The rising Medicaid spending in Iowa under a privatized managed-care system comes as no surprise to a health policy expert at the Iowa Child and Family Center in Des Moines.
“When it comes to managed care, we should always be somewhat skeptical of any promises of cost savings,” Mary Nelle Trefz, health policy associate at the center, told The Center Square. “There’s been some national research that’s found little evidence that managed care has been able to achieve any cost savings.”
The Iowa Department of Human Services (DHS) said this month that the state’s share of Medicaid funding in the new fiscal year will rise 6.5 percent. The insurers Amerigroup Iowa and Iowa Total Care will receive funding levels of nearly $400 million over the previous fiscal year under newly signed contracts, according to DHS.
Total federal and state spending for Medicaid services will increase 8.6 percent.
Three years ago, former Gov. Terry Brandstad moved to transition from a state-run Medicaid system to one overseen by private managed-care organizations, arguing that a privatized system would better keep annual cost increases in check. But for the past two years, total costs have gone up more than 8 percent annually.
“Managed-care organizations have a lot of leverage right now,” Trefz said. “We’ve had two organizations depart in the last couple of years.”
State officials, including Gov. Kim Reynolds, have said the increase in spending is justified due to new state commitments to Hepatitis C treatment, nursing home care and mental health services for children.
Trefz said she hoped to see the increased system accountability that Reynolds and others have promised. And many medical care providers in the state deserve higher reimbursement rates because they have struggled to keep their doors open, she said.
Trefz remains uncertain about whether the costs of the managed-care system would stabilize in the years to come.
“It sounds like it’s [Gov. Reynolds’] belief that these should level off in the near future,” she said. “That remains to be seen.”
But if they don’t, that would put the state in the same position it was in when Brandstad opted for managed care, according to Trefz.
Though some health policy observers in other states have criticized recent cost increases that have occurred under Medicaid expansion, she defended the health care system.
“Medicaid is already a highly cost-effective program,” Trefz said. “There’s simply not much fat to cut.”
Iowa expanded health insurance options through Medicaid under the Affordable Care Act in 2015.