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The two companies that manage Iowa’s Medicaid program will receive an 8.6% increase in state and federal dollars for next year, according to new contracts signed by the state.

Officials announced Wednesday the state has signed contracts with Amerigroup Iowa and Iowa Total Care — the managed care organizations overseeing the program that provides health care for more than 600,000 Iowans — for fiscal 2020, which started July 1.

According to the contracts, the insurers are receiving a $386 million total increase in capitation rates, including $115 million from the state.

That is an 8.6% total increase, and a 6.5% increase in state funding over fiscal 2019.

The rates were negotiated behind closed doors by company officials and the Iowa Department of Human Services. A summary on the contract states the fiscal year 2020 rates — which are paid to the insurers on a per member per month basis — were “established and reviewed by an independent actuary.”

“Medicaid members and providers can be assured that both, Amerigroup and Iowa Total Care, are here to serve Iowans for the long term,” Iowa Medicaid Director Michael Randol said in a statement. “These new contracts demonstrate a commitment to those we serve including greater access to hepatitis C treatment and additional funding for the adult mental health and children’s mental health systems.”

Iowa Senate Democratic Leader Janet Petersen criticized the funding increase, calling the contracts “outrageous” and the privatized Medicaid program “unsustainable, unaffordable and unpredictable.”

“Gov. (Kim) Reynolds has once again agreed to give the (managed care organizations) the largest dollar increases for Medicaid in the last decade,” Petersen said in a statement, “ ... The big cheerleaders for privatized Medicaid — Gov. Reynolds and Republican legislators — cannot back up their claims that privatizing would save money and make people healthier. That’s because it hasn’t happened.”

Last year, following contract negotiations for fiscal 2019, the state agreed to an 8.4% increase in state and federal funding, which amounted to $344.2 million to Amerigroup and UnitedHealthcare. That included a $102.9 million in state funding, or a 7.5% increase.

But despite the raise, UnitedHealthcare officials said the company lost millions of dollars during its time in Iowa’s Medicaid program.

The company — which covered the majority of the state’s Medicaid members at the time — announced in April it would exit the program at the end of June.

Iowa Total Care, a subsidiary of Centene and the latest insurer to join the state program, took on coverage of Medicaid members July 1.

The departure makes UnitedHealthcare the second managed care organization to depart Iowa Medicaid since the program switched to managed care in 2016. AmeriHealth Caritas left in November 2017.

“Amerigroup is proud to continue serving Iowans enrolled in Medicaid as we have since 2016,” according to a statement from Amerigroup. “We appreciate the collaborative discussions we’ve had with the state. We remain focused on providing access to the medical care and support services our members need as well as ensuring that our new members have a seamless transition from their previous (managed care organization).”

A spokesman for Iowa Total Care did not immediately respond to requests for comment.

“With additional funding for nursing homes, mental health services, and health care providers, this agreement provides Iowans compassionate, integrated and coordinated health care options,” Reynolds said in a statement. “The negotiated contract ensures greater health care access for those who need it and demands more accountability from the managed care organizations involved in the program.”

Contract details

Program and policy changes account for about $83 million of the rate increases.

That includes a reset on the base for the reimbursement for certain federally-designated health care facilities that aligns rates “with the actual cost to serve Medicaid members with complex care needs,” according to a contract summary. Additional funding under this rate will be directed to Federally Qualified Health Clinics, Rural Health Clinics and Intermediate Care Facilities for the intellectually disabled.

State officials said the contracts include increased “liquidated damages” related to timely and accurate data submissions, “which is a key to oversight” of the companies. “Additionally, penalties have been put in place for reoccurrence of prior authorization and claims payment system issues,” a contract summary states.

Adjustments also have been made to assessments for Long-Term Services and Supports members, or patients who require a higher level of care. Under the new contracts, managed care organizations must provide more timely notice to members of their assessment. Members must receive a copy of their assessment within three days, and are allowed to have other individuals of their choice present during the assessment.

Mental health care

Legislative requirements from a bill passed in the most recent legislative session also went into effect under these contracts. Contract items from this bill include:

  • An addition $12.8 million for the adult mental health system and to lay groundwork for a children’s mental health system.
  • Nursing facility base rates are adjusted, estimated to increase overall Medicaid expenditures by about $23 million in state dollars or $59.8 million in total.
  • $1.5 million in state dollars to Critical Access Hospitals for additional reimbursement.

Officials at the Iowa Hospital Association, which represents all 118 Iowa hospitals, hope any rate increases translate to better access and improved care coordination for Medicaid members, said Chief Executive Officer Kirk Norris.

The adjusted reimbursement comes after the association’s previous call to return federally-designated Critical Access Hospitals that serve rural communities to a cost-based payment model that existed under the previous Medicaid system, Norris said.

The Iowa Hospital Association estimates total funding needed to return Critical Access Hospitals to the cost-based payment is between $8 and $10 million, he said.

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