who tries so hard to get better sound like something that constituents would support? The impossible part about this scenario is there is no facility in Hawaii to accomplish this “institutionalization.” Where do they want to send my medically fragile daughter? Were they thinking about taking our daughter from us and placing her on another island or, worse yet, sending her to another state? If my daughter is placed in an institution, she won’t have her family or her right to a Free Appropriate Public Education. They will put her in a crib bed that is caged and not allow her to live her life. In essence, they would be putting her in a jail because of her disabilities. We treat our criminals better. What crime has my five year-old child committed that she deserves this fate?


Senate Bill 1274 will unjustifiably and irreversibly damage health care consumer protection in Hawaii. Our external review law, H.R.S. § 432E-6, has served health care consumers well for over a decade. It gives health care consumers a more level playing field against powerful insurance companies. Consumers have access to experienced advocates to assist them with preparing and presenting their cases in a manner consistent with Hawaii’s medical necessity law. Decisions are made by a local expert panel, and consumers are able to present expert testimony and other evidence in a fair, but efficient, hearing process.

While Hannah has severe disabilities, she is a lovely and loving child. She works hard every day to master new skills. She is learning against great odds, and her quality of life is very high. So is the joy that she gives to us, her caretakers, and our friends. Don't eliminate Hannah's rights and extinguish her joy. Please Veto SB1274.

Hawaii Governor unaware or unconcerned of federal investigations of DHS

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Governor Abercrombie's health policy analyst Michael Ng admitted yesterday the governor is unaware of any of the ongoing federal investigations targeting DHS and its administration of Medicaid and Medicare.

One of two things has happened: either the state's Medicaid bureaucrats have hidden the information from the governor; or the governor has adopted an ostrich position of what he doesn't know about he doesn't have to do anything about.

Specific federal investigations Ng denied knowledge of included the following:

* six investigations by the Office for Civil Rights, including two opened in May;

* CMS investigation of potential Medicare fraud at DHS;

* on-going personal visits and phone calls from federal regulatory officials;

* on-going federal regulatory violations by the health plans about which DHS is doing nothing.

Documentation was provided to Ng. It will be interesting to see if that gets to the Governor's desk.

The information came out at a meeting yesterday between Ng and a group composed of lawyers, social workers, nurses, and the children with disabilities and their families who will be hardest hit if the governor does not veto SB 1274. Parents were literally pleading for their children's lives if access to the state's independent insurance division appeals process is denied them.

Abercrombie's campaign website is still up, and his campaign promises for healthcare, civil rights and human services are there. The difference between what he said and the message of his failure to veto SB 1274 is striking.

Monday is the deadline and the state still has not asked the feds if they really need to repeal H.R.S. 432E-6 in order to meet federal Affordable Care Act requirements.

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.