DES MOINES — The two private health care companies that manage Iowa’s $5 billion Medicaid program are getting a funding boost. But don’t call it a raise, the state’s Medicaid director said Thursday.

Contracts signed this week by the state include an 8.6% increase in state and federal funding for Amerigroup Iowa and Iowa Total Care, the two insurers that provide health coverage for more than 600,000 disabled and low-income Iowans on the Medicaid program.

That 8.6% totals to a $386 million overall increase from state fiscal 2019, including $115 million from the state. Iowa’s share is increasing 6.5% from the previous year.

Iowa’s Medicaid Director Mike Randol told reporters the funding increase is not a raise for the managed-care organizations, but rather a boost to help the companies manage increased medical costs and new programs and requirements.

“The MCOs are not getting raises,” Randol said in the state health care department’s offices in Des Moines on Thursday. “These rates are based on actuarial soundness and services that our members actually had during that base period.

“So it’s not an increase for the MCOs. The majority of that funding will go out to the providers who are providing the services and delivering those services to our members.”

The capitation rates — paid to the insurers on a per member per month basis — were negotiated behind closed doors by company officials and the Iowa Department of Human Services.

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

Saving money

Randol said despite consecutive years of funding boosts, he is confident the state is saving money by contracting with private insurance companies to oversee Medicaid. The state managed the program until former Gov. Terry Branstad altered the structure in 2016, switching the program to managed care.

“I understand that without the managed care delivering those services to our members and actually managing that care, that those costs would be much higher,” Randol said.

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Under the previous state-run program, Medicaid costs were growing annually at a rate of 5%. According to the state, federal and state dollars spent on the old Medicaid system nearly doubled between 2005 and 2015, from $2.5 billion to $4.9 billion.

Randol previously said a public meeting he estimated Medicaid privatization saved the state $140.9 million for fiscal year 2018, a figure former State Auditor Mary Mosiman supported in an audit of the Medicaid program released in late 2018.

But despite the consecutive years of increased payments to the managed-care organizations, UnitedHealthcare officials criticized the state for underfunding the Medicaid program, stating it had lost millions of dollars in three years.

The company announced in April it would exit the program at the end of June, forcing Medicaid members and health care providers into another transition.

UnitedHealthcare is the second managed-care organization to depart since the program privatized in 2016, following AmeriHealth Caritas, which exited in November 2017.

Critics of Iowa Medicaid say the departure of two insurers and other upheavals since the program privatized has been contentious for patients and providers.

“That’s really hard when it keeps changing, especially for the families of chronically and seriously ill people,” said Peggy Huppert, executive director of the National Alliance on Mental Illness of Iowa.

Iowa Total Care, the newest managed-care organization, joined the program on July 1.

Randol said he is confident Amerigroup Iowa and Iowa Total Care will remain long-term partners with the state.

“I realize there’s been disruption, two MCOs leaving. It’s not ideal,” Randol said. “But I think we’ve successfully gone through that, and we will work with members and providers to ensure that we can develop some stability within the program.”

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