One of America\u2019s most competitive gubernatorial races could settle a heated argument over whether private insurance companies should run Medicaid.<\/p>\n
The race is in Iowa, whose Medicaid program has been plagued with controversy since 2016, when the state hired national insurance companies to manage billions of dollars\u2019 worth of benefits.<\/p>\n
That shift was made by then-Gov. Terry Branstad, a Republican. With his executive order, Iowa joined most other states in privatizing the management of Medicaid, which covers healthcare for more than 67 million Americans with low incomes or disabilities.<\/p>\n
The arguments have resurfaced this year during the competition to replace Republican Gov. Kim Reynolds, who was Branstad\u2019s prot\u00e9g\u00e9 and continued contracting with private companies to manage Medicaid benefits. Zach Lahn, the Republican candidate to succeed the retiring governor, supports the practice. Rob Sand, the Democratic candidate, wants to end it.<\/p>\n
\u201cIt\u2019s been a disaster,\u201d said Sand, Iowa\u2019s state auditor. \u201cThe number of complaints has been catastrophic.\u201d<\/p>\n
Pros and Cons<\/strong><\/p>\n Supporters of privatization say the insurers, known as managed-care organizations, make Medicaid more effective and efficient. Critics contend the companies pad their profits by denying payment for crucial health services and by shortchanging agencies and professionals who provide care.<\/p>\n Iowa is among 41 states, plus the District of Columbia, that contract with outside companies to run at least part of their Medicaid programs. Overall, private insurers manage the benefits of more than three-quarters of Medicaid patients. Connecticut is the only state that has fully reversed course after privatizing its Medicaid system.<\/p>\n Sand has criticized privatized Medicaid for years. As state auditor, he published reports<\/a> alleging that the national insurers systematically deny or delay payment for services to which Medicaid participants are entitled.<\/p>\n He has vowed not to renew state contracts with the three insurers managing care for more than 600,000 Iowans on Medicaid, which is jointly financed by the state and federal governments. He would resume having state employees review and pay bills from clinics, hospitals, and other healthcare providers.<\/p>\n Lahn told KFF Health News that Sand\u2019s pledge to resume state administration of Medicaid \u201cis the exact wrong idea.\u201d<\/p>\n Lahn is a former activist for Americans for Prosperity, a national pro-business group affiliated with the Koch family. He contends that state governments and Medicaid participants benefit when insurers compete to serve them.<\/p>\n \u201cThere are very few things that government does more efficiently than the private sector,\u201d he said.<\/p>\n Lahn, who is a businessman and farmer, emphasized that state officials should strictly enforce contract requirements, ensuring that the insurers treat Medicaid recipients fairly and make prompt payments to care providers. He also said he would bar insurers from using artificial intelligence systems to determine whether to pay for medical claims under Medicaid. \u201cIowans deserve to have a human looking at their case,\u201d he said.<\/p>\n Sand said in a recent interview that he doesn\u2019t want Iowa to fully return to a \u201cfee-for-service\u201d Medicaid system, in which hospitals, clinics, and other healthcare agencies would effectively be paid piecemeal for whatever services they provided. Instead, he said, state employees should take over operation of a managed-care system, in which administrators review services to help ensure Medicaid participants receive what they need without wasting public money on ineffective services.<\/p>\n A few months ago, Republicans controlling the Iowa Legislature considered a bill to require the state to have a privately managed Medicaid system. That proposal would have blocked future governors from unilaterally shifting back to public management of the program. But the bill failed to pass.<\/a><\/p>\n Sand, a former assistant state attorney general, said he is confident he would have legal authority as governor to stop contracting with private Medicaid managers, although he cautioned that the transition would be complicated and could take time.<\/p>\n A Toss-Up Race<\/strong><\/p>\n National political observers say the Iowa governor\u2019s race could go either way.<\/a><\/p>\n This June, Lahn won an underdog primary campaign to beat a sitting congressman backed by President Donald Trump. Lahn gained Trump\u2019s endorsement after winning the Republican primary. He is a vocal supporter of the Make America Healthy Again movement, led by Health and Human Services Secretary Robert F. Kennedy Jr., which aims to improve Americans\u2019 diets and reduce environmental poisons.<\/p>\n Sand noted that Lahn\u2019s past political activism included a failed 2014 attempt to defeat a proposal to cover more people under Montana\u2019s Medicaid program.<\/p>\n Lahn said that at the time he worried the federal government would reduce how much money it would contribute to such Medicaid expansions, leaving states to foot much of the bill. He said he also didn\u2019t want to see public programs such as Medicaid giving benefits to adults capable of providing for themselves. But he said those concerns have been allayed, partly by the Trump administration\u2019s moves to require millions of Medicaid recipients to prove they are working, volunteering, or going to school.<\/p>\n If elected governor, he said, he would not try to reverse Iowa\u2019s expansion of Medicaid, which happened in 2014 under Branstad.<\/p>\n Branstad also is the governor who decided in 2016 to hire private insurers to manage Medicaid.<\/p>\n Branstad, who declined to comment for this article, did not need the legislature to approve his momentous decision. He weathered controversy over the change, including allegations that the companies systematically denied payment for care that people with disabilities needed to remain in their homes.<\/p>\n Andy Schneider, a Georgetown University researcher<\/a> who studies health policy issues, said it\u2019s understandable that many government leaders see an advantage in hiring private Medicaid management companies. Each state\u2019s Medicaid program pays claims for hundreds of thousands or even millions of members, and administrators must scrutinize bills from thousands of hospitals, clinics, and other healthcare organizations. \u201cThat\u2019s a heavy lift,\u201d said Schneider, who worked in federal Medicaid administration when Barack Obama was president.<\/p>\n Schneider noted that Medicaid expenses are among the biggest parts of any state\u2019s budget. The costs can vary dramatically year to year, he said, which is hard for legislators and governors to plan for. Management companies sign contracts for set amounts of money per enrollee, depending on people\u2019s ages and health conditions. Managed-care companies say they can improve Medicaid members\u2019 health and reduce expenses. But Schneider said outside researchers<\/a> have been unable to confirm or disprove those claims.<\/p>\n Federal law gives states flexibility in how they run their Medicaid programs, including whether they hire private insurers to manage the programs. \u201cUnwinding those arrangements might take a little time, but there\u2019s no question they can do it,\u201d Schneider said.<\/p>\n Connecticut ended its use<\/a> of private insurers to run Medicaid in 2012. Minnesota legislators decided<\/a> to contract only with nonprofit insurers, starting in 2025, and that state\u2019s governor has talked about<\/a> doing away with private management altogether.<\/p>\n Gary Jessee, a former Texas Medicaid director who helped transition that state\u2019s program into managed care, noted that most Americans\u2019 health coverage is managed by some kind of insurance company, whether they obtain it on their own or get it through a government or employer plan.<\/p>\n![\"Newsletter](\"https:\/\/kffhealthnews.org\/wp-content\/plugins\/kff-shared\/dist\/\/images\/newsletter-icon.png\"){kind=icon}
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