Alex Kachik: Hello and welcome to the Beyond Signature section of Modern Healthcare, where we offer a look behind the scenes of our reporting. I’m Alex Kachik. I write about hospital operations. Insurance reporter Nona Tepper will join me today to report on a new lawsuit against Aetna. Thanks for joining me, Nona.
Nona Tepper: Thanks, Alex.
Alex Kachik: So, Nona, you covered a lawsuit that was recently exposed that alleged that Aetna ran a shadowy network of pediatric primary care physicians. So what were some of the charges?
Nona Tepper: I want to start by reiterating your point of view that these are just accusations. We don’t know if this is true, and yes, just at the top. But most of the lawsuit said Aetna lied about the number of providers on its network. And this could have happened for a number of reasons. Maybe to get members into your network with a gimmick that, oh, your doctor, we have a contract with them. You don’t have to change your service provider. ” Maybe as a way to upset the attendees in some weird backward way by making it harder for them to make an appointment. This makes the situation more like you are missing an appointment or less likely to see your doctor. And the reason this lawsuit says they potentially did it is because they could get Medicaid contracts in Pennsylvania.
Alex Kachik: And these contracts are usually pretty competitive. Different states will send RFQs and then offer different rates. But yes, I suppose if you say you have a large network of health care providers, that could give you an edge when trying to serve this particular pediatric group.
Nona Tepper: Fully. These contracts are supercompetitive, and there are only more and more of them. New coverage has emerged in the Medicaid managed care market. Thus, there are more insurance companies you will have to compete with, and more states are also expanding their Medicaid programs and looking to manage health care as a way to stabilize costs. And, in theory, offer more prevention services and more services to address the social determinants of health.
I also think there is a Democratic proposal in Congress that says they want to do a federal Medicaid managed care program. And they will be doing it in non-expanded states, which represent a huge slice of potential applicants, which would be a huge dollar amount. So while Medicaid Managed Care actually provides the lowest ROI of any insurer business, these are still big contracts and they are still very competitive. For example, Aetna is now suing the state of Pennsylvania because it did not get a contract in its recent Medicaid managed care proposal, even though the lawsuit exists.
Alex Kachik: Interesting. Yeah. So a little background on the qui tam lawsuits. I know we both covered them up and they are informally known as whistleblower lawsuits. And they are filed by the realtor on behalf of the government to reimburse taxpayer money spent on fraudulent claims, and they are first sealed, and in the initial litigation, and eventually released to the public. And the government can intervene in this, which they do in every fourth case. Or they do less than one in four. And then they can also let the realtor continue and just ask them to oversee the case, or they can go on to get fired.
And there was a memo, a Granston memo that was put into effect in 2018 to try to weed out frivolous lawsuits over fears that whistleblowers were suing solely for their share of the settlement because they would get their share if they succeed. But what do we know … how often they are brought in by former employees. So what do we know about who filed this amended complaint against Aetna?
Nona Tepper: Good question. Yes, this claim, you are right, was filed by the informant. She was a former employee of Aetna. I believe she was a nursing quality consultant and was responsible for investigating why Aetna visits Medicaid Managed Care members under the age of 21 each year. They had fewer doctor visits than the state average. At the time, Aetna said it was discrimination by providers. They don’t want to see Medicaid members, maybe their rates are lower or something else. Aetna also accused these Medicaid participants of parental negligence, but after that, an investigator named Carol Wessner opened an investigation. I’m guessing she said she discovered that Aetna was faking her network of suppliers.
So they listed providers who were either off-chain or out of state, who hadn’t seen the children, and in some cases were dead, and they assigned them to these Medicaid members and said, “ Hey, you have to meet this federal requirement. see these children once a year. “
Alex Kachik: So, plaintiff Carol Wessner argued that Aetna distorted its primary health care networks in all 13 states in accordance with Medicaid contracts. It seemed like it was focused on Pennsylvania, but if these claims prove to be true, what’s the point?
Nona Tepper: This is a big deal. If Aetna lied about its 13-state network of Medicaid Managed Care providers, there are obviously legal implications. This would be a violation of the False Claims Act. And that’s what this lawsuit is filed for. There are also business ramifications.
As we said, you know that this is a truly competitive market and that would help Aetna secure these highly profitable five-year contracts, so it will add stability to their business. And I also think there are consequences for life and death here, too. For example, when you designate someone as a health worker who is potentially dead, you are saying that they will not go to the doctor this year. They won’t get the help they need and they won’t get a good experience in health care.
We know that Medicaid participants are disproportionately poor people of color. For example, you can exacerbate health inequalities across countries, as well as strengthen the faith of some people, such as distrust in the medical industry. So there are huge implications if it’s a national issue or even just a local issue in Pennsylvania.
Alex Kachik: Of course. And I suppose it could have provoked lawsuits from competitors, you know, if they thought they were unfairly agreed upon in this bidding process, competing for these pretty lucrative Medicaid contracts. My guess is that they could try to recover their alleged loss or damage due to not receiving these contracts.
I’m not that familiar with these types of lawsuits when it comes to these shady networks, but as you know, we are monitoring how the DOJ investigates claims against insurers, including Aetna, that they manipulated risk adjustment estimates for their Medicare Advantage patients. to get more. And so they would allegedly charge the government for more complex care if they had comorbidities or other problems that made it harder for them to care. They may say that this patient has a higher score, even if he may not have been as ill as they would have imagined with these numbers. So, I know that their insurers have their own arguments and excuses, and some of them may be administrative oversight or negligence. But it looks like there are different ways that federal regulators are looking to make sure these insurance companies exceed the bar.
Nona Tepper: Fully. Medicare Advantage, I think you are more likely to see risk adjustment inflation in these plans. I haven’t seen him on Medicaid yet, but that doesn’t mean he doesn’t exist, and I think another part of the Medicare Advantage story is that his costs are growing faster than traditional Medicare costs. So the amount spent per member, but we have no reason to believe that Medicare Advantage members are worse. And he also makes up a larger share of the federal Medicare budget than the population he represents. So I think that’s about 46% of the federal Medicare budget, but that’s only 42% of the participants. So, the amount we spend is increasing, but we have no reason to believe that the participants are worse or healthier, which leads to better results for the patients.
Alex Kachik: Got it. And it is just for us to understand, you know, these insurers, whether it is a managed care organization, they manage some of these claims on behalf of these various organizations that, as you mentioned, continue to grow. Therefore, they control some of these Medicaid or Medicare Advantage managed care plans.
Nona Tepper: Yeah. So basically Managed Care takes on a fraction of the state enrolled members for Medicaid Managed Care, and they say, “Usually we’re going to enroll them on a per member per month basis.” As such, they will receive a flat monthly fee to manage the care of each of these contributors, and basically their value proposition is similar to that of the state, especially during COVID. For example, “we will help you increase the stability of your budget and also reduce your costs because we are going to better manage your treatment and provide long-term care and preventive services, as well as services related to social determinants of health.” So I like the trips to the doctor, fresh food, affordable accommodation.
But the question is, does it really save money? Since Medicaid Managed Care contracts, they are allowed to spend 85% of their … or they are allowed to spend 15% of their profits on administration, or just keep them for themselves. But some local health authorities said, “Well, we can manage Medicaid.” The traditional Medicaid service fee is 5% of administrative costs. ”
I know this was part of the problem in Oklahoma where the governor and local health authorities wanted the Medicaid Managed Care program to succeed, but voters and the American Hospital Association, the local hospital association were opposed and ultimately rejected and although Oklahoma has expanded Medicaid, which is the traditional Medicaid service fee.
Alex Kachik: Got it. And I know you mentioned that federal law is expanding some of these Medicaid managed care programs. But in any case, there are states that are pushing for the expansion of Medicaid. So my guess is that this could be a potential area for growth, and under regulatory oversight, it is likely to have to be scaled up as well.
Nona Tepper: Yes, this is an area of great growth, especially during an economic downturn or when unemployment is so high. There are more publicly enrolled students than commercial students. So your government Medicaid managed care members grow and your incomes rise. While the amount you can get from your employer, clients can diminish. So this is also part of the equation. And supervision is always good.
Alex Kachik: And Nona, well, thanks for telling us about this. Thanks for taking the time.
Nona Tepper: Thanks for inviting me.
Alex Kachik: Everything is fine. Thank you all for your attention. If you’d like to subscribe and support our work, there is a link in the exhibition notes. You can subscribe to Beyond the Byline on Spotify or wherever you listen to your podcasts. You can stay up to date with our work by following Nona and me on Modern Healthcare on Twitter and LinkedIn. We appreciate your support.