ADEA State Update

Rising Costs in Iowa Medicaid?

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When former Governor Terry Branstad privatized the management of Medicaid in Iowa in 2015, he promised the state would save tens of millions of dollars. A recent report from the state’s non-partisan Legislative Services Agency has shown that the promised savings may not have been realized. The report shows that since FY17, the first full year of privatization, the per-member cost of Iowa’s Medicaid program has risen an average of 4.4%—nearly three times more than the previous six years, where the per-member cost rose an average of 1.5% per year.

Defenders of Iowa’s transition to privately managed Medicaid claim that these per-member cost figures may be misleading, as previous years’ totals may be inflated because they include payments for services provided in previous years. Critics of privatization contend that these new numbers are proof that the transition has not fulfilled its promises of saving money and, indeed, have increased the cost of Medicaid in the state more than when the program was managed by state administrators.

The privatization of Medicaid in Iowa has become a significant issue in the upcoming gubernatorial and state legislative election. The incumbent, Republican Gov. Kim Reynolds, has defended her predecessor’s decision to shift to privatized Medicaid management, and while open to making changes, she says that many Iowans are pleased with the current program.

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