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Branstad questions Medicaid savings estimate

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DES MOINES | Gov. Terry Branstad took issue Thursday with provisions of a Senate-passed human services budget bill, saying majority Democrats are using unrealistic savings projections in switching Medicaid to a managed care system and "looking backward" in trying to keep open mental health institutes that are "outdated and outmoded."

On a party-line decision, senators passed a $1.9 billion fiscal 2016 budget that would establish a state commission to oversee the transformation of Iowa's $4.2 billion Medicaid program into a managed care system that will enlist private health care vendors to coordinate care and manage program spending. They also voted to cap profits by limiting administrative costs paid to managed-care companies and barring them from saving money by cutting provider rates or reducing Medicaid waiver slots before sending Senate File 505 to the GOP-led House for consideration.

Democrats who run the Senate projected savings from the transition would top $120 million. Branstad administration officials have projected savings from changeover to a managed care system closer to $51 million.

"I think the $51 million of savings that we recommended is a fair and realistic estimate," Branstad told reporters Thursday. "To double that I think is not responsible."

Branstad said the administration's savings projections are based upon experiences in other states that have privatized their Medicaid systems, but Sen. Amanda Ragan, D-Mason City, co-leader of the health and human services budget subcommittee and S.F. 505 floor manager, said she has not seen detailed number to back up the administration’s estimates.

Earlier this year, the state Department of Human Services issued a request for bids from potential vendors to convert to a risk-based Medicaid modernization initiative aimed at improving coordination and quality of care while providing predictability and sustainability for taxpayers in Medicaid spending.

DHS officials said the objectives were to improve quality and access, promote accountability for outcomes and create a more predictable and sustainable Medicaid budget for a program that has grown 73 percent since 2003 with a cost last fiscal year of $1.5 billion to Iowa taxpayers.

Democrats' proposed $1.904 billion health & human services budget for next fiscal year also built in about $13 million from federal and Medicaid sources to keep mental health institutes in Clarinda and Mount Pleasant operating beyond July 1.

However, Branstad challenged that provision as well, saying Iowa's transition to a regional delivery system for mental health services was a "long overdue" change that reflected "an enlightened approach" to treating mental health patients rather than "warehousing them for years" in the state's four MHIs.

"These institutions are outdated and outmoded and don't really fit the needs of providing the best quality mental health for people today and so I think it would be a big mistake to just kick the can down the road and not make the important decisions that provide better services to mental-health patients in the future,” the governor said. He added he preferred that approach to “looking backward and trying to defend the status quo."

At the outset of negotiations, Senate Democrats and House Republicans are about $100 million apart in their HHS spending targets, but House Speaker Kraig Paulsen, R-Hiawatha, said Thursday he believed progress was being made. "It's always very difficult when you're trying to resolve money," he said.

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