State Auditor Report: Iowa Providers Express Dissatisfaction with Medicaid Privatization

DES MOINES, Iowa – On Monday, State Auditor Rob Sand released a survey of Iowa’s Medicaid providers conducted last fall that asked their experience with Iowa’s Medicaid privatization. 

The Iowa Department of Human Services (DHS) manages the Medicaid program in Iowa that pays for health care services for individuals with limited income and resources who meet Medicaid eligibility requirements. 

Before 2016, authorized providers billed DHS for services to Medicaid members and were paid by DHS on a fee-for-service basis. Under former Governor Terry Branstad’s administration, on August 17, 2015, DHS issued a notice of intent to award contracts to four Managed Care Organizations (MCOs) to administer the program. DHS transitioned most Iowa Medicaid members from fee-for-service to a Medicaid managed care system called IA Health Link on April 1, 2016. As of July 1, 2019, two MCOs are administering the program. 

Sand reported 2,592 of 11,801 providers eligible to provide Medicaid services were surveyed, of which 813 who provided services under both models responded. The survey has a margin of error of +/- 3 percent with 95 percent certainty. 

“There are not quite 12,000 Medicaid providers across the state of Iowa. They include people in a variety of professions, institutions, you’ve got hospitals, you’ve got optometrists, you’ve got physical therapists. chiropractors, medical device, sales folks, transportation providers, and so on and so on. So there’s a lot of folks that are involved in this business across the state of Iowa that live everywhere in Iowa,” Sand said during a press conference on Monday morning. 

“We had an opportunity to hear from them about how Medicaid privatization was working on there. And so out of those 12,000 Medicaid providers, we selected a random sample of 2500. And we kept it proportional by profession,” he added.

The survey asked providers to compare services, timeliness of payments, and additional costs between the fee-for-service (FFS) model and the MCO model. Providers were asked about the benefits and advantages of the MCO model as compared to FFS. 

Providers were also asked about financial information, including outstanding balances of MCO payments, debt entered into as a result of MCO delaying payments, and additional staffing and administrative costs incurred as a result of implementing the MCO model. 

Some of the key findings include:

• Only 6.1 percent of respondents felt privatization had been beneficial to the quality of care; 51.5 percent thought it had been negative. 
• Only 9.9 percent of respondents felt privatization had been helpful to access care; 54.0 percent thought it had been negative.
• 26.5 percent of respondents are satisfied or extremely satisfied with MCOs’ impact on providers’ ability to provide services to Medicaid patients; 41.1 percent are dissatisfied or extremely dissatisfied 
• Within the substantial majority of providers that believe policies, procedures, and guidelines have become more strict under MCOs, they believe by a 5-to-1 margin that the restrictions are inappropriate. Just two percent of all respondents thought new restrictions were appropriate. 

Sand said answers also varied by the profession of the providers; for instance, optometrists and chiropractors had a more positive view of MCOs than other providers. 

The state auditor’s office also surveyed all Iowa hospitals publicly listed by the Iowa Hospital Association. 

Sand said oversampled hospitals since there are a smaller number of them in Iowa. 

“It’s fairly easy to understand why. Hospitals are both some of the biggest in terms of dollar value flowing through Medicaid dollars, but also just in terms of life in small town in rural Iowa, some of the most important. They’re often the only provider of emergency services in a county. They obviously are the place where most of the folks when they think of wanting to make sure you have access to medical care in the event of a heart attack or something like that. You’re going to want to have a hospital nearby,” he added.

Some key findings from responses from hospitals include:

• The majority of hospitals that believe policies, procedures, and guidelines have become more strict under MCOs; believe by a 12-to-1 margin that the restrictions are inappropriate. 
• 82.9 percent of the hospitals responding reported they were either extremely dissatisfied or dissatisfied with MCOs’ timely and accurate payment for services 
• 91.4 percent of the hospitals responded settling claims is a more complicated process through MCOs. 

Sand said that there were recommendations inherent in the answers providers provided, such as discussing how complex the program had become suggests simplification is needed. 

His office also recommended that Iowa standardize the model for providers. 

“Right now, as MCOs come and go into Iowa. They each come in and are allowed to use their own system for claims. So every medical provider sitting there, whether or not they are a psychologist, or a hospital, depending on what MCO they’re dealing with, whether it’s one of the two that’s here now, or maybe one of the ones that was here previously, they have to learn a new system for how to report their care that they’re providing,” Sand explained. 

He said it would be more efficient for Iowa to standardize reporting systems to require MCOs to adapt to Iowa’s process instead of forcing providers to change every time there is a new MCO. 

Iowa Medicaid Enterprise (IME) responded to the survey.

“We value the feedback from all Iowa Medicaid providers and have continued to implement improvements to our Medicaid program based directly on their feedback. Our program also includes stronger accountability measures and we withheld funds from an MCO that did not pay providers on time. Oversight of our managed care organizations (MCOs) is essential to ensuring providers are supported by timely and accurate payments so they can continue to provide critical care for Iowans,” Michael Randol, Iowa’s Medicaid Director, told Caffeinated Thoughts. 

Sand said the survey was conducted before IME announced they would withhold funds from an MCO that did not pay provider on a timely basis.

DHS announced last week that Randol transition to the private sector effective August 14. Sand said he provided the department with the report three weeks ago, but it’s unclear whether it has anything to do with the announcement. 

“Director Randol was brought on at a critical time to stabilize our Medicaid program,” Gov. Kim Reynolds said in a statement responding to his resignation. “I am so thankful for the work he’s done to not only stabilize the program, but improve the system, incorporate technology, and set a foundation that we can build on moving forward. I wish him the absolute best in his next endeavor.” 

A 2018 report by Sand’s predecessor, State Auditor Mary Mosiman, found that the Medicaid privatization plan saved less than half of what was projected. Sand said he did not plan to provide another audit related to cost soon, saying more data was needed. 

“What was issued then it was more of a forward-looking estimation. And as we let a little time pass, we’ll able we’ll be able to look back and have a little bit more of a backward-looking review of established facts and established costs,” he said.

He said it makes more sense to look at access and quality of care before providing another audit of the program’s cost. “If I go home and I tell my wife that I got a new truck and it only cost $500. She’s not going to be impressed if it turns out that it doesn’t have an engine, and it doesn’t have tires, etc.. So we’re trying to get a whole picture in a timely or a complete picture in a timely manner. We can then go back later on and take a look at cost,” Sand added.

The latest report follows a report from Sand’s office on Medicaid contracts released earlier this month.

Read the full report below:

Listen to Sand’s press conference: