Highlight on Indiana: Lead and arsenic contamination causes health problems for children in East Chicago

Approximately 1,200 residents of the West Calumet public housing complex in East Chicago, Indiana, are looking for new homes after dangerously high levels of lead and arsenic in the area’s soil were detected. The Indiana State Department of Health (ISDH) is partnering with the East Chicago Health Department to offer free blood lead testing clinics for city residents, particularly those living in the West Calumet Housing Complex. However, a lawyer for some of the complex’s residents says it may already be too late; he reports that 85 children have tested for high lead levels.

East Chicago

East Chicago, Indiana, has about 30,000 residents. According to the Environmental Protection Agency, multiple manufacturing facilities in the area could have caused the contamination. The U.S. Smelter and Lead Refinery Inc. operated as a primary and secondary lead smelter in East Chicago from 1920 to 1985. Smelting operations generated waste materials including blast-furnace slag and lead-containing dust, and volatilized metals, including arsenic. Some of the waste materials were stockpiled south of the plant building and spread over an adjoining 21-acre wetland, and some lead-containing dust was deposited on area soils by the wind. Other potential sources of lead and arsenic contamination in the residential area include the former Anaconda Copper Company site, which manufactured white lead and zinc oxide, and the E.I. DuPont de Nemours Company facility, which manufactured the pesticide lead arsenate.

Soil contamination

In parts of the West Calumet Housing Complex, soil tested high for levels of lead and arsenic. Residents have been notified about these results, and warned not to allow children to play in dirt. The Agency for Toxic Substances and Disease Registry, advises parents to prevent children from playing in dirt or mulch, to wash toys regularly, and to wash children’s hands after they play outside. All residents should remove shoes before walking into their homes. Residents have also been advised to not disturb the mulch or dig or garden in their yards.

The Environmental Protection Agency initially planned to clean up the area by removing and replacing two feet of soil; however, after delays and accusations of not going far enough to protect residents, East Chicago Mayor Anthony Copeland ordered the removal of all complex residents.

Lead poisoning in children

According to the Mayo Clinic, lead poisoning can affect anyone of any age, but children under six are the most at risk. The signs and symptoms of lead poisoning in children may include:

  • Developmental delay
  • Learning difficulties
  • Irritability
  • Loss of appetite
  • Weight loss
  • Sluggishness and fatigue
  • Abdominal pain
  • Vomiting
  • Constipation
  • Hearing loss

Medicaid Whistleblower Leads to $137.5 Million Settlement

Tampa-based managed care company WellCare Health Plans, Inc. recently agreed to pay $137.5 million to settle allegations of fraud and other abuses, the Justice Department announced. The federal government will share the proceeds of the settlement with nine states: Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Missouri, New York and Ohio. The for-profit company served about 2.6 million Medicaid beneficiaries as of August 2011. The four relators who brought whistleblower suits against the company will receive about $25 million.

The alleged fraud, which the company has not admitted, included:

  • inflated reports of the amounts spent on medical care to avoid returning funds to state agencies
  • retention of overpayments
  • operation of a sham special investigation unit
  • cooperating with providers who overbilled for services
  • falsification of records of patients’ medical condition and treatments provided and
  • manipulation of grades of service in reports on the performance of its call center

The company also allegedly violated federal marketing requirements for Medicaid managed care organizations by “cherrypicking” potential members to keep costs down. It was reported that WellCare performed a study of its costs for certain patients and then encouraged patients to disenroll to shift the cost of their care to state Medicaid agencies. A relator who worked undercover to assist in the federal investigation alleged that the company dropped premature infants and terminally ill patients. Arguing that the company’s actions cost the government between $400 and $600 million, the relator initially objected to the settlement; he disbelieved the company’s claim that it could not possibly afford more than $137.5 million.

In 2009, the company paid $80 million—$40 million in restitution and forfeiture of another $40 million—and entered into a Deferred Prosecution Agreement for fraud against the Florida Medicaid program. Thus, according to DOJ, its total recovery against WellCare will exceed $200 million. And if the company is acquired or there is a change of control in the next three years, the company will have to pay an additional $35 million. In April, 2011, the company entered into a corporate integrity agreement with the HHS Office of Inspector General to come into compliance with the law.

In 2009, in a related enforcement action by the Securities and Exchange Commission (SEC), WellCare agreed to pay $10 million to the SEC and return another $1 million in profits. Top-level executives, including the former general counsel, were prosecuted for fraud. One pleaded guilty in 2007; three others are scheduled for trial in 2013. SEC brought a civil suit against the three in January 2012.

In 2011, the company also settled a class action brought by investors alleging misrepresentations in violation of federal securities laws. The $200 million settlement is to be paid with $87.5 million in cash and $112.5 million in bonds. As with the DOJ settlement, if the company is acquired or experiences a change in control within three years of the agreement, it must pay another $25 million.

Florida Health News reports that resolution of its legal difficulties makes WellCare an attractive target for a buyout. Because many states are moving toward mandatory managed care, there are many opportunities to grow its business. One analyst says that the company’s revenue could double. If the Supreme Court upholds the Affordable Care Act, the expansion of Medicaid eligibility will make contracts with Medicaid agencies even more valuable.

Even while the settlement was on hold, the company picked up a contract with the Kentucky Medicaid agency, which began in the fall of 2011. Problems with the roll-out of Kentucky’s managed care program were discussed in an earlier post.

Competition for those Medicaid managed care contracts is fierce. States usually must use competitive bidding. Bidders and their affiliates make large campaign contributions to state officials. In Missouri, Centene donated $50,000 to the governor’s campaign in the two years preceding the contract award and $175,000 to the Democratic governors Association. Centene is based in Missouri but did not have a Medicaid contract previously; Molina, which lost despite 16 years of managed care contracts with the state, sued and asked the court to enjoin the state’s open enrollment, set for April 19, 2012. The case is being litigated at this writing.

According to the Chicago Tribune, in November, 2005, WellCare and its affiliates contributed a total of $100,000 to the reelection campaign of then-Governor Rod Blagojevich. The local affiliate had given him $25,000 earlier in the year.

 According to the Orlando Sentinel, three Medicaid HMOs— Humana, United and WellCare—were among the top 100 spenders for lobbying the Florida legislature in 2011. Humana spent more than $300,000. United and WellCare each spent an amount in the mid-210’s. In addition, the Florida Association of Health Plans, which seeks to influence Medicaid policy, among other issues, spent more than $300,000 on lobbying. Blue Cross Blue Shield, which isn’t a Florida Medicaid contractor but plans to bid, spent just under $300,000.

All the money that any plan spends on fines, unlawful remuneration, campaign contributions or lobbying isn’t going to pay for health care. It’s not paying for quality review, patient education, or even upgrading electronic health record systems. Could these facts be related to the findings of the study described in an earlier post, showing poorer health outcomes for beneficiaries in publicly traded Medicaid managed care organizations?

Medical Loss Ratio Waiver Requests Rejected for Indiana, Louisiana

While some entities want the medical loss ratio requirements to be completely abolished, some states are applying for exemption waivers from the requirements. The Department of Health and Human Services (HHS) denied requests from the states of Indiana and Louisiana to be exempt from the health care reform law’s medical loss ratio requirement. At issue is a provision of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) that compels health insurers to spend a minimum of 80% of premiums on patient care, as opposed to overhead costs such as administrative expenses, salaries and profit. In the event that an insurer does not meet the requirement, it must provide a rebate to its members, beginning in January 2012. The law permits HHS to issue a temporary waiver if the 80% ratio is likely to destabilize the individual health insurance market in the state.

Indiana had requested a 65% ratio for 2011, which would increase gradually over the next few years, as well as a permanent waiver for consumer-driven high deductible plans, which are gaining popularity in the state. HHS concluded that the state’s health plans were already meeting the 80% requirement or were capable of satisfying the requirement without becoming unprofitable, and that the agency was not given the authority to grant permanent waivers as was requested for the consumer-driven plans in the small group and individual markets.

Likewise, Louisiana requested an incremental increase over the the next two years, from 70% to 75%. HHS found the state based the request on preliminary data that the average medical loss ratio was 67%; however, the state’s most dominant insurer was not included in that figure, which would equal 79% if that insurer had been factored in the data.

“Neither application demonstrated an immediate need for an adjustment to the MLR standard,” stated Gary Cohen, acting director for the Office of Oversight at the HHS Center for Consumer Information and Insurance Oversight.

Thus far, 17 states have submitted waiver requests for the medical loss ratio requirement, of which seven have been approved and four have been denied.

Do you think the medical loss ratio requirement will provide a better value for health care consumers or will it destabilize the individual health insurance market, leaving fewer options for consumers?

Is Indiana’s Consumer-Driven Health Plan Experiment the Right Model for Other States?

In his Wall Street Journal op-ed article, Indiana Governor Mitch Daniels stated that “(t)here will be no meaningful cost control until we are all cost controllers in our own right.” This belief has shaped Indiana’s health care reform experiment, which strongly encourages state workers to participate in a high deductible, low premium consumer-driven health care plan combined with a health savings account as opposed to the traditional PPO plan.

The idea behind consumer-driven health care is that if people must pay for a larger portion of their health care out-of-pocket, they will be more conscientious regarding which services they elect to receive and will be less likely to overspend on services that are not necessary. Many, such as Daniels, believe that the majority of plans, which require patients to pay less out-of-pocket, encourage wasteful health care spending and the perception that the individual can “buy health care on someone else’s credit card.”

Under Indiana’s highest deductible consumer-driven plan, a non-smoking employee’s premium for family coverage is $10.16 bi-weekly, in contrast with the state’s traditional PPO premium, which is $289.04 bi-weekly for a non-smoker. The plan pays 80% of medical costs after the insured meets a deductible of $5,000. To assist the employee in meeting the deductible, the state contributes approximately half of the deductible amount to the employee’s health savings account. Employees may contribute pre-tax dollars to the health savings account and any unused funds are carried over.

Indiana has seen unprecedented success in employee enrollment in the consumer-driven plans, which have been offered since 2006, with over 70% of state workers electing them over the traditional plan in 2010. According to Mercer Consulting’s 2010 case study, the consumer-driven plans were projected to save Indiana $17-23 million and state workers and their families $7-8 million that year. Mercer concluded that the savings were due to significantly less usage of health care resources and services compared to those insured under the PPO plan; however, Mercer did not find evidence that participants in the consumer-driven plan were avoiding care due to the higher deductible.

Given the savings demonstrated for both the state government and the insured employees, one may expect that other states in the union would be rushing to implement such plans in their public sectors. However, evidence shows that employee support has been poor, with merely 2% of state employees enrolling in consumer-driven plans offered in other states.

So why has Indiana succeeded where other states have failed?

According to Stateline, Indiana’s success can be largely attributed to its intensive effort to educate state employees on the consumer-driven programs and its contributions to health savings accounts. Other states may be reluctant to request legislators to make room in already-overstretched state budgets to take the initial risk of funding employee accounts. One of Governor Daniels’ first acts when he took office was to eliminate collective bargaining rights for state employees, which may also be a contributing factor to the success of the experiment. However, in many states, such attempted measures have been hotly contested and many unsuccessful. Additionally, there is a concern that along with greater participation in consumer-driven plans will come higher costs.

Do you think that consumer-driven health plans in the public sector are the answer for other states attempting to cut health care costs? Is it a model for federal health reform?