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Critical Condition: Idaho Health and Welfare's Annus Horribilis

One state agency's battle against an avalanche of problems

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At the same time, you were experiencing record-high applications for food stamps.

We knew there was a pent-up demand out there. We have a very proud and independent culture in Idaho. We always knew that there were more people who qualified for food assistance yet weren't accessing services. But the recession deepened, and dual-wage earners became single-wage earners. More people said, "I can't do this anymore," and now they've been asking for help at a record pace. Our food stamp participation growth-rate is now at 41 percent. We're the highest in the nation. Currently, we have more than 200,000 Idahoans accessing food assistance. And let me tell you, this food stamp growth rate is the early warning system. This is the canary in the coal mine. Because it reacts quickly to economic changes.

So what might be correlated to this growth?

Child protection for one. In the last quarter, our number of child-protection cases have started going up again. And that's a function of poverty. As households lose resources, adults don't always cope with that stress effectively and the children become an unintended victim.

Are your social workers stressed out?

Absolutely. Our turnover rate is unsustainable. We're losing our front-line social workers. Today, in fact, I just got a report that shows that social work is the No. 1 category in the state for turnover. It's a 31 percent turnover rate right now.

In May 2010 Idaho hospitals and nursing homes were told that any Medicaid reimbursements wouldn't be coming for up to three months. The state's Medicaid fund had simply run out of money. Smaller providers such as physicians, nurse practitioners, therapists and counselors were told in June that they wouldn't be paid for three months, but they would receive their funding in early July. Concurrently Molina Health Systems had acquired an information management system from Unisys, taking over management of Idaho's Medicaid reimbursement program.

BW: When did you first have an inkling that something wasn't right with the Medicaid reimbursement system?Armstrong: Actually in June we started seeing a major decline in reimbursement claims. But we had already told hospitals and other providers: "We can't even pay your claims, so don't even send them to us right now." Needless to say, we were a bit anxious. But that smaller issue actually masked the reality that there was something larger wrong with the transition of the system management.

Is it fair to say that Molina wasn't ready?

That's absolutely fair to say. There was a combination of factors. Unisys was coming out, Molina was coming in, and then we had the delay in funding on top of that. It was a collision of forces. As I now look back, Unisys was inadequately staffed to begin with, so Molina actually inherited an understaffed and undertrained workforce.

Did you do as much due diligence on this change as you should have?

In hindsight, I would have kept the old claims on the old system, and the claims that we held up could have been paid out of the old system. That wouldn't have burdened the new system with the old claims.

Was that even possible to do?

I don't know. It's all hindsight. But I can tell you looking back, that's exactly what I would have done because that way we would have had purity between the two systems, and we could have paid those claims in early July.

In spite of an official statement from Health and Welfare that all payments should be sent by July 9, providers across the state were reporting empty bank accounts. Many caregivers told BW that they tried calling Molina, spending hours on the phone only to get recorded messages. When BW asked Health and Welfare for a statement, we were told the "system is working." But according to clients, it wasn't.

"If we hadn't dipped into our own personal reserves, we would have had to close our doors," said Kathy Tidwell owner of Tidwell Social Work in Boise.

On Aug. 3, the Idaho Medical Association called the Medicaid problem "massive, pervasive and fundamental." IMA CEO Susie Pouliot told BW thousands of her organization's members "experienced a major cash flow issue." Dr. J. Mario Molina, president of Molina, flew to Idaho to offer a public mea-culpa while standing next to Otter and Armstrong.

"I'm not here to make excuses," said Molina. "I want to apologize to providers and to the State of Idaho."

But that same week, Molina reported premium revenue of $977 million--6 percent more than the previous year--and an overall operating income profit margin of approximately 24 percent.

BW: For a company that talks about millions in profits, why didn't Idaho slap them with a fine?

Armstrong: I can tell you that Idaho has served them notice of cure. In other words, under the contractual structure that we have, we've put them on legal notice that they've failed to meet the contract benchmarks. We're going to go through the legal process of determining damage to the State of Idaho. It's now a matter of demonstrating the injury and how much that's worth.

Where are you with that process?

It's active right now. But there's a more immediate reality. I can tell you that we haven't paid them for their services.

For how long?

We haven't paid them since June. And I'm not going to pay them until we're satisfied.

Is that hundreds of thousands of dollars?

It's millions of dollars. It's probably now approaching $10 million. That's real money.

How close are you to fixing the problems?

We identified 18 defects. They've solved half of them. The others are to be solved by the end of this year. This is an automated claims processing system which, when it's working well, doesn't require a lot of human intervention. But when it's not working well, you have a whole lot of people manually trying to fix transactions.

Back in July and August, how difficult were your days?

It was awful. We were flooded with calls ringing off the hook. Everything got focused into crisis management.

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