Private Equity Wreckers Come For Your Health Insurance
As hundreds of thousands lose coverage and face major additional out-of-pocket expenses, private equity enters the spotlight.
by Matthew Cunningham-Cook - Lever - July 28, 2023
The private-equity backed health insurer Friday Health Plans collapsed under order by Colorado state regulators on July 18, stranding 30,000 policyholders without health insurance as of August 31 — forcing them to pursue new plans in the middle of the year and rendering the money they’ve already spent towards annual deductibles and out-of-pocket maximums moot.
The implosion of Friday Health Plans, which offered plans on seven state health insurance exchanges, comes as other private equity-backed insurers have faced similar issues. Bright Health, which was backed by private equity titan The Blackstone Group among others, had to end its insurance business on the exchanges last year, leaving hundreds of thousands of people to find new insurance policies for 2023.
In total, more than a million people have lost their health insurance thanks to the failures of the two private equity-backed insurers.
Their collapses illustrate the major risks of private equity moving into the already unstable health insurance market. Due to decades of failing anti-monopoly policy, the health care industry is designed for big players that are getting bigger. Lax regulations mean unscrupulous entrants can offer insurance to potentially millions of people with minimal oversight, while facing massive headwinds to profitability and long-term stability for patients.
Private Equity Moving In
The failure of private equity-backed insurers — and their impact on customers desperate for affordable care — comes as private equity has massively expanded its footprint in the health care space.
Hospitals, medical practices, nursing homes, psychiatric care, disability care, and health care information technology have all been subject to extensive private equity speculation.
Private equity’s business model is centered on extracting profits, rather than providing high-quality, consistent, and affordable care. Studies show private equity involvement often spells worse patient outcomes.
Private equity-owned nursing homes have 10 percent higher resident deaths than in nursing facilities overall. Private equity-backed hospitals have cut staffing and services to meet the colossal dividend payments to the private equity firms that bought them. Private equity-backed emergency room staffing firms helped effectively create the “surprise billing” phenomenon, in which patients receive far higher medical bills for out-of-network care despite going to hospitals that are included in their insurance networks. And private equity roll-ups of dermatology practices have resulted in higher prices with poorer quality care.
Laura Katz Olson, a professor at Lehigh University who has studied private equity’s role in health care, said that private equity results in “instability for patients and far lower quality of care. They sell off their companies after several years, so patients don’t have any stability in terms of their providers.”
“They’re extracting value from the health care system, they load them up with debt and then they pay it back by lowering the quality of care,” said Katz Olson. “Health insurance is just another niche that private equity is destroying. They keep buying up these places, extract the value, and then spit them out.”
Friday had been operating plans in Colorado for six years, and for less than three years in the six other states where it operated. Bright Health was founded in 2016 by a coterie of former executives at UnitedHealth Group, the country’s largest insurer.
Friday, which is based in Denver, received backing from Vestar Capital Partners, a private equity firm with strong Colorado connections. Vestar Managing Director Jim Kelley is based in Denver and also heads the Colorado Impact Fund, where former Denver mayor and U.S. Transportation and Energy Secretary Federico Peña is a senior adviser.
From 2006 until 2018, Vestar owned The Mentor Network, a for-profit foster care company for children with intellectual and physical disabilities. A bipartisan report from the Senate Finance Committee found that 94 children died in the company’s care during that period.
Bright Health, which is based in Minneapolis, has recorded a 99 percent erosion in its share price since going public in June 2021. Modern Healthcare reported that when Bright Health exited the exchange market in October, the company would be able to reap $250 million from winding down its businesses. Instead, it owes $200 million to health care providers.
Blackstone backed Bright Health as part of a funding round in September 2020. Other backers include venture capital firm Bessemer Venture Partners, and the hedge fund Tiger Global Management.
While Bright Health, an insurer, would appear to have a vested interest in lowering the cost of providing care, Blackstone’s other investments in the health care space have substantially increased care costs.
Blackstone-backed TeamHealth, an emergency room physician staffing firm, helped pioneer the practice of surprise medical billing. According to a 2017 working paper from Yale researchers, out-of-network billing costs increased by 33 percent when TeamHealth entered a given market.
TeamHealth is currently restructuring its debt and could face bankruptcy in the coming months.
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“A Good Governance Problem”
Ari Gottlieb, a health care analyst who has studied private equity-backed insurers, says of the Bright Health and Friday collapses, “There’s a good-governance problem and a systemic-solvency problem.”
For starters, said Gottlieb, regulators failed to ascertain whether these plans had sufficient capital, despite a long history of excessive risk-taking by private equity firms.
“Insurance companies are authorized by state regulators to operate for a full year,” he said. “But they don’t have to sign anything certifying that they actually have the capital to operate.”
Gottlieb pointed out that the Centers for Medicare and Medicaid Services (CMS) — which is tasked with regulating the state health insurance exchanges created under Democrats’ 2010 Affordable Care Act (ACA) — doesn’t guarantee or investigate insurer solvency, meaning that insurers can be approved to operate on the exchanges even if they don’t have sufficient capital.
“If you want to sell insurance products for a year, you should certify that you have money to operate for a year,” he remarked.
Another core issue is that the rapid consolidation of health care is driving up costs for insurers and making it harder for narrowly focused insurance startups to survive.
As hospitals are consolidated, only large insurers with diverse regional footprints will have the market power to negotiate lower prices from hospitals and medical practices — the latter of which have been getting scooped up by private equity firms as well as by giant health insurers.
If an insurer is only focusing on the ACA exchange market and the Medicare Advantage markets, as private equity-backed insurers have typically done, that doesn’t provide the company with enough market power to negotiate the same prices that much larger insurers like Blue Cross and UnitedHealth can demand.
“The individual market isn’t big,” said Gottlieb. “In any given market, you’re never going to be big enough to bargain with providers.”
Likely in part because of these issues, Friday collapsed midyear — a catastrophic development for many policyholders in Colorado, who will now face significant additional out-of-pocket expenses if they need care this year .
That’s because the vast majority of other insurers have refused regulators’ request that they voluntarily honor the payments these policyholders had already made to Friday towards their deductibles and out-of-pocket maximums.
“Friday is being shut down involuntarily, they’re going through the liquidation process in the middle of the year,” said Gottlieb. “As a result of failing midyear, individuals are having to pick new plans. Their deductibles don’t carry over. There’s no provision in the law protecting them.”
Health insurers are currently allowed to impose out-of-pocket maximums of up to $9,100 for individuals and $18,200 for families on ACA exchange plans. Friday’s “gold,” or most robust, insurance offering in Colorado, had out-of-pocket limits of $8,250 per individual and $16,500 per family.
For example, if a family already paid $16,500 or more for out-of-pocket costs this year on their Friday health plan, they could now face an extra $18,200 in out-of-pocket costs on their new health plan before the end of 2023, if anyone on their plan needs expensive care or services.
Despite their collapsing business, Bright Health’s executives have still enjoyed major rewards. (Bright Health is publicly traded, so this information is public. Friday Health is privately held, so there is no public information about executive compensation.)
As Bright Health was pulling back from providing insurance altogether, choosing to focus on a small group of primary care clinics it had purchased, its board of directors — which includes former General Electric CEO Jeff Immelt and Biden COVID-19 adviser Andy Slavitt — approved $4 million in bonuses for Bright Health executives. These payments came despite the company’s stock price falling precipitously.
Under the terms of Bright Health’s supervisory agreement with the state of Florida, where it offered coverage, the company could not pay bonuses to executives, Gottlieb pointed out. But because the parent company is separate from the legal entity that offered insurance in Florida, the bonuses were still legal.
“It’s just sort of staggering that they have negative capital, and are paying cash bonuses,” he concluded. “Where’s the accountability there?”
Letter to the editor: The problem with upcoding under Medicare Advantage
On July 30, 1965, President Johnson signed Medicare into law, allowing millions of seniors to access health care. On the occasion of Medicare’s 58th birthday, Medicare is under threat. Efforts to privatize Medicare are eroding this landmark program, allowing the greed of a few to threaten the well-being of us all.
The Medicare Advantage program is diverting billions of dollars a year to corporate profiteering. Through the process of “upcoding” (making patients look sicker than they actually are), insurance corporations have been overpaid by taxpayers to the tune of tens of billions of dollars.
Here’s how “upcoding” happens: I am 66 years old, in good health. I am enrolled in a Medicare Advantage plan. I am getting several calls each month from the insurance company, urging me to take advantage of a “free” health screening. The purpose of this home health visit is not to provide health care. Rather, its purpose is to “upcode”: to add irrelevant diagnoses to my medical history just to increase the insurance company’s payout.
President Biden has taken some steps to try to rein in the practice of upcoding, but he can do more. Therefore, on the occasion of Medicare’s 58th birthday, I am encouraging President Biden to take executive action to prohibit upcoding, and to stop overpayments to Medicare Advantage. The tax dollars saved can be used to improve traditional Medicare – eliminating deductibles and expanding coverage to include dental, vision and hearing – so that we have the freedom to just choose Medicare, not a privatized plan.
Julie Pease
Topsham
Martin’s Point Health Care to pay $22 million to settle Medicare fraud claims
An agreement announced Monday, the largest Medicare fraud settlement in state history, includes a $3.8 million payment to a whistleblower who sued Martin's Point in 2018 alleging that it was miscoding the health conditions of Medicare Advantage patients.
by Emily Allen and Joe Lawlor- Portland Press Herald - July 31, 2023
Martin’s Point Health Care in Portland has agreed to pay more than $22 million to the U.S. government for alleged Medicare fraud that was brought to light by a whistleblower within the company.
Of that total, $3.8 million will be paid to Alicia Wilbur, a former manager at Martin’s Point from mid-2016 through late 2017 who filed the complaint against the company in June 2018. Her complaint was unsealed in federal court Monday, where the terms of the settlement also were filed. It was the largest Medicare fraud settlement in state history, the U.S. Attorney’s Office in Maine told The Associated Press.
Wilbur informed her superiors numerous times about inflated payments for Medicare services, but she was rebuffed, according to court documents that detail problems with the billing that date to 2013. Attempts to reach Wilbur through her attorney were unsuccessful Monday.
Martin’s Point would routinely code patients’ historical health conditions – such as for cancers, strokes and heart conditions – as active conditions, according to court records. That generated additional revenue for the nonprofit that it was not entitled to receive from the Medicare Advantage program.
Medicare Advantage is supplemental insurance for patients who have Medicare coverage – typically those 65 and older – that covers costs Medicare doesn’t pay for, such as vision, hearing and dental, drug costs not covered by Medicare, and other health services not covered.
“Martin’s Point repeatedly pressured and directed employees and contractors to ignore unsupported codes – such as coding historical conditions as active – because deleting those codes would hurt profitability,” the complaint alleges.
Martin’s Point provides primary care to patients at six locations: Portland, Biddeford, Brunswick, Scarborough, Gorham and Portsmouth, New Hampshire. It also offers a Medicare Advantage plan that covers about 60,000 members.
From 2016 to 2019, Martin’s Point assigned additional diagnoses to patients in order to get higher reimbursements using information that was not supported by medical records, Wilbur alleged in her complaint.
“Medicare Advantage programs rely on accurate health information to provide the best health care and proper payment from the federal government,” said Amy L. Easton, an attorney who represented Wilbur. “Inaccurate diagnosis codes distort both the delivery of health care and government payment for that health care.”
Martin’s Point billed Medicare for medical conditions such as diabetes, obesity, congestive heart failure, heart arrhythmias, vascular disease, rheumatoid arthritis and other conditions “of which a significant percentage were unsupported based on the underlying medical records,” according to court records. Martin’s Point “submitted these erroneous codes knowingly” and received payments “to which it was not entitled,” the settlement agreement said.
“Stunningly, in 2017, when Martin’s Point retroactively reviewed a sample of three years of medical charts, it found that the patients did not have (or the charts did not support) 60% of the illnesses reported to, and paid by (the Center for Medicare and Medicaid Services),” the complaint reads. “In response, Martin’s Point did nothing: it did not investigate further, broaden its sample size nor look for these errors in prior time periods. On information and belief, it did not even notify CMS and kept the resulting overpayments.”
‘NO IMPACT TO OUR PATIENTS OR MEMBERS,’ MARTIN’S POINT SAYS
Steve Amendo, chief marketing officer for Martin’s Point Health Care, released a statement on behalf of the organization that said “claims resolved by the settlement are allegations only, and there has been no determination of liability.”
“The settlement is not related to member care or the payment of member claims. Martin’s Point worked collaboratively with the (Department of Justice) during the course of the investigation,” the statement says. “Despite denying liability for the litigation claims at issue, Martin’s Point ultimately determined that settlement of this matter was appropriate rather than engaging in the cost and uncertainty of protracted litigation.
“This settlement is not an admission of liability, it instead allows us to avoid the disruption, expense and uncertainty of litigation,” Amendo continued. “This resolution allows us to put the past behind us, and we remain committed to our patients and members across our service regions and to the regulatory agencies that oversee our work.”
The statement by the health care nonprofit also said that “Martin’s Point Health Care is committed to the integrity of our work, mission, and service to our patients and members. Since 2019, Martin’s Point has taken steps to strengthen and develop new risk adjustment processes. Additionally, under the direction of new executive and senior leadership, the organization has established a team of experienced personnel specifically tasked with oversight of all risk adjustment practices.
Amendo, in an email response to questions about the allegations, said that “Martin’s Point will continue to operate with no impact to our patients or members.”
According to the most recent publicly available Internal Revenue Service 990 form – from 2021 – Martin’s Point reported $551 million in revenue and $479 million in expenses, ending the year with a $71 million surplus.
Amendo’s email also said that “Martin’s Point adheres to responsible financial stewardship practices, and we are well-prepared for circumstances such as this. Our overall organizational financial position remains strong and this has no implications for our day-to-day operations.”
Dr. David Howes, former president and CEO of Martin’s Point, earned $937,418 in 2021, three years after Wilbur’s initial court filing. His income was $643,509 in 2014 before ballooning to about $860,000 in 2015. Howes’ salary fluctuated after that, but was generally about $900,000 per year.
It was unclear according to the 2018 court filing how much Howes knew about the alleged overpayments, but in one passage it said Howes, along with another executive, either “knew or recklessly disregarded or were deliberately ignorant” of “high error rates uncovered by audits.”
Attempts to reach Howes were unsuccessful Monday.
Dr. Paul Kasuba replaced Howes as president and CEO in 2022, according to a Martin’s Point news release. Kasuba was not mentioned in any court documents as being involved in the Medicare Advantage reimbursement system.
Ed McKersie, chair of the Martin’s Point board of directors, refused to comment on the settlement when contacted Monday, referring questions to Amendo.
Problems with Medicare Advantage overbilling have become widespread, according to an October, 2022 article in The New York Times, with eight of 10 of the largest Medicare Advantage insurers having submitted inflated bills, a recent analysis by federal audits shows. A separate analysis estimated $12 billion in overpayments in the Medicare Advantage program in 2020, The New York Times reported.
Justin Ward, executive vice president of Gray-based Patient Advocates, which assists people with medical billing issues, said the complex coding system, if used improperly, can lead to “millions in overpayments.” Ward said their group does not work with clients who have Medicare Advantage plans.
“One reform that could help would be giving patients unfettered access to their complete medical records, at any time,” Ward said.
‘REVENUE MAXIMIZATION’
According to the 2018 court filing “Martin’s Point knew that physician-supplied diagnosis codes were often inaccurate, and dedicated numerous resources to reviewing the charts and physician-supplied diagnosis codes in order to capture missing codes. Conversely, little to no resources were dedicated to correcting unsupported codes that resulted in overpayments.”
Martin’s Point “dedicated an entire internal unit and hired third-party vendors to capture codes that physicians may have missed” doing so “under the guise of promoting accuracy.” However, “the aim of these activities was purely revenue maximization, not accuracy,” the 2018 court filing states.
Although the terms of the settlement allow Martin’s Point to avoid liability, it does not release the company from the possibility of criminal charges.
The Office of Public Affairs for the Justice Department did not respond to questions Monday on how the settlement will be used, and if Martin’s Point is responsible for reimbursing Medicare Advantage patients if they were overbilled. The department also did not respond to inquiries on how the settlement compares to others related to the False Claims Act, or whether prosecutors are considering criminal charges.
The U.S. Attorney’s Office for the District of Maine helped coordinate the settlement along with other agencies, according to the DOJ, but they referred all questions to the Justice Department.
“The government expects those who participate in Medicare Advantage to provide accurate information to ensure that proper payments are made for the care received by enrolled beneficiaries,” Deputy Assistant Attorney General Michael D. Granston said in a statement Monday. “Today’s result sends a clear message to the Medicare Advantage community that the United States will take appropriate action against those who knowingly submit inflated claims for reimbursement.”
Martin’s Point fraud settlement highlights shortcomings in Medicare Advantage program
by Joe Lawlor - Portland Press Herald - August 4, 2023
The Medicare Advantage insurance program that is at the heart of this week’s $22.5 million settlement between Martin’s Point Health Care and the U.S. Department of Justice has siphoned off billions of dollars from Medicare, the government health insurance program for people ages 65 and older.
Practices brought to light in Maine by a whistleblower, as well as similar methods of overbilling, have become widespread in Medicare Advantage plans across the country, according to research and analysis by experts in Medicare policy. And although the practices don’t affect patients directly, this overcharging – which includes adding unnecessary codes to patients’ medical conditions to extract extra money from Medicare – threatens services provided by traditional Medicare and the financial solvency of Medicare itself.
“These Medicare Advantage plans are getting grossly overpaid,” said David Lipschutz, an attorney who works for a national nonprofit that advocates for Medicare.
Dr. Donald Berwick, who headed up the Centers for Medicare and Medicaid Services during the Obama administration and is currently a health policy lecturer at Harvard University, agreed that the status quo with how Medicare Advantage operates is “highly destabilizing” to Medicare.
Medicare Advantage is a replacement plan for Medicare that typically offers an array of benefits not included under traditional Medicare – such as vision, dental, and hearing, and may have lower out-of-pocket costs – which makes the plans attractive for those who can afford them.
Martin’s Point is a primary care provider with six locations in Maine, including Portland, and has 60,000 members enrolled in a Medicare Advantage plan.
The settlement, filed in court on Monday, detailed allegations of how Martin’s Point’s Medicare Advantage plan would code patients’ historical conditions – such as for cancer, stroke, and heart disease – as current health conditions to obtain money from Medicare that it was not entitled to receive. It’s the largest Medicare fraud settlement in state history.
As part of the settlement, Martin’s Point was not required to admit to any wrongdoing. Its officials have declined interview requests.
“Martin’s Point repeatedly pressured and directed employees and contractors to ignore unsupported codes – such as coding historical conditions as active – because deleting those codes would hurt profitability,” court records state.
Lipschutz, associate director for The Center for Medicare Advocacy, a Connecticut-based nonprofit law firm that advocates for improved Medicare services and to protect access to the program, said the current system of Medicare Advantage overbilling is extremely lucrative for the firms selling those plans.
The financial rewards are so great, that the penalties for getting caught gaming the system are not stiff enough to stop plans from continuing to overcharge, he said.
“The incentives are in place for Medicare Advantage plans to maximize profits, regardless of whether this is causing inappropriate additional costs borne by federal taxpayers,” Lipschutz said. “These settlements appear to now be part of the cost of doing business.”
Berwick said the practice – called “upcoding” – has become so ingrained in the system that Medicare Advantage plans that properly followed all the rules would be “driven out of business.”
But the current system is creating a vicious cycle – estimates of the overbilling range from $12 billion to $75 billion per year – where Medicare Advantage enrollees receive more generous benefits at the expense of traditional Medicare, Lipschutz said. Medicare Advantage plan enrollees tend to be wealthier and healthier than traditional Medicare patients, skewing the risk pool and making it more costly for the federal government to care for Medicare patients. If in response to rising costs, Medicare slashes reimbursement rates paid to doctors, while Medicare Advantage continues to reap record profits, that could incentivize healthcare providers to limit the number of traditional Medicare patients, he said.
The irony is that gaming the system means that Medicare Advantage is pretending its patients are much sicker than they are, Lipschutz said.
TRADITIONAL MEDICARE COULD SUFFER
Also, with Medicare Advantage plans flush with cash they shouldn’t have, they can offer increasingly generous benefits, attracting even more enrollees, Lipschutz said. The larger Medicare Advantage becomes – it currently has nearly half of all Medicare-eligible enrollees – the bigger the threat to Medicare’s financial solvency.
“You could see this spiral of growing enrollment in private Medicare Advantage plans, to the detriment of traditional Medicare,” Lipschutz said.
Although the scheme destabilizes the Medicare program, it doesn’t cause overbilling of the patients themselves.
Berwick said if current trends continue, Medicare Advantage overcharging could further threaten the Medicare hospital insurance trust fund, which according to the Kaiser Family Foundation is currently at about $170 billion but is slated to be depleted by 2029. If the trust fund runs out, Congress could slash Medicare benefits, raise taxes or come up with other fixes to make it solvent again.
In recent years, the Justice Department has gone after numerous providers of Medicare Advantage plans across the country and reached settlements in the millions, including with major insurers like Anthem, United Health Group, and Independent Health Group in Buffalo. An October 2022 article in the New York Times showed eight of the 10 largest Medicare Advantage insurers having submitted inflated bills to Medicare, according to a recent analysis by federal audits.
Lipschutz said the current penalties do not appear to be enough to stop the practice. Suspending operating licenses for insurance companies would be a substantial penalty, but he said he’s not seeing that happen.
“If these companies are defrauding the federal government, why are they allowed to continue to operate?” Lipschutz said.
Criminal penalties for executives also could help deter “upcoding.”
“You very rarely see health executives being led away in handcuffs,” Lipschutz said. The settlement agreement with Martin’s Point did not rule out future criminal charges, but there have not been any criminal charges filed in connection with the case.
Berwick said depending on how it’s done, “upcoding” in many cases is legal, even though it’s harmful to the system. But he said the more aggressive insurance companies are at “upcoding,” the closer they “skate to the edge” of legality, and those responsible could face criminal charges.
LOOKING FOR SOLUTIONS
Lipschutz said Congress or Medicare officials also could devise other solutions, such as limiting or eliminating “risk adjustment” payments for patients. Under “risk adjustment,” Medicare Advantage is paid more if the patient is sicker, giving financial incentives to insurers to code patients with conditions they don’t have or had years ago. Congress could simply eliminate “risk adjustment” or use other formulas to balance out potential overpayments, he said.
The issue is starting to attract the attention of members of Congress.
Matthew Felling, a spokesman for Sen. Angus King, I-Maine, said in response to questions from the Press Herald that “Senator King is engaged in efforts to improve Medicare Advantage and to protect the long-term solvency of the program.”
Steve Amendo, spokesman for Martin’s Point, released a statement on Monday that said, “the settlement is not related to member care or the payment of member claims.”
“Despite denying liability for the litigation claims at issue, Martin’s Point ultimately determined that settlement of this matter was appropriate rather than engaging in the cost and uncertainty of protracted litigation,” he said.
According to court filings, the claims of erroneous coding that were brought to light by whistleblower Alicia Wilbur, a former Martin’s Point employee who received $3.8 million in the settlement, were not enough to stop Martin’s Point from continuing its practices.
“Stunningly, in 2017, when Martin’s Point retroactively reviewed a sample of three years of medical charts, it found that the patients did not have (or the charts did not support) 60% of the illnesses reported to, and paid by (the Center for Medicare and Medicaid Services),” the complaint reads. “In response, Martin’s Point did nothing: it did not investigate further, broaden its sample size nor look for these errors in prior periods. On information and belief, it did not even notify CMS and kept the resulting overpayments.”
Wilbur has not responded to a request through her attorney to be interviewed.
Lipschutz said until reforms are enacted, there are enough loopholes for the problems to continue.
“There’s a lot of wiggle room right now for plans to exploit, to try to defend an indefensible practice,” he said.
Nearly 4 million in U.S. cut from Medicaid, most for paperwork reasons
by Amy Goldstein - Washington Post - July 28, 2023
The notice arrived in an envelope stamped “important information,” telling Kristin Fortner she needed to prove that she and her husband still deserved Medicaid. She filled out the form within a week of receiving it this past winter and mailed it back. So she was perplexed by a phone call almost three months later from the Arkansas Department of Human Services alerting her that she had neglected to renew the couple’s Medicaid and, unless she sent the paperwork, their health insurance would end.
Fortner quickly resubmitted the same form, this time in person. Except Arkansas already had cut them off. She discovered in May that her insurance had vanished as she tried to pick up a prescription for Suboxone, the medicine that helps her stay off opioids, from a Walgreens near her Fayetteville, Ark., home. Suddenly, she owed $380. Her Medicaid coverage, the pharmacy’s records showed, had expired April 30.
A 33-year-old waitress earning $3 an hour plus tips, Fortner walked out of the drugstore without the pills. She is among nearly 4 million Americans who have been lopped off Medicaid since the end of a pandemic-era promise that people with the safety-net health coverage could keep it, requiring every state to begin a herculean undertaking of sorting out who still belonged on the rolls. The 3.8 million — the most thorough tally — is an undercount, reflecting only people who have lost coverage so far in 38 states that have voluntarily made public their data from this sorting process, known as the Medicaid unwinding.
Most of those people have been dropped from Medicaid for reasons unrelated to whether they actually are eligible for the coverage, according to KFF, a health-policy organization, which has been compiling this data. Three-fourths have been removed because of bureaucratic factors. Such “procedural” cutoffs — prompted by renewal notices not arriving at the right addresses, beneficiaries not understanding the notices, or an assortment of state agencies’ mistakes and logjams — were a peril against which federal health officials had cautioned for many months as they coached states in advance on how best to carry out the unwinding.
Fortner’s experience attests to the bureaucratic maze ensnaring some people — and the damage being done to their well-being. The Arkansas Medicaid agency, one of the nation’s first to launch the unwinding, has repeatedly insisted that Fortner needs to provide different documents. Her husband, Ryan, has stopped making physical therapy appointments for a herniated disk. As for her Suboxone, Fortner felt like she was going through withdrawal when she skipped it for two weeks, and now, after paying for a partial order with a drug discount card, stretches the supply by cutting the pills in half.
Medicaid, the country’s largest public insurance program, is a legacy of the 1960s’ War on Poverty. The federal government provides most of the money, lays down basic rules and supervises states, which set eligibility standards and handle applications and renewals.
Beneficiaries typically must renew Medicaid every year, but that stopped in 2020 when the coronavirus arrived. With no one leaving the program, the number of Americans on Medicaid swelled to 85 million by this April, when the unwinding began in phases, with five states starting to terminate people. By July, every state except one had started removing some people from the program. Oregon will begin removing people in the fall. The government wants states to spread the undertaking over a year, although a few have chosen to do it faster — none more rapidly than Arkansas.
Health and Human Services Secretary Xavier Becerra has made clear his displeasure with the high rates at which low-income people are being severed from Medicaid without knowing whether they still qualify.
“[I]t is critically important to ensure that individuals do not lose coverage due solely to administrative processes,” Becerra admonished in a June letter to the nation’s governors in which he urged states to improve their renewal methods.
Some health-policy advocates and Democrats on Capitol Hill contend that HHS is partly to blame, saying federal health officials should exert a heavier hand with states that have been performing poorly.
“They have to be more assertive,” said Rep. Frank Pallone Jr. (N.J.), the top Democrat on the House Energy and Commerce Committee, which oversees Medicaid. Pallone said in an interview that the Centers for Medicare and Medicaid Services should explore whether some Republican-led states are deliberately winnowing their Medicaid rolls so they will have fewer low-income people to insure. Last year, Congress gave CMS the power to order states to draft plans to correct the problem and pause removing beneficiaries for procedural reasons — and to fine states that persist in mishandling cases.
During the unwinding’s first few months, CMS refused to disclose how many states were violating federal guidelines and how often federal officials were intervening.
In recent days, the agency has pivoted, portraying itself as stepping in when it discovers that a state is performing badly. According to Daniel Tsai, CMS’s Medicaid director, the agency has ordered a half-dozen states he did not identify to pause the removal of people for paperwork reasons and to reinstate some whose coverage had been denied — up to tens of thousands of people, depending on the state. The agency is conferring with about a dozen other states regarding potential violations.
Tsai said some states are failing to follow a federal requirement that they rely when possible on electronic data — such as wage records from food stamps or other benefits programs — to check people’s eligibility automatically and avoid the burden of renewal notices.
“Make no mistake, where we have found problems or violations of federal requirements, we are taking action to ensure that states correct the issue immediately,” CMS Administrator Chiquita Brooks-LaSure said during a recent news briefing.
CMS has been collecting states’ unwinding data monthly but said it could not release its first state-by-state snapshot before the end of July because federal officials needed time to check the accuracy of that data. Many health-care advocates say CMS should have been providing this unwinding picture sooner.
On Friday, the agency issued the first official unwinding data based on 18 states that began the process relatively early. The report evaluated what happened with 2.2 million beneficiaries whose status was scheduled to be reviewed. It found that 46 percent remained on Medicaid or the Children’s Health Insurance Program, 32 percent were removed from the program, and 22 percent of the reviews had not been completed. Of those removed, 79 percent were for procedural reasons.
Spanning just two months, the federal snapshot is less complete than the data compiled by KFF and separate tracking of 20 states by Georgetown University’s Center for Children and Families. Still, all three sources show considerable variation in how many people have been cut off — and the rate at which people lose coverage for paperwork reasons. Michigan and Pennsylvania are doing comparatively well, with most beneficiaries who have come up for renewal remaining on Medicaid. The KFF and Georgetown tallies show that, in both states, 3 in 5 cases removed from the rolls were dropped because of ineligibility.
Florida has severed the second-most people, after Texas — slightly more than 300,000, two-thirds for procedural reasons. And CMS says Florida has been the only state unwilling to discuss with the agency how to minimize removing people for the wrong reasons.
“We are alarmed by the data,” a coalition of more than 50 health-care and other advocacy groups wrote this spring to Florida Gov. Ron DeSantis (R), calling on the governor to pause the unwinding until the state improved its methods.
Rep. Kathy Castor (D-Fla.) and the seven other Democrats in the state’s congressional delegation also wrote to DeSantis, saying the disenrollment rate “is incredibly concerning” and echoing the call for a pause. “I’m very concerned too many Floridians are going to be lost in the shuffle,” Castor said in an interview.
According to Castor’s staff, DeSantis, a candidate for the 2024 GOP presidential nomination, did not reply to the lawmakers’ letter. The governor’s office referred questions from The Washington Post to the Florida Department of Children and Families. Mallory McManus, the department’s deputy chief of staff, said the agency had developed “a thoughtful, common-sense plan … to return to normal Medicaid processes” and already uses some procedures urged by federal health officials. “Florida’s top priority is ensuring that those who are eligible for Medicaid remain enrolled,” McManus said by email.
Already, the large proportion of beneficiaries in some states tumbling into the ranks of the uninsured is starting to hurt clinics and hospitals that focus on low-income patients — especially in the poorest states, such as West Virginia, where about 1 in 3 residents have relied on Medicaid.
“It’s a total failure, this unwinding,” said Craig Robinson, the executive director of Cabin Creek Health Systems, a network of a half-dozen clinics in West Virginia. Every day, he said, people arrive for appointments or for medicine at each clinic, unaware that their Medicaid coverage has stopped.
Cabin Creek is not alone. At West Virginia Health Right, a Charleston clinic with 43,000 patients at three sites, the number covered by Medicaid fell by about 1,600 in May and June, the first two months of that state’s unwinding, according to Angie Settle, the clinics’ chief executive. The number of uninsured patients, usually fairly stable, rose by about the same number during those two months.
Settle said the unwinding is putting a strain on the staff as new people show up for medical services they can no longer afford — and a strain on finances as more people show up for medications for which no one else is paying the costs.
One of Health Right’s new patients is Heather Elkins, who lives nearby with her daughter in Dunbar, at a bend in the Kanawha River. Living on $1,100-a-month Social Security checks, Elkins, 63, had no health insurance starting in 2012, when she quit the construction work that was hurting her body, partly because of breathing lime dust on river barges. Five years later, her health deteriorating, she applied for Medicaid, which has paid for medications for her high blood pressure, high cholesterol, depression and diseased lungs.
When she went to pick up prescriptions the first week in May, Elkins said, the pharmacist told her, “Honey, you’re declined. You don’t have coverage.”
She paid out of pocket for the prescriptions, except for the Symbicort to treat her chronic obstructive pulmonary disease, because a month’s supply would have cost about $400. Instead, she headed to Health Right for it.
Elkins said she isn’t certain whether her renewal notice from the West Virginia Department of Health and Human Resources never came or was stuck in the middle of other pieces of mail. She stopped at a state office to try to find out what she needed to do. Over the next two months, she was told to bring a Social Security card, assured that would suffice, then was told she would need to start a new application. When Elkins finally brought in the completed paperwork, an employee looked in the computer, ripped up the form without examining it and said she was back on Medicaid. Stunned, Elkins asked about what she’d been told by the first worker who triggered the whole runaround — and was told he had been a new employee and did not work there any more.
According to Sarah Young, the health department’s deputy commissioner, each beneficiary receives three phone calls and written notices before a case is closed. She did not address how situations such as Elkins’ could happen but said by email, “the challenge remains how to increase the number of individuals who submit their renewal forms in a timely manner to prevent a loss of coverage.”
Some states face special obstacles. In Alaska, renewal notices do not always reach intended recipients in rural communities that lack roads or broadband internet, according to Anne Zink, the state’s chief medical officer. Some towns and villages at times lack a working postmaster, so mailbags containing the notices sometimes pile up outside shuttered post offices, Zink said.
Alaska is among 34 states, plus D.C., that have been out of compliance with at least one federal requirement for how to conduct the unwinding, a CMS tally shows. But even some states that meet all the federal rules have high rates of people being dropped from the program for paperwork reasons, mystifying state officials and patient advocates alike.
One of those states is Indiana, where 86 percent of removals were done on procedural grounds, according to the KFF and Georgetown data. In addition to sending beneficiaries a postcard, letter, renewal packet, text messages and phone calls, the state’s Medicaid agency is launching a multilingual ad campaign and has collaborated with food banks, pharmacists, clinics, school systems and child-welfare workers to spread the word, according to Michele Holtkamp, the agency’s spokeswoman.
In Arkansas, a 2021 law requires the state to sort through renewals within six months, half the time the Biden administration recommends. Gov. Sarah Huckabee Sanders (R) published an op-ed in the Wall Street Journal in May saying, “I’m proud Arkansas is leading the nation in getting back to normal.” Most Arkansans who lost jobs during the pandemic are working again, she wrote, saying, “It’s time to get them off the path of dependency.” The governor did not say how many of the reemployed have health benefits through their jobs.
Trevor Hawkins, an attorney at Legal Aid of Arkansas, said some people have been told their Medicaid cases were closed at their own request — when that was not true. As in a number of states, he said, children are being removed from coverage if their parents become ineligible, even though the children still qualify. And some people are simply being denied and told to reapply, Hawkins said, so they are uninsured while “they are just patiently waiting to be reapproved …[with] no idea how long the line is.”
Arkansas Community Organizations, a grass-roots antipoverty group, held a protest last month outside one of the Department of Human Services’ Little Rock offices. Demonstrators carried hand-lettered placards saying, “Fix the glitch!” and “This update is life or death,” and one protester staged a skit simulating depositing information into a cardboard computer and receiving a slip of paper saying, “Denied.”
Gavin Lesnick, spokesman for the state’s human services department, said Arkansas is following “a detailed plan … that is both fair and helps protect Medicaid resources for those who truly need it.” He said that just because a case is closed for a procedural reason does not necessarily mean someone failed to receive a renewal packet or did not know about the unwinding. Some people, Lesnick said, have chosen not to return renewal forms, aware that they are no longer eligible.
In Fayetteville, Fortner does not know when — or if — her Medicaid coverage will be restored. She does not understand why her 15-year-old daughter has been allowed to stay on the children’s version of Medicaid, while she and her husband, the manager of a vape shop, were cut off — without receiving a denial letter.
She takes Suboxone to stay clean from the opioid addiction she said she has struggled with since she was 14 and prescribed painkillers for whiplash from a car crash. The day this spring she could not afford the Suboxone, she said, “I felt hopeless … and pretty irritated.”
After discovering in May that her Medicaid coverage had been cut off, she went to a local branch of the human services department to find out what was going on. “I was told I would need to reapply completely,” Fortner said. By the end of that week, she took in all the requested information, including proof of her husband’s previous jobs and his current one.
“They said I was good to go,” she said, and was told the paperwork would take 30 to 45 days to process. After calling repeatedly, she returned in person in mid-June. She was told she needed to furnish evidence that she no longer worked at another waitress job she had left nearly a year before. She also was told her husband’s doctor needed to provide proof of why he was on Social Security disability. Her husband has never been on disability. She asked for a copy of the form with the disability question, but the employee said she couldn’t print it out because it had just been mailed to their home and, once it arrived, she could mail it back saying he did not have disability benefits.
“It’s very, very frustrating,” Fortner said. “I keep thinking I’ve done everything I’m supposed to do and it’s fine, but then, when I check, it’s not fine.”
https://www.washingtonpost.com/health/2023/07/28/medicaid-unwinding-pandemic/
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