Monday, May 17, 2010


How a for-profit Medicaid provider makes money and what it means to public safety

by Larry Geller

From Summer Harrison at Disability Mom (click link below for the complete article and others related to this issue):

According to Wellcare Health's 10-K report to the SEC, nine percent of the company's gross revenue in 2009 was generated by the two percent of its members who live in Hawaii.

Wellcare is the parent company of Ohana, one of two for-profit companies providing medical, home and community services to the state's elderly, disabled and blind population.  Ohana was recently linked to a shooting in Honolulu, when it was discovered the victim had not been able to renew his prescription medications because the company could not find him a doctor to authorize them.

Page 58 of the report notes that Wellcare's revenue from state Medicaid contracts had jumped 8.9 percent from the previous year, in spite of the 8.3% decline in membership from being dropped by programs in Florida and Ohio.  The report directly attributes this significant increase in company revenues to the tiny 2% of their members in Hawaii.

Page 59 of the report blames the Hawaii enrollees for the company's drop in the profitability derived from calculating actual expenses as a percentage of the capitation fee.  For instance if direct medical costs rise from 84.8 percent of revenue from premiums, to 86.3%, then the company's profit has decreased accordingly.  These are the actual figures for Wellcare taken from the report.

We reported last week that Ohana was receiving $3,890 every month as their capitation payment for Martin Boegel, the victim of a suicide-driven shooting in Honolulu last week.  By not finding Mr. Boegel a physician, the company did not have to pay out that money for prescription medication or doctor visits.

This is how for-profit companies make more money by denying or reducing services that a doctor has said are medically necessary for an individual with disabilities to live at home rather than in an institution.

[Disability Mom, Hawaii is 2% of Wellcare membership but generates 9-12 % of company revenues, 5/17/2010]

The decision to switch from a fee-for-service system, that is, one in which the state simply pays for treatment and medication, to a capitated system and contract with two Mainland providers was made by Hawaii’s Department of Human Services and the Lingle administration. That decision underlies the problems that inevitably come with this form of managed care.

The responsibility for avoidable deaths resulting from that decision must rest squarely with the Lingle administration.

Most of us have little idea of how government decisions such as this directly affect life and death because the consequences usually aren’t news.

When someone is off their meds and commits suicide, it usually only makes the obituary page. No headline screams that our state government has taken away the life of one of its citizens by putting in place a system of care that is defective and has failed to provide necessary treatment, medication or case management.


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