Iowa Medicaid insurers call millions in losses ‘start-up costs’

Published: Dec. 2, 2016 at 10:50 PM CST
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Two of the three private companies now managing Iowa's Medicaid system each recorded more than $100 million in net losses in the first nine months of this year. The figures come from financial data they filed with the state.

Iowa handed over its five billion dollar Medicaid system to the three private managed care organizations, or MCOs, in April. The state used to run the program itself for the nearly 600,000 Medicaid users.

Iowa Governor Terry Branstad spearheaded the privatization effort in hopes of saving the state millions of dollars.

From January to September, AmeriHealth Caritas had a net loss of more than $132 million. Amerigroup, even worse, $147 million. UnitedHealthcare reports didn't show Iowa figures, but the company told lawmakers it too had been losing money in the state, during a summer meeting.

While that sounds like a lot of loss, in a statement, an AmeriHealth spokesperson told TV9 this sort of thing was expected. He said transitions like Iowa's quote, "commonly incur start-up costs and discover opportunities to enhance how the program works in practice."

Ben Hammes, a spokesperson for Governor Branstad, said something similar, in a statement.

"These insurance filings capture only a very short time period, during the first six months of managed care implementation, where MCOs are making long-term investments in the Medicaid program," said Hammes. "Our partner MCOs and Iowa Medicaid remained focused on helping patients become healthier without cutting benefits through better care coordination efforts, and on creating a more efficient and sustainable Medicaid program that roots out fraud and abuse for the long term."

Announcement of the losses comes about a month after Branstad said the state would be paying an additional $33 million to the MCO's, due in part to higher prescription drug costs.

In a press conference October 31st, the governor said Iowa would still be saving money with privatized, care despite the upped costs.

"Because there's that much more savings than was anticipated,” said Branstad. “The savings was more than anticipated."

Speaking of savings, a quarterly report released Wednesday, showed the state had saved more than $29 million with the private system. Although that margin could decrease if MCOs require more money from Iowa, on top of the millions recently announced.

Whether that's likely is uncertain. However, Chairman Joseph R. Swedish of Amerigroup's parent, Anthem, said this last month in an earning's call:

“Unfortunately, the recent rate increase is still inadequate given the claims experience to date,” said Swedish. “We remain confident we can make a meaningful impact by improving the cost and quality of care in Iowa, as we've done for our other state partners. However, we will remain disciplined and only participating in markets where we receive rates that are actuarially sound.”