Is Your State Stealthily Privatizing Medicaid and Putting Patients at Risk?

There have long been moves to privatize the management of Medicaid, but with shock-doctrine austerity hawks making as much mileage from their budget crises as possible, this year has seen an especially strong push to privatize the heath care of low-income and disabled Medicaid users at a state level. All across the country in states like Texas, New York, Louisiana, Florida, Illinois, South Carolina and Kentucky, state governments are stealthily privatizing Medicaid by handing over the money they get from the federal government to private contractors -- sometimes with minimal savings to the states themselves. It’s all part of a broader trend called “managed care” or “co-ordinated care” -- deceptively bureaucratic terms for a turn with sometimes deadly consequences for Medicaid patients.

Figures recently published by the Commonwealth Fund, show that the percentage of people receiving Medicaid who are signed up through publicly traded HMOs has increased nationally from 19.6 percent in 2009 to 27.1 percent in June this year. This is set to increase this year by at least 1.7 million new people, bringing Medicaid patients in privatized health plans to a record 29.8 percent.

In June, California began moving 380,000 older and disabled patients into private plans, while New York will begin moving 1.5 million patients into managed care in October. Further south, Florida is looking to move most of its 3 million Medicaid enrollees into private plans. And with the Affordable Care Act (the recent health care reform law) expected to raise Medicaid enrollment by 16 million by 2019, the Commonwealth Fund concluded that "given recent patterns in state contract awards to managed care plans, it is reasonable to anticipate that plans operated by publicly traded companies will enroll the majority of the expanded Medicaid population."  As a result, the Washington Post reports that insurers expect $60 billion in new annual revenue from this market after 2014.

As usual, Republican governors are leading the way when it comes to trading public programs for private profits. The most severe move is in Louisiana, where managed care is being brought in without the approval of even the State Legislature. There, Governor Bobby Jindal is unilaterally turning over $2 billion in tax money to contractors to run the Medicaid system, while the savings projected to the state are only $135 million. In a state as poor as Louisiana, even that relatively small savings might seem significant, though the true cost to the state may end up being much greater.  

Research on the over-65 Medicare system has shown that private sector health care is a significantly less efficient use of public funds. A 2009 report delivered by the Bart Stupak-chaired Energy and Commerce Committee found that Medicare spends less than 1 percent on administrative costs and 98 percent on health care, while HMOs eat up 15 percent of their revenue on profits, marketing and other corporate expenses. As with Medicare, the privatization of Medicaid through managed care is likely to result in a significant reduction in public moneys spent on health care.

In Louisiana, as in other regions of the country, there’s a transparently ideological rather than fiscal reason for privatization. Nola.com columnist John Maginnis reports that Jindal has long aimed for this model, calling for it as early as 1996 when he was health-care secretary. And it should be noted that this comes as the latest part of a greater pattern of Jindal's support of privatization. In June this year, a Jindal-backed move to privatize the Louisiana state employees' insurance was shelved amid claims of a suppressed report indicating the privatization would in fact run at a loss. For Medicaid, as with other privatization contracts, there’s good reason to be suspicious of the governor's numbers.