The Company Salivating Over The Medicaid Disaster

An astonishing 17 million people stand to lose their Medicaid coverage, thanks to bipartisan legislation passed in December. In today’s featured story below from Lever reporter Matthew Cunningham-Cook, we reveal that one company stands to benefit: Maximus, a little-known federal contractor that generates big revenue when Medicaid and other government programs become more onerous and bureaucratic.

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Rock the boat.

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As more than 17 million people stand to lose health insurance in the unfolding Medicaid eligibility review disaster, there’s one company licking its lips: Maximus, a little-known federal contractor that is one of the biggest players in privatizing essential government services previously done by civil servants — in particular, taking over states’ capacity to determine who is eligible for Medicaid and who isn’t.

In a February earnings call for shareholders and Wall Street analysts, Maximus’ CEO Bruce Caswell announced that the current nationwide eligibility review of 90 million people on Medicaid and other government health insurance programs “is unprecedented in its scope,” and will allow Maximus “to gain traction in the market.” As a result of the deluge in so-called Medicaid “redeterminations,” Caswell said, “we expect improvement to operating margin.”

The company has accordingly boosted its earnings estimate by $100 million. Maximus’s share price is closing on its all-time high, up nearly 50 percent since October. Caswell earned $6.3 million in 2022.

Outsourcing Medicaid eligibility reviews to Maximus has major implications beyond the company’s expanding bottom line. It also removes essential government services from the realm of public accountability, while draining resources from governments.

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“One of the big concerns here is it’s a company that’s really making money coming and going from county, state, and the federal governments,” said Daniel Hatcher, a law professor at the University of Baltimore who has studied Maximus. “People who are benefiting the most are the company, occasionally governments, but not the people who are supposed to be benefiting from Medicaid services.”

Along with draining public finances, Maximus and other Medicaid redetermination contractors are incentivized to advocate for making Medicaid even more of a bureaucratic nightmare for recipients.

“If you look at the payment structure of these contracts, the more red tape, the more money Maximus makes,” Hatcher said. “The harder it is to get enrolled, the easier to get kicked off — the more money Maximus and contractors are making.”

Maximizing Profits

During the COVID-19 pandemic, lawmakers required states to stop removing people from Medicaid, the national health insurance program for low-income Americans. The move led to record enrollment in a strictly means-tested program designed to benefit only the very poor — one from which people are often arbitrarily removed.

Late last year, Congress passed and President Joe Biden signed a year-end spending bill directing states to resume annual redeterminations of Medicaid recipients’ eligibility for the program. Now, an estimated 17 million people, and potentially up to 24 million, could lose their coverage.

Studies suggest that expanding Medicaid coverage substantially reduces deaths, and positively impacts people in poverty throughout their entire lives.

While there are significant reporting gaps as to where Maximus is doing redeterminations and how states are reporting eligibility reviews, Maximus dominates 60 percent of the Medicaid eligibility market, according to a recent report in Modern Healthcare.

While the final determinations for Medicaid eligibility must be completed by public employees, every other step of the process — from processing applications, to running call centers, to reaching out to people on the verge of losing benefits — can be done by private contractors.

In a recent investor presentation, Maximus wrote that it was boosting its “revenue and earnings guidance to account for Medicaid redeterminations,” and noted that “actual volume flow and beneficiary interaction will influence overall profitability.”

So far, more than 70 percent of those who have recently lost Medicaid coverage have been terminated for administrative reasons, such as not responding to a piece of mail or getting dropped from a call with a redetermination specialist, rather than because they were deemed ineligible due to their income and assets. Many of these people are likely still technically eligible for the program.

Maximus runs the call center for Medicaid eligibility in Indiana, where 85 percent of the 107,000 people kicked off Medicaid this year lost coverage because of procedural reasons. According to Maximus’ $400 million Indiana contract, up to seven percent of its eligibility calls in the state in a given week can be dropped before the company is penalized.

“We do not make Medicaid eligibility determinations,” Maximus said in a statement to The Lever. “Our job is to support the states' responsibilities to ensure that everyone who is eligible for Medicaid remains covered. If they are no longer eligible for Medicaid, we work with the states to refer them to other healthcare options such as the insurance marketplace. We are not paid in any state on the basis of whether an individual is found eligible or ineligible.”

Maximus did not answer follow-up questions about the scope of its work in various states and how much revenue the company expects to generate from its Medicaid redetermination business.

As Maximus seeks to expand its Medicaid redetermination work, the company has leaned into lobbying and political donations.

Maximus has donated $2.5 million to national political groups affiliated with state and local politicians since 2017. That includes $955,000 to the Republican Governors Association; $665,000 to the Democratic Governors Association; $450,000 to the Republican State Leadership Committee, which funnels money to GOP state legislative campaigns; $210,000 to the Republican Attorneys General Association; and $165,000 to the Democratic Attorneys General Association.

The company additionally donates to the National Governors Association, a nonpartisan group that represents governors from both parties.

Maximus spent $960,000 on federal lobbying alone in 2022, and its roster of lobbyists included former longtime Rep. Al Wynn (D-Md.), who is now a senior director at the lobbying powerhouse Greenberg Traurig.

Wynn was one of just a handful of members of the Congressional Black Caucus to vote “yes” on the final vote on the 1996 welfare reform bill. The legislation, which led to a doubling of extreme poverty, provided an enormous boon to Maximus by incentivizing the outsourcing of welfare eligibility work.

Shar Habibi, the research director of In The Public Interest, which advocates against privatization, said that Maximus’ role in Medicaid redeterminations will hollow out the government’s ability to effectively provide public services.

“When governments contract with firms like Maximus to do essential public functions like determining who is or isn’t eligible for Medicaid, the question gets raised: Does outsourcing eligibility determination-related functions compromise the integrity of the program, especially when people’s lives are at stake?” she asked. “Using contractor staff does not promote an effective, efficient, and equitable delivery of Medicaid.”

Maximus also has major contracts with the federal government to provide assistance to those seeking to enroll in Medicare, the government health insurance program for seniors and those with disabilities, as well as those looking to sign up for individual health insurance plans offered on state marketplace exchanges created under Democrats’ 2010 health care law, the Affordable Care Act.

Some people formerly on Medicaid will move to exchange-based plans, which will almost certainly result in substantially higher out-of-pocket costs.

In May, Maximus laid off 700 workers from its Medicare and marketplace call centers where workers were seeking to unionize with the Communications Workers of America (CWA) union. The move led CWA to file an unfair labor practice charge with the National Labor Relations Board and launch a petition to pressure Secretary of Health and Human Services Xavier Becerra to investigate Maximus’ labor practices.

Meanwhile, Maximus’ government contracts to do such work have continued to expand under the Biden administration, despite the fact that Joe Biden pledged in his 2020 campaign that “I intend to be the most pro-union president leading the most pro-union administration in American history.” In September 2022, Maximus was awarded a $6.6 billion contract from the Center for Medicare and Medicaid Services (CMS) in September 2022.

Samira Burns, a spokesperson for the Health and Human Services Department, which includes CMS, told The Lever that the department has initiated a request for information process with contractors like Maximus as part of a broader consideration of whether or not to improve labor standards in contracts with such companies.

Editor’s note: The author is a member of the NewsGuild-CWA and was a researcher for CWA from 2016 through 2018.