When governments decide to privatize functions, one of the things they often promise is that the move will save money. In Iowa, Gov. Kim Reynolds says privatizing management of the Medicaid system has saved the state tens of millions of dollars. But there’s no real agreement about how much money has actually been saved -- or where the savings are coming from.  

In May, Mike Randol, Iowa’s Medicaid director, told legislators that the state had saved $141 million just this year through privatization. That was a lot less than the $238 million that then-Gov. Terry Branstad promised when he ordered the change back in 2015. Still, it was a lot more than earlier estimates of actual savings. In fact, it was triple the amount Randol’s agency had estimated as recently as January. “You can see with the changing savings figures that the state has not been terribly transparent,” says Anne Discher, executive director of the Child and Family Policy Center in Des Moines. 

Randol initially offered no explanation as to why the savings estimate had jumped from $47 million to $141 million in just a few months. He later said that the picture changed when he looked at the system as a whole, rather than individual programs and services. The state Department of Human Services (DHS) subsequently released details about its methodology, but legislators expressed some puzzlement and asked the state auditor to look into the disparity. 

State officials continue to insist that turning over management of the $5 billion Medicaid system to the private sector has brought the taxpayers a windfall. “There is no dispute that managed care is bringing savings,” says Matt Highland, a DHS spokesman. 

But a number of health providers in the state have complained that the numbers are a little fishy. They say the savings have resulted in part from delayed compensation to them, or complete nonpayment for legitimate treatments. They contend, among other things, that a change in the coding of procedures means valid services that aren’t on the new list aren’t being paid for. In short, providers say, they’re getting stiffed. “The claims about savings were not a savings in services, but the fact that the Medicaid managed care companies simply weren’t paying the bills,” says Peter Fisher, research director of the Iowa Policy Project, summarizing the argument. “They counted that as saving money.” 

Health-care advocates say that while there may be nothing wrong with managed care, the privatization switch was too much, too soon, with 600,000 individuals moved over into the new system all at once. In August, Reynolds fired a Medicaid adviser who had questioned the numbers. “The state essentially handed over the program to three proprietary companies and has not managed the program,” complains Kirk Norris, president and CEO of the Iowa Hospital Association. 

Norris warns that the new system may actually cost the state money in the long run. Brenna Smith, communications director for the governor, insists that the opposite is true. “DHS’ newly released analysis reflects that our Medicaid program is the only way to ensure a responsible and sustainable program, as health-care-related costs continue to rise,” Smith says. 

Time will tell who’s right. That, and the auditor’s report. And, if the complaints about nonpayment for services are seen as valid, potentially some lawsuits.