Biggest Hurdles to Medicaid Managed Care in Iowa May Be in Court

Each month of delay costs Iowa $8 million in savings that the Branstad administration assumed in the state budget.

When Governor Terry Branstad pitched his plan for Iowa to move 560,000 Medicaid recipients into managed care a year ago, the biggest challenges appeared to be public opposition, recalcitrant Democrats, and wary officials at CMS.

All 3 have materialized to be sure, but these days the wild cards are the would-be contractors who are fighting the plan in court. Opponents include healthcare giants like Aetna, whose bid for a piece of Iowa’s Medicaid piece was rejected; and WellCare, which initially captured 1 of 4 contracts, only to have it canceled after its communications with the governor’s healthcare aid during a blackout period were revealed.

The companies, along with Meridian, yesterday asked a judge to halt or throw out Iowa’s privatization plan, which still has to pass muster with CMS (the federal agency said it anticipates approval, which won’t come before March 1). Every month that goes by without implementation costs Iowa $8 million in savings. The state budget anticipated $51 million in savings for the first 6 months of 2016.

From the start, Medicaid managed care has had detractors, especially among Democrats in the state legislature. But with well-known healthcare names enjoined to fight implementation, there’s a threat of substantial losses in the current budget year, a point made by attorneys for the state.

“It’s not a faucet that can be turned on an off,” state attorney Diane Stahle argued, according to published reports.

While most states have some form of Medicaid managed care, conversions of the scale contemplated in Iowa have been rocky elsewhere, a point not lost on opponents. The need for a smooth transition is why CMS refused to let the state start managed care on January 1, 2016, as planned.

After kicking out WellCare, Department of Human Services officials were in the process of reassigning 125,000 beneficiaries who had selected that company to other providers. WellCare is asking the court to stop this process, while Aetna and Meridian say the scoring process used to select winning bidders was so flawed that it should be thrown out, and Iowa should be forced to start from scratch.

The stakes for contractors are high. According to published reports, managed care companies stand to make up to $540 million a year in multi-year deals.