Bill would allow Iowa’s disabled to avoid managed care in Medicaid

Tens of thousands of disabled Iowans who rely on Medicaid would no longer have to deal with private managed-care companies under a bill now being considered by state lawmakers.

Senate File 2013 would create an exemption from the managed-care component of Medicaid for disabled and elderly Iowans who rely on long-term support services such as housing, meals, employment and transportation.

Such a change likely will face stiff resistance from GOP lawmakers who support managed care and don’t want to create a two-tiered system of Medicaid, with hospital patients forced to deal with the cost-containment efforts of managed-care organizations while nursing home residents and people with lifetime disabilities bypass the MCOs entirely.

The Iowa Health Care Association and the Iowa Association of Community Providers are backing a bill that directs the Iowa Department of Human Services to terminate its contracts for long-term support services with Medicaid’s managed-care companies.

The Iowans who receive those services would then be transferred to a Medicaid-funded program that would be administered by the state on a fee-for-service basis.

MORE: How Iowa's Medicaid maze is trapping sick and elderly patients in endless appeals

Shelly Chandler of the Iowa Association for Community Providers said the bill would benefit thousands of Medicaid-dependent nursing home residents as well as the 39,000 disabled Iowans who rely on Medicaid for home- and community-based services such as meals, housing, employment and transportation.

She noted that 37 of the 39 states that have moved toward a privately administered form of Medicaid have exempted those populations from managed care because of the beneficiaries’ recurring nonmedical needs.

Only two states — Iowa and Kansas — have opted to use private, for-profit managed care organizations to oversee services for intellectually disabled people receiving home- and community-based services.

"In Iowa, Gov. Branstad followed Kansas Gov. (Sam) Brownback’s methodology of including all Medicaid-funded services within managed care," Chandler said. "There’s nothing inherently wrong with managed care, but it is focused on medical care, reducing hospitalizations and health and wellness. The services we’re talking about here are different, and they’re related to residential care — sometimes 24/7 care, from birth to death — as well as employment services, transportation and things that are completely outside the bailiwick of a traditional healthcare company."

Bill Dodds, president of Optimae LifeServices, which provides a range of assistance to disabled Iowans, agreed.

The MCOs manage costs in part, he said, by encouraging people to take preventive measures and lead healthier lifestyles. While that may be an effective method of controlling certain medical costs, it doesn’t translate to savings for people whose disabilities necessitate long-term assistance with daily living.

“So what the MCOs try to do is look at who is costing them the most and they try to shave some funding for that off the top,” Dodds said. “Well, what happens then is the service provider has no choice but to reduce services and that — particularly among folks with mental illness — invariably leads to a deterioration of their condition, they end up going to a hospital or committing a crime and going to jail and the whole cycle starts all over again.”

Dodds said that last year Optimae was providing housing and 24-hour supervision for a nonverbal Ottumwa woman who had chronic schizophrenia. Under managed care, Optimae’s funding for her care was cut by roughly $80 per day. “She had been institutionalized for 20 years before she came to us,” Dodds said.

Optimae continues to provide the woman with housing, but at a financial loss. "There is really no other place for her to go," Dodds said.

Chris Sparks, executive director of Waterloo’s Exceptional Persons, which provides residential services for the disabled, said that in the 20 months since managed care organizations took over Iowa’s Medicaid program, revenue at his organization has been cut by $1.4 million, with no corresponding reduction in the demand for services.

The first cut, he said, came when the state fixed the payment rate for services at the 2014 average, resulting in a $653,000 loss of revenue.

More recently, he said, Exceptional Persons learned it would have to absorb the cost of transportation services, such as driving clients to and from jobs and habilitation services.

“That is literally a $675,00 revenue reduction for us,” he said, noting that the organization tries to maintain an operating margin of 1 to 3 percent — a level they have not been able to reach the past two years.

Sparks said that while he supports the state’s efforts to reduce costs, the MCO’s expenses are paid out of Iowa’s Medicaid dollars.

“When you have a $4.8 billion Medicaid program and you allow the managed care organizations to come in and take 12 percent for administration and profit — although we understand there has been no profit — you are taking $576 million right out of that fixed pool of funding,” he said.

Those cuts, he said, make it difficult to maintain a stable workforce. “It’s not uncommon in organizations like ours to have annual turnover in the direct-support staff of 30 to 70 percent, or to have 25 percent of our positions vacant,” he said. “And yet we know that staffing is the primary determinant of quality.”

Chandler said that while she doesn’t expect the exemption bill to become law, she hopes that it will set the stage for a discussion on “the real issue,” which is just how underfunded the system of home- and community-based services is in Iowa.

She said that a few years ago, Iowa was leading the nation in some of its efforts to integrate people with disabilities into the community, but now, under managed care, Iowa’s progress on that front has come to a standstill.

“The only conversation we’re having now is about the providers trying to get paid for the services they are providing,” she said. “And as you know the providers are also dealing with managed care’s decision to reduce or deny payment for services.”

On Tuesday, Gov. Kim Reynolds promised a state review of the appeals that are filed by Medicaid beneficiaries who have been denied care by the MCOs.

Dozens of Democratic lawmakers have pledged their support for House File 2002, which would bring an end to managed-care Medicaid in Iowa. So far, however, no Republicans have backed the bill.