- Associated Press - Monday, October 31, 2016

DES MOINES, Iowa (AP) - Iowa is increasing the amount of money it pays three private insurance companies to administer the state’s Medicaid program, a development that could affect the state’s current cost projections for the newly privatized system.

State health officials said Monday they don’t expect that to happen, and Gov. Terry Branstad reiterated the point in a press conference.

“This is something that’s … done in normal course of business and it does not affect the savings that we anticipate,” he said.

The non-partisan Legislative Services Agency said in a memo Friday that the Iowa Department of Human Services decided recently to pay an extra $33.2 million to the companies in rates that are distributed for each Medicaid patient. The federal government, which shares the cost of Iowa’s Medicaid program, will also pay an additional $94.5 million for the jump in so-called capitation rates.

LSA analyst Jess Benson said the increase, for a period that spans parts of 2016 and 2017, could be attributed in part to outdated data used to initially determine the rates and an increase in prescription drug costs.

Benson added LSA will predict, based on the increase, a $20 million to $30 million shortfall in the program for the current budget year when it meets next month with state officials to update the state’s forecast on Medicaid expenses.

That figure is preliminary, and it’s unclear if DHS would absorb such possible costs or if Branstad would request extra state funding in his next budget recommendation in January.

Branstad has predicted the state will save roughly $110 million this current budget year by switching Medicaid to a privately-run system. In a letter to Branstad dated Monday, DHS Director Chuck Palmer said he expected to maintain those savings despite the extra costs. Palmer said Medicaid patients are becoming healthier under privatization and there’s more efficiency in care.

“The savings are based on improved management of the health care needs of Medicaid members,” Palmer wrote in the letter. “This is why we will still be able to attain our $110 million in savings … while updating the capitation rates.”

Senate Democrats have been critical of Branstad’s decision to privatize Iowa’s health care program for more than 500,000 poor and disabled residents. Democrats have held multiple legislative meetings to highlight reports of delayed care and payments. DHS has repeatedly said such issues are not indicative of systemic problems.

Democrats on Monday criticized the increase in rates and Branstad said he wasn’t surprised given previous public statements. One Senate leader, Sen. Joe Bolkcom, D-Iowa City, challenged the continued savings projection. He pointed to data released in August that showed all three insurance companies lost money in the initial months of privatization.

“How can both be right?” Bolkcom said.


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