President Lyndon Johnson signs H.R. 6675, into law in 1965, establishing Medicare and Medicaid. (Truman Library)

The Dismantling of Medicaid

Once considered one of the crowning achievements of The Great Society, Medicaid is now being steadily chipped away—and patients are suffering because of it.

BY Michael Collins

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Plagued by a poorly designed medical reimbursement process that rewards health care professionals for providing medically unnecessary care and yet doesn’t pay enough for many specialists or small providers to deal with burdensome administration, the popular program has been a target of reform for decades. With state budgets hollowed out and a budget regime that cuts investments in health to fund tax breaks for corporations, legislators are now looking to cut costs—and if there’s time, improve the quality of care.

When Suzanne Klug took her daughter Tamara to an orthopedic surgeon in the winter of 2012, the first question the doctor asked her was, “Why are you here?”

“My daughter had five operations on her back and a surgically removed leg bone; she has two brain shunts. And now her foot aches,” Suzanne remembers telling the doctor. The rolling spasms, bone pain and general discomfort her daughter had been experiencing of late, she says, had finally sent the two of them to find an in-network orthopedic surgeon for treatment.

But according to Suzanne, Tamara’s pain wasn’t enough to warrant medical attention. “He said, ‘I can’t help you, come back when you have a problem.’ He wouldn’t even look at her foot,” Suzanne recalls now.

This wasn’t the first time a medical professional had turned down Suzanne and her daughter for medical care. Tamara, a 24-year-old wheelchair user with advanced cerebral palsy and multiple attendant disabilities, needs access to professionals who treat her with dignity and who have the skills to suit her needs. Because Suzanne, Tamara’s sole caretaker, was covered through Aetna-managed Medicaid, those doctors must also be in her network. And finding them, the Klugs say, is a near-impossible task.

Medicaid, once considered one of the crowning achievements of The Great Society, is now being dismantled by those entrusted with its care. Plagued by a poorly designed medical reimbursement process that rewards health care professionals for providing medically unnecessary care and yet doesn’t pay enough for many specialists or small providers to deal with burdensome administration, the popular program has been a target of reform for decades. With state budgets hollowed out by the perfidy of the mortgage industry and a budget regime that cuts investments in health to fund tax breaks for corporations, legislators across the nation are now looking to find ways to cut costs—and if there’s time, improve the quality of care.

How managed care operates

Here enters managed care, seen by some elected officials as a panacea to their fiscal woes. Under this system, private insurance companies, or Managed Care Organizations (MCO), receive a fixed monthly payment from the state per Medicaid patient. In exchange, they agree to work with hospitals to strike deals and lower costs.

The first step in this process for an MCO is to sort patients by health risk by reviewing their medical records or, in severe cases, sending a social worker to evaluate them at home. As a hypothetical example, if 100 people enrolled in Aetna’s MCO were at risk of a heart attack, Aetna would calculate how many of them could improve their health through low-cost interventions, such as free gym memberships and dietary counseling. If Aetna decided that, say, 60 of the new enrollees wouldn’t need access to expensive cardiologists if they improved their eating and exercise habits, it could then approach regional hospitals and doctors with a bargain: a guaranteed referral of 40 new patients to said facilities in exchange for lowered medical costs. Doctors and hospitals are promised a flow of new patients, and the MCO gets cheaper care and doesn’t have to pay for the most expensive intervention possible.

Theoretically, this costs states less than paying for each patient directly. In fact, managed care seems like a great idea overall, until one factors in the often unscrupulous business practices of the health insurance industry.

One obvious flaw in the system is that MCOs can increase their profits by erecting roadblocks to care. If you’re one of the aforementioned 60 patients put on a diet and exercise regime, you may find it more difficult to get access to a cardiologist. Worse still, if MCOs make a patient drive three hours to see an “in-network” specialist he or she needs, chances are lessened that the patient will make it to that professional at all—and the MCO can keep the funds it receives from the state without paying for that person’s care.

States argue that they have a two-pronged response to avoid these negative circumstances: consumer “choice” and careful monitoring. If insurance companies cheat by making it too hard for patients to find the care they need, they say, consumers will simply switch to a better network. If the bad behavior continues, then the state will find another company willing to play by the rules. But the MCO market is frequently monopolized by one or two companies in a region—and state regulatory agencies have become so weak that the “worst of the worst” are still getting contracts, meaning that opting for one over another doesn’t guarantee any sort of improvement.

Kentucky taxpayers became intimately aware of just how quickly the profit motive can strip away access to care in 2011, when the Kentucky legislature outsourced its experiment in Managed Care to three companies: CoventryCares, Kentucky Spirit Health Plan and WellCare. The basic logistics of grouping patients by risks and dividing them into hospital networks resulted in abrupt and potentially dangerous changes in treatment. While Medicaid recipients once had relationships with local medical professionals, many were now forced to try and navigate an often-complicated bureaucracy to try and find doctors that worked for them in their “network.”

In a letter to the editor of the Lexington Herald Leader, the head of statewide child advocacy organization Kentucky Youth Advocates lamented that the rollout of managed care severed continuity of care around the state, because “many parents had to switch their children to another plan once they discovered the providers in their area weren't part of their assigned plan.” For most families, this was an inconvenience at best; for those with rare illnesses and few specialists near their home, however, trying to find quality care was a hazardous burden.

And Kentucky’s inauspicious start to privatizing managed care was quickly followed by a perilous end. Kentucky Spirit, one of the three companies hired by Kentucky to administer Medicaid managed care, refused to meet its contract’s year-long term and abruptly cancelled its services. Citing a lack of full disclosure from Kentucky of just how ill Medicaid patients were, shareholders in Kentucky Spirit’s parent company Centene decided it was time to jump ship. Or, as Kentucky Secretary of Cabinet for Health and Family Services Audry Haynes wrote in a press release, “[a] Fortune 500 company has chosen to put profits above people and will not honor the terms of its contract.” Centene skipped town, resulting in chaos for its 125,000 enrollees, many of whom didn’t know where to go to get vital prescriptions. Though Kentucky Spirit patients were re-enrolled in other networks, the process took time and money—and the state and its residents were left to flounder.

Centene’s search for profit also devastated patients in Kansas. A lawsuit recently filed against a Centene subsidiary in the state alleges that a CEO instructed plan operators to illegally shift patients to cheaper doctors. Sunflower State Health Inc, run by CEO Jean Wilms, signed a contract with the state of Kansas promising that Sunflower “must ensure that members are afforded the right to select the providers of their choice without regard to variations in reimbursement.”

But the former Vice President of Contracting and Network Development for Sunflower alleges that she was directly instructed to do “whatever was necessary” to prevent patients from seeing the doctors of their choice. Instead of driving down costs through innovation or reducing bureaucracy, Centene decided it would be easier to simply restrict who patients could visit.

Big shoulders, bigger problems

Suzanne and Tamara became all too familiar with the low quality of care offered by privatized Managed Care Organizations. After a year and a half, they were tired of searching nonstop for doctors within their Aetna “network” who weren’t ableist, had handicap-accessible offices and were within 50 miles of their home. When Suzanne reported that none of the doctors in her network were willing or able to treat her daughter, she says that her Aetna social worker told her to try specialists in Kankakee—70 miles away.

Even worse than the unavailability of treatment, however, were the excessive wait times for vital medical equipment. Suzanne often went weeks without knowing when her next shipment of colostomy bags would arrive for her daughter. At one point, desperate and out of supplies, she even had to begin reusing single-use bags—which can lead to potentially life-threatening infections. She assumes now that the long intermissions were a result of the bureaucratic labyrinths created by privatized care.

“For someone like my daughter with multiple disabilities, [accessible medical care] is her lifeline. She could’ve died, and I felt really trapped,” Suzanne says.

For the Klugs, managed care became synonymous with headaches, disrespect, danger and wasted time. So they packed up their things again and began looking for a new home that didn’t force Medicaid patients into Managed Care Organizations. In September 2012, they moved to the North Side of Chicago, hoping to find more and better specialists.

Which is why it was such a disappointment when they found out this year that managed care was coming to the city, and for-profit insurance companies were leading the charge. In April 2014, Chicago’s business weekly Crain’s reported that Cook County had given a no-bid contract to Centene, the same parent company that had abruptly quit their contract in Kentucky. With taxpayers footing a $450 million yearly bill, Centene’s contract promises that it will reduce the cost of care per patient by $1,000 a year.

Just as in Kentucky, though, Medicaid patients across Illinois’ largest county are suffering from disruption of services and a dip in care quality. During a pilot program from 2010 to 2013, Centene’s Illinois incarnation, IlliniCare, failed to meet 21 out of Cook County’s 42 performance goals. Ideally, insurance companies should work with doctors to administer preventative treatment and reduce more expensive procedures in the long run. But in 2013, IlliniCare actually decreased the amount of cholesterol testing it performed in a one-year period; this has the potential to let Coronary Artery Disease go unchecked in patients. Likewise, IlliniCare also performed worse in the percentage of patients they followed up with after receiving ambulatory care.

For that middling performance, however, the CEO of Centene received a total compensation package of $14.5 million in 2013; the company will provide care to hundreds of thousands of Illinois residents until 2015.

Fighting the trend

Illinois is just one of dozens of states attempting to move state-provided health care services from the relative accountability of local government into private operators notorious for their cronyism. While far from perfect, local health departments must follow public meeting laws and are subject to internal (such as Inspector Generals) and external (such as FOIA requests and public interest lawsuits) oversight. That’s not the case when private companies take the reins.

To combat this alarming trend of backdoor Medicaid privatization, activists across the nation are stepping up to demand protection and systemic change. In Illinois, Tom Wilson of Access Living, a policy and organizing group fighting for disabled people, is working with three hospitals and a think tank to beat the insurance companies at their own game. They formed Community Care Alliance of Illinois, a nonprofit Managed Care Organization, in 2010.

Wilson’s work, he says, is informed by an explicit understanding that “People with disabilities are normally the most knowledgeable people about their own health.” In recognition of this, the Community Care Alliance has created a Stakeholders Forum consisting of representatives with disabilities—of which Suzanne is a member. When the CCAI reduces costs through effective care-management, it reinvests those savings into purchasing durable medical equipment for patients rather than squirreling them into higher-ups’ pockets.

But Wilson admits that the combination of constant budget cuts, new providers and changing legislation make for “a lot of change to stay on top of from an advocate’s point of view.” As a result, CCAI—arguably one of the most ethical incarnations of the MCO program—is still far from perfect. Though there are 1,000 primary care physicians and 3,000 specialists in its network, it still has to grapple with bureaucracy and ration care based on health history.

Suzanne says even at CCAI, her wait time for colostomy bags is still alarming, although her social worker is much more helpful. Robert Currie, the president of CCAI, wrote in a comment that they are learning to “cope with [the] tremendous demand for [their] innovative, consumer led model-of-care.”

Both Suzanne Klug and Tom Wilson readily admit that in a perfect world, the state would implement a single-payer system framing medical care as a public good rather than a private asset. Even if the U.S. were to implement such a thing tomorrow, however, the crises of our broader economy would make such a system untenable. Providing a high level of health care for the chronically ill and severely disabled will require massive investments and a radical shift in values, the likes of which the U.S. hasn’t seen since the first progressive movement.

Sharon Post, the Director of the Center for Long Term Care Reform at the Health and Medicine Policy Research Group, argues that the flaws in our health delivery system are deeper than administration and privatization.

“Just switching to single payer won’t change the range of practices and habits [of care providers],” Post says. “It won’t necessarily get better. We have a separate insurance system for poor people.”

Post encourages activists and health care providers to think of medical care and its funding structure as “vital to emancipatory politics.” To liberate ourselves from a morally bankrupt medical system, she suggests we reframe our thinking on health care. “Is there a long-game to look beyond managed care to a better overall system that isn’t so fragmented and doesn’t segregate poor people into one underfunded plan? And what can we learn from the managed care experiments to inform a longer-term plan for a more just and effective health care delivery system?”

While our economy isn’t structured to invest in the people and institutions that matter most, plenty of people are working hard to change that. In addition to Access Living, groups like National People’s Action, the Chicago Teachers Union and the National Nurses Union are calling for a radical reimagining of our tax system that puts people first. Once we take back our money from the be-Rolexed hands of Wall Street, they hope, we can finally put it towards health care for all people.

Michael is the Executive Director of the Center for Progressive Strategy and Research where their research interests include race, employment and transnational labor solidarity. They currently sit on the board of The People’s Lobby Education Institute and have previously served on the boards of the Crossroads Fund and In These Times magazine. They are a proud member of Chicago's progressive queer community.

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