Firm proposes ‘dramatic’ Medicaid restructuring

As part of its no-bid contract with the state, a large private firm has proposed that New Hampshire ask for a special waiver enabling it to slash spending through a “dramatic” restructuring of its Medicaid program.

But at deadline the state Department of Health and Human Services would not release documents about its response to the proposal, leaving the details of any Medicaid restructuring a mystery. Thus it is still not clear whether the state is planning to change Medicaid from an entitlement program that mandates that recipients – the state’s poorest residents — get what they need to a more flexible block grant program with a cap on spending, no matter how many people require services.

Maximus Inc., a publicly traded company based in Virginia, proposed that its subcontractor, Sellers, Feinberg and Associates, a smaller Philadelphia consultancy, apply for such a waiver in a March letter to state HHS Commissioner John Stephen. Under the proposal, the consultants would get some portion of the state’s savings, though not necessarily the 15 percent contingency Maximus is getting under its existing contract.

“That is sick,” said Jim Squires, president of the Concord-based Endowment for Health. “The more they cut, the more they make? The idea is to take care of people who desperately need the support of government. The question should be, ‘How we are going to pay for them?’ Not, ‘Are we going to pay for them’”

Consultants who get Medicaid contingency fees also have drawn federal criticism, including form U.S. Sen. Chuck Grassley, R-Iowa, chair of the Senate Finance committee, who has called on the General Accounting Office to launch a national investigation into such contracts.

Maximus’s draft confidential proposal – which New Hampshire Business Review acquired under the state’s Right to Know law – was not signed.

HHS Commissioner Stephen called the proposal “an unacceptable deal” when asked about it after a June 3 forum in Concord on Medicaid modernization. But when asked if HHS was negotiating another deal with the company, Stephens pointedly walked away without answering the question.

Maximus officials working on the project have not returned phone calls. Officials from Sellers, Feinberg refused comment, referring all questions to HHS.

‘Close working relationship’

During the series of public forums he has been holding in an effort to get suggestions from the public on how to reform Medicaid in face of federal cutbacks, Stephen has been dogged by accusations of “backroom deals” with consultants to apply for a block grant waiver. Stephen has repeatedly denied that there is any secret plan to seek a waiver to cap Medicaid, though he would not rule that out.

The department, he said, was just “considering its options,” though he did add that some kind of waiver was needed so “rules and regulations” could be relaxed.

At a forum in May in Manchester, the commissioner said in reaction to one such question about a waiver-writing contract: “We don’t have a contract. We are working with a consultant to help us facilitate this whole process. Are they going to get a share of anything? Absolutely not. There is no way we are going to share any revenue at all with any company. Not on my watch.”

However, last fall, under the watch of Stephen’s predecessor, Nick Vailas, Maximus was awarded a contract that would give it 15 percent of any additional federal funds it could bring in through the Medicaid program, though the contract does not mention any broad-based waiver or capping Medicaid,

The contract was not put out to bid because of budget pressures and the need for immediate savings and because Maximus had already established a “close working relationship” with state officials, and it is the pre-eminent company in its line of business.

Maximus – with over a half-billion dollars in sales – is the 800-pound gorilla when it comes to maximizing federal revenue. Indeed, that is where the firm – created nearly 30 years ago by David Mastran, a former Nixon administration official – got its name. But Maximus does have competitors, including a few firms that already have other contracts with the state.

Maximus has garnered at least $8 million in contracts with the state over the past five years, doing everything from overhauling the state’s computer system to writing a waiver requirement to include Social Security numbers on recreational license applications. All of the other eight contracts, however, were either put out to bid or are continuation of older contracts. Maximus was the low bidder on only one of the contracts, but when the rest of factors were included — especially the company’s experience – its score came out on top.

Mediscam crackdown

A company of Maximus’ size is bound to have its share of controversies. Maximus faced litigation in Maywood, Ill., and San Diego, Calif. There are news reports charging it hung on to child support problems for too long in Maryland. In New Jersey, the state indicted seven Maximus employees for Medicaid fraud and in Wisconsin, Maximus admitted to improperly billing the state $411,000.

The greater controversy, however, doesn’t involve one company, but the increasing use of contingency contracts as a percentage of revenue. The contracts encourage consultants to stretch the rules in order to draw down federal funds by “opportunistically inflating a state’s Medicaid claims,” said Senator Grassley, who has demanded the GAO investigation.

In Georgia, for example, a small consulting firm with ties to a former governor walked away with $84 million for savings later deemed dubious.

The Maximus contingency contract with New Hampshire was on a much smaller scale. Its fees were capped at $3 million, and the company proposed a dozen small ways that would add up to bring into the state some $6.3 million. But HHS didn’t agree to many of those plans – and the few it did agree to didn’t work out.

In e-mails obtained by the Business Review, several department officials complained that working with the consultant was a waste of time and money — or at least that time should be counted when calculating savings.

“Maximus has got to understand that we do not have the resources to pursue goose chases,” said one official.

Thus far, Maximus has not documented a penny of savings, and therefore hasn’t received any money, according to HHS officials. Meanwhile the budget situation in New Hampshire has been getting increasingly desperate.

The federal government has raised the heat in its crackdown on Medicaid money that states divert to their general fund. In fact, New Hampshire was one of the pioneers of this complicated scheme, known as Mediscam, which involves taxing and reimbursing the state’s hospitals. The state has counted on receiving $50 million a year through the system.

In fact, the state is so dependent on the money to help balance its budget that Gov. Craig Benson traveled to Washington in January to meet with federal Health and Human Services Secretary Tommy Thompson to see what could be done to save the funds — at least in the short term. But Thompson was looking for something in return: A state to test a block grant program, which could enable it to see a substantial cut – or at least a slowdown – in Medicaid spending.

Benson appeared to be ready to strike a deal under which the state would be allowed to grandfather in its Mediscam money as long as the total amount the state would get was capped at a certain level.

“Tommy Thompson and I had a very nice discussion about creative ways to work together, including what’s called a block grant program, which no state has embarked on, and I told him we’d be interested in perhaps becoming that first state,” Benson told New Hampshire Public Radio at the time.

The words launched a storm of criticism — a storm that refuses to die down, even though the term “block grant” has long been dropped. Critics charge that the Mediscam money never went to Medicaid recipients, though it should have, so why should the poorest people in the state get even less money to balance the budget?

“This will be the most major change since the inception of Medicaid,” said Squires, a former state senator and candidate for the Republican gubernatorial nomination.

Hurdles ahead

Meanwhile HHS has been putting increasing pressure on Maximus to come up with some savings.

“I need by Thursday some real dollar estimates from Maximus’ efforts,” wrote one official in early February. “The commissioner looking for ways to plug $30 million state fund shortfall and is counting pennies.”

Soon, however, Maximus was proposing ways to save more than pennies.

On Feb. 19, Maximus proposed using Sellers, Feinberg to redesign its Mediscam program so it could pass federal muster. Sellers, Feinberg not only has expertise in this area, but it has a “lobbying relationship in the nation’s capital with two prominent firms who have the ability to reach out to CMS (the Centers for Medicare and Medicaid Services), HHS and the White House.”

On March 9, Maximus proposed restructuring Medicaid through the “aggressive use of federal 115 waivers,” developing a proposal within three months.

“The benefit to New Hampshire will be cost savings achieved through reducing Medicaid expenditures from projected levels over the next four years to desired levels both during and after restructuring,” the company stated.

According to the proposal, Maximus would suggest a method of “calculating the firm’s fees” based on the savings realized through any restructuring program.

The contract is unsigned and there was no response in the files released to the Business Review. Department officials did not say why there was no written response, but they did note that if another contract were being negotiated such negotiations are exempted from the state’s Right to Know law.

When asked earlier if such negotiations were going on, Stephen would only say, “we are trying to work things out.”

But what is being worked out? Is it just a way to trim savings, like buying some medical supplies more cheaply through Wal-Mart rather than at a much higher cost through Medicaid? Or is it a substantial cut in benefits, reimbursement rates or tough eligibility criteria?

Meanwhile, as the public forums and the private negotiations continue, those concerned about block-granting and capping Medicaid are not standing idle. The state House amended a bill – over Stephen’s objection — that would help the state capture some of the Mediscam money but require that the department go before the Legislative Fiscal Committee with any plan to cap Medicaid.

The amended bill sailed through the House and Senate, but Governor Benson has threatened to veto the bill.

In addition, any new contract concerning Medicaid modernization or restructuring would have to be approved by the Executive Council and a proposal might run into resistance there as well.

“They have been less than forthcoming,” said Executive Councilor Peter Spaulding of HHS. “No one will tell us the plans until after it’s done. But if it is a block grant, it would be a great disservice to the state. It would be the dismantling of the safety net.”