Iowa's Branstad to Hire Managed Care Firms for Medicaid Program

When it comes to Medicaid managed care in 2015, keep an eye on Iowa.

Gov. Terry Branstad said this week he will hire a private managed care contractor—or more than one—to run the state’s Medicaid program with the hope of achieving significant short-term savings.

The announcement is not a surprise, but it will be a test for the longtime Republican governor, who received good reviews from many corners last year for negotiating and then rolling out a unique brand of Medicaid expansion under the Affordable Care Act (ACA).

Branstad sought Iowa’s CMS waiver a full year before many other GOP governors began asking for consideration, thus ensuring that rural hospitals would not lose revenue as this new population gained coverage while other funding sources waned.

In particular, Iowa gained national attention for trying to improve the delivery of mental health services, although some say access has been mixed.

But in December, Branstad predicted that 2015 would bring a budget shortfall, and Director of Human Services Charles Palmer warned of “storm clouds.” Curiously, this week’s announcement on the managed care plan has few details except for this: the projection that it will save $51.3 million from January through June 2016, its first six months.

In Medicaid managed care, private contractors oversee health care coverage and share in the savings that they extract from the efficiencies they achieve. Some states have done this successfully by taking it slow through pilots, and Iowa already has two such contracts for some Medicaid services.

Transitions to Medicaid managed care have gone poorly when states have tried to move too many clients over to contractors too quickly, and when the move is propelled largely by the need for budget savings, with coordinated care considerations taking a back seat. Kentucky and Ohio have had such experiences; Ohio reported disruptions in services and home health aides who quit longtime assignments because they weren’t paid for weeks.

Medicaid covers 564,000 poor and disabled Iowans, or 18% of the population, at an annual cost of $4.2 billion. Branstad spokesman Jimmy Centers told The Des Moines Register that the point of the plan is to improve care and lower costs.

"Through better coordinated care in Medicaid, focused on improving outcomes, Iowa can better serve Medicaid patients and provide more predictability for Iowa taxpayers,” told the newspaper. "The growth of Medicaid spending in Iowa is unsustainable over the long-term and it limits Iowa's ability to provide high-quality and stable health services to our most vulnerable residents as well as our ability to invest state taxpayer dollars in other key programs aimed at growing our state."

The timetable calls for the Department of Human Services to finalize and plan by March 1, and then to put it out for bid, with implementation to begin January 1, 2016. Some Iowa state workers who process claims could be laid off or be transferred to private contractors.

A Human Services spokeswoman said Iowa’s Medicaid program costs $4.2 billion a year, including $1.5 billion in state funds. While she noted that was up 73% since 2003, the report did not say how much of the increase was due to Medicaid expansion under the ACA.

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