One dollar payments get Iowa millions in Medicare dollars

By Paul Brennan | Iowa Watchdog

DES MOINES, Iowa — Talk about a massive return on investment: Iowa receives millions each year from the federal government in exchange for $1 monthly contributions for each of the state’s Medicare recipients.

In 2011, Iowa contributed $497,000 and received $39 million from the federal government, a ratio of roughly $80 from the feds for every $1 contributed, according to a new report from the inspector general for the U.S. Department of Health and Human Services. The state pays $1 per month for each Iowan enrolled in Medicare as part of a cost-sharing arrangement.

The IG report concludes Iowa is violating not the letter, but the intent of what is called the Supplemental Security Income program.

“The SSI program was intended to ensure that recipients would no longer have to subsist on incomes below the poverty level,” the report says. “However, these payments exist for the sole purpose of maximizing Iowa’s receipt of (federal dollars).”

The IG report notes that what Iowa is doing is legal since the federal government has never set a minimum contribution that states must make.

The Centers for Medicare and Medicaid Services has been aware of Iowa’s $1 per month contributions since the state joined the cost-sharing program in 2003. Iowa received formal federal approval for its minimal payments a year later.

The one restriction the federal government placed on Iowa was “the payments cannot be lowered” without prior approval.

The IG only learned of Iowa’s $1 per month contributions while auditing the state’s Medicare and Medicaid programs in 2012.

The Iowa Department of Human Services, which administers the state’s Medicare and Medicaid programs, disputes those numbers.

The state paid $156,600 towards Medicare premiums under the program in 2011 and received $12.4 million from the federal government, according to Amy Lorentzen McCoy, public information officer for IDHS.

The IG’s number was based on its estimate that 41,481 Iowans were eligible in 2011 to receive Medicare premium assistance through SSI. The actual number of people receiving assistance in 2011 was 13,050, McCoy said.

The dramatic difference between the IG and IDHS estimates illustrates how the Centers for Medicare and Medicaid Services currently doesn’t require states to report the amount of their contributions to the cost-sharing program.

Iowa plans to make no changes to its $1 per month contribution rate, according to McCoy.

“There are no plans to change the practice which is both legal and was approved by CMS, unless there would be further direction from CMS,” she said.

The inspector general cannot determine how many of the other 44 states participating in the program are taking Iowa’s $1 per month contribution approach. The report recommends CMS require more detailed reporting from states participating in the cost-sharing programs so it can be determined how tax dollars are actually being spent.

The report also recommends CMS push for legislation that will set a minimum contribution for states, so a disproportionate part of the cost of covering the Medicare premiums isn’t passed on to the federal government.

Contact Paul Brennan at pbrennan@watchdog.org