News & Politics

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

Louisiana's Bobby Jindal and other Republican governors are handing over taxpayer dollars to private companies to provide health care--and make profits.

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. 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.

But while the economic cost of the wholesale transfer of public funds to private companies remains up in the air, the human cost is all too predictable. Privatizing Medicaid care could in many cases be dire, removing the safety net that provides vital treatment for those with uninsurable conditions. Bint Alshamsa, a Louisiana writer on disability issues, talked to me about the problems with private insurance companies that led to her going on Medicaid. “The reason why I wound up in the Medicaid system is because companies like these refused to offer services to someone like me, with pre-existing conditions. So I was uninsured when I developed cancer and forced to turn to Medicaid in order to get the radiation and surgeries that I needed to stay alive.”

Already, evidence is emerging that managed care providers may practice some of the same abuses as the private sector programs run by those companies. In Illinois, the managed care program has already been shrouded in controversy, with managed care provider Amerigroup (one of the five companies awarded contracts in Louisiana) paying out $225 million in 2008 amid allegations it defrauded the state by systematically avoiding enrolling pregnant women and other “high-risk patients” in its programs between 2000 and 2004.

In Massachusetts, another Medicaid user I spoke to who preferred to go only by the name Sarah, pointed out the disastrous nature of that private industry care for people with disabilities. She says the care she received as a disabled patient in a HMO was woefully inadequate. “When I became disabled, in 1995, I had a private HMO. It was awful. The HMO didn't have a single doctor in their plan who was a specialist in, or even competent in, the diseases I had.”

It is the HMO model of limited care that is being mimicked by managed-care Medicaid plans. Ironically, given the conservative rhetoric about “death panels” during the national health-care debate, managed care gives Medicaid patients far less choice about their health care. Under the traditional Medicaid system, patients are able to see whichever doctor they like, so long as their doctor participates in the government program. By contrast, the new “managed care” regimes restrict patients’ choices severely in placing them within a limited network of providers. Managed-care patients may find themselves, like Sarah, increasingly unable to access care from the necessary specialists.

I talked to Phoebe Livingston (not her real name), in Oregon about her and her husband’s care on a managed-care plan. She and her husband had to make a case to Care Oregon, a managed-care provider, in order for him to receive a lung transplant. She says, “that an essential, life-saving part of my husband's anticipated health care would take a special appeal at the eleventh hour and could be denied was entirely maddening. It should be something he was entitled to, something that was agreed upon by the specialists treating his condition as necessary to save his life. It should not be a matter of bureaucratic fiat. The arbitrariness of managed care made us feel unsafe.”

Though this goes against the privatization dogma, there are other indicators beyond the anecdotal that managed care fails to deliver for its patients. The Commonwealth Fund found that publicly traded plans did substantial worse than non-profits on both preventative care (62 versus 72% clinical quality measures) and chronic illness (52 versus 63%). Alshamsa questions whether for-profit companies can truly deliver effectively health care to Medicaid recipients and deliver a profit as promised, pointing out that “now these companies are claiming that they can manage the care for people like me and make a profit from it. Well, if they already have the ability to do that, they wouldn't reject these very same people when they attempt to buy coverage. The people of Louisiana are being forced to give their tax dollars to companies (that aren't even located in the state) that have never done what they're now promising.”

Indeed, some of the managed-care contracts may provide substantial disincentive toward quality care. In Louisiana, health care providers will be paid a monthly flat fee for each enrolled patient, what Health Secretary Bruce Greenstein called "pre-paid coordinated care networks." Alshamsa points out this model means that publicly traded plans have little incentive to deliver quality care, saying that “these companies can only turn a profit by denying as much care as they can to those who are being forced into this system. In other words, they have a huge profit motive to mistreat and under-treat the people who rely on medical care in order to stay alive.”

It should be no surprise, therefore, that Jindal has resisted quality control moves on the part of the Legislature. This year, Senate Bill 207, which would have set a renewal period at 2014 and required detailed reports on the plan’s success, including the number of denied claims, was passed by the Legislature but vetoed by Jindal. Alshamsa asks me, “what happens if they can't do what they've promised? If you're disabled and in need of care that these companies can't actually deliver, what then? Are we supposed to just wait three years and then hope that the next companies that are awarded contracts will give us the care we need? I mean, Jindal vetoed the bill that would have added accountability measures to this scheme. That means that these companies won't ever have to prove that they are actually providing the care that patients need.”

Further complicating the picture, two firms are already disputing the fairness of the Jindal administration’s decision, calling for the heath state agency to release all of its scoring documentation and the winning proposals from three firms. Louisiana Democratic State Senator Butch Gautraux has been an outspoken critic of the Louisiana bidding process. He told me, “my complaint is the way the contract was awarded in a clandestine and secretive manner, but I think it’s too early to tell if the delivery [of Medicaid] will change.” The move toward managed care in Louisiana has been anti-democratic at every step of the way--being neither democratically voted in nor with any checks and balances on accountability.

Of course, there are some signs that the privatization of Medicaid may not all be smooth sailing at an institutional level. In Illinois, where over 40,000 Medicaid patients are being put into managed care, the move is meeting with resistance from care providers. Out of Chicago’s leading academic medical centers, only the University of Illinois at Chicago Medical Center has agreed to join the new Medicaid program, while only one of Will County's four general hospitals has come on board. In a statement to the Chicago Tribune, the Loyola University Health System confirmed that it was not joining the managed care pilot program because "our expenses for Medicaid exceed our reimbursement."

Given that academic centers tend to treat the most difficult cases, this is bad news for many of those 40,000 patients in Illinois -- but a measure of how fraught the road to privatization may be. What is good for publicly listed companies may not be good for doctors or patients.

The U.S as a nation spends a far greater amount of public money on healthcare (16 percent of its GDP) than other developed countries with universal healthcare -- over 40 percent more than the country spending the second-largest share of GDP (France 11.2%) -- and delivers a far worse system with decreased doctor visit time and increased drug and visit costs to the patient. In written testimony to the Illinois House delivered this January, Dr. Anne Scheetz noted that “that the only health care system capable of controlling costs is, paradoxically, one in which everyone has access to care, because only a universal system is able to reduce the bureaucracy that consumes at least 30 percent of our health-care dollars.”

That the US lags behind its competitors in the developed world is because business interests compromise the rights of the patient--the citizen--to have ready access to affordable healthcare. In states like Louisiana and Illinois, governors are pushing the care of disabled populations into the high-risk world of the for-profit publicly listed company, placing those sick patients depressingly close to the whims of the roulette wheel stock market. The myth of the efficient public-private partnership that delivers both high patient outcomes and private profits is just that: a myth.

The 2008 crash proved that many large corporations cannot even run themselves as successful businesses without needing the wide-scale support of public government. We are all still, collectively, paying the price for that failure, as well as the collective dodging of corporate responsibility in paying taxes that create such a drain on the public purse. It is hard not to wonder, almost three years after the market crash, why corporations would be any better at addressing the needs of the general public, in a field in which people’s lives are at stake.

Emily Manuel is editor-in-chief at and a freelance writer.
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