Wednesday, October 19, 2022

Health of Cards: Obama Pals Rake in Millions from Obamacare, Chicagoans Suffer


Insurance Executive Lauren Underwood 2018 Campaign Ad
 

The state of Illinois paid a private firm $1.2 billion to cover health care needs of about 55,000 Medicaid enrollees in Cook County. The firm's numerous, glaring, and persistent inadequacies outraged network hospitals.  Enrollees surmounted bureaucratic hurdles to flee the plan. In June of 2020, three years after signing an unusual contract, the company went out of business, leaving health care providers complaining about unpaid bills. Did NextLevel Health Partners, Inc. fail because of COVID and special challenges facing Black entrepreneurs, the explanation of founding CEO Dr. Cheryl Whitaker? Or, was the state's 2020 order declaring NextLevel insolvent and on notice for legal proceedings the fault of a few investors and officials prioritizing their own salaries and profits over paying those providing health care?     

The harm and death attributable to our country's public health crisis are of enormous magnitude, arguably greater than those caused by street crime and police brutality combined.  If you doubt this, read The Death Gap, a book about health inequality in Cook County. 

In 2022, Illinois will spend over $30 billion on Medicaid contracts alone, a quarter of the state's budget. Yet these outlays are not improving Illinoisans' health. Operating behind a smoke screen of jargon and complexity, corporate officials get away with harmful, even fatal outcomes that are as predictable as they are preventable, the arguably unlawful and thus unjust enrichment of firms like Centene normalized as "profit," not unlike how private prisons have been unlawfully enriched by illegal labor practices.

If you've read even this far, give yourself a pat on the back.  Words like "Medicaid" and phrases like "managed care organizations," "managed care plan quality," and "service utilization" torture the English language.  Comprehension of the forty pages of definitions and acronyms typical of government Medicaid contracts is so brain-numbing as to incentivize full comprehension only for those most passionate in their pursuit of the immense wealth such expertise makes possible. Performing an appendectomy seems so much easier, and, for those at the top of the jargon learning-curve, far less lucrative. 

By not paying health care bills, the bloated health insurance sector continues to expand, driving doctors to despair and often out of medicine.  Essays here in the next few weeks will explain how and why money that was supposed to go to health care could so easily be diverted to Whitaker and other NextLevel officials, including Rep. Lauren Underwood (D-IL)-- who ran for office while NextLevel's senior director for strategic and regulatory affairs -- the problems this causes for health care and our political system, and propose some short and longer-term solutions. Thanks in advance for hanging in there.  

Part 1
In August, 2017 the Chicago Tribune published a rare article reporting on the billions in state contracts going to private health insurance firms managing Medicaid funds. A firm called NextLevel Health Partners, Inc. had not been selected. That made sense. NextLevel had been repeatedly sanctioned for its failure to submit data to allow oversight of its enrollees' health and the integrity of NextLevel's plan management.  Illinois Health and Family Services (HFS) in 2017 had informed NextLevel CEO Dr. Cheryl Whitaker that the firm's failure to account for 28% of enrollee health provider encounters that quarter was well above the already generous 10% wiggle room.  NextLevel was fined $50,000.     

The contract's more substantial guard rail for flagrant violators like NextLevel was automatic cessation of assigning new members to the plan. NextLevel received a letter imposing this sanction as well. In fact, NextLevel received sanction letters for all quarters for which it was evaluated in 2017.

No wonder the firm wasn't going to obtain a new contract and expand its operations.  

And yet, well, this is Illinois. Cheryl Whitaker and her husband Eric, no stranger to financial controversies with public money, vacationed with the Obamas. When Lauren Underwood left her position as a political appointee in the Obama administration's Department of Health and Human Services, Cheryl Whitaker hired Underwood as the firm's senior director for strategic and regulatory affairs, a position Underwood held while she was campaigning for her current job in Congress, the same time frame of NextLevel failing its regulatory obligations.  

In 2018 Underwood, with massive backing from the corporate wing of the Democratic Party, flipped a red district and was elected to represent Naperville in Congress.  Throughout the campaign, Underwood's marketing machine, aided by a curiously uninterested press corps, had stunning success in brazenly misleading voters as to her true vocation as a corporate hack, not a working nurse.  

Underwood also failed to disclose her full salary from NextLevel, in violation of House Ethics rules.  Underwood and her press office did not respond to queries from reporter John Washington and me about her false statements filed with Congress.  Only after The Intercept published our article highlighting Underwood's transgression did she submit a new form revealing her 2017 NextLevel employment and higher salary, though questions still remain.  (Underwood has not responded requests for interviews going back to 2019.)

Meanwhile, Underwood's talents directing strategy seem to have paid off. In 2018, the spectacularly undeserving NextLevel landed a jackpot contract.

While punishing for physicians and enrollees, Medicaid contracts can be quite lucrative for the corporate honchos who administer them. Firms obtain reliable revenues from the government, with interest guaranteed on any late payments. Members are automatically enrolled, so no need to to advertise. And if firms think they've underbid for coverage, they can just go back to the state and they'll earn more, at least in Illinois, even though this defeats the stated purpose of Obamacare's insurance privatization.  

Also, Medicare, which handles coverage for more many high income seniors, enforces a 15% ceiling on administrative overhead.  Yet for no good policy reason, Congress has not capped Medicaid's administrative overhead.  So, no set limits in the salary for Whitaker. (Some states enforce a 15% administrative cap for Medicaid contracts.  Illinois is not among them.)

In 2018, the Tribune did not cover the HFS "Supplemental Notice" for a new Medicaid contract with NextLevel, one on which private firms could bid only if owned by minorities, women, or persons with disabilities.  Nonprofits also were barred from bidding, including the one handling then handling Cook County residents the new contract steered to NextLevel. 

Indeed, the only existing insurance firm eligible to bid at the time was NextLevel.  The Request for Proposal limits drew vehement objections from the Comptroller, concerned the narrow pool might decrease the quality of the plans and increase "health care costs as a result of decreased competition.” The fewer firms bidding, the more the state would have to pay the winner and the less leverage the state would have to insure funds went to health care not Whitaker's own bank account. 

The Comptroller in the spring of 2017 also noted that HFS had "remove[d] the procurement from the independent review afforded by the Chief Procurement Officer," and was "claiming exemption from independent oversight."  The HFS rules thwarted "adequate scrutiny of conflicts of interest," the Comptroller pointed out.

HFS brushed off the criticism and went ahead.
 

Throughout 2018, Whitaker's firm persisted in its failure to comply with reporting and other requirements. And, HFS persisted in enabling this, "funneling more people into the Medicaid managed care plan with the highest turnover and lowest scores on state quality measures," Crain's Business reported in October, 2019:

The Illinois Department of Healthcare & Family Services sends 35 percent of new Medicaid enrollees who didn't request a particular plan to NextLevel Health... NextLevel gets all those new customers despite poor quality grades and high rates of defection among its current members.

Reporter Stephanie Goldberg further noted, "The plan finished last in the state's latest quality survey, which rated NextLevel 'low' or 'lowest' in five of six performance metrics. Meanwhile, NextLevel lost customers at twice the rate that patients left the program overall."

Once NextLevel's and HFS's malfeasance was reported, HFS might have been expected to apologize, and promise that Illinois residents deserved better.  That would make sense.

Instead, HFS Director Theresa Eagleson defended NextLevel and the contract for its support of minority-owned businesses that "reflect the diversity of our Medicaid membership."

Eagleson told Goldberg, "We were trying to, because they got a late start, help make sure they had the ability to be successful." Taken at face value, Eagleson was saying that the 30 year death gap between Chicago's Gold Coast residents, who can expect to live to 90, and those in neighborhoods served by the community hospitals left understaffed in part from NextLevel not paying its bills, were not her concern.  

Eagleson's misunderstanding of how government might improve public health and thwart injustice is toxic and not uncommon. Eagleson is the top officer in Illinois in charge of funding health care. Congress and the federal government have developed extensive protocols for how to control expenditures for those unable to afford private health care, so that taxpayer funds enhance the public's health, not corporate slush funds. Those protocols are behind the sanctions imposed on NextLevel. Yet Eagleson thought it reasonable to say in public that she was more concerned about protecting bloated payments to a few African-American officials running NextLevel than the health care of 55,000 residents of Chicago, most racial minorities, who depended on NextLevel for the proper management of their health care.  

Still, Eagleson's rationale for enrolling people into a firm providing substandard health support, injurious in itself and offensive for the gall to state it publicly, is more palatable than the truth.  Whitaker was no health insurance newbie.

Whitaker in 2015 was an “operating partner” of Harthaven Capital Partners, a firm whose trademarked motto was “At the intersection of Wall St. and Healthcare.”  Three other individuals on Harthaven’s 2015 “Leadership Team” also had investments in NextLevel.  One of them was Michael Kinne, a White, male official of  Fortune 50 Centene subsidiary, and someone who also happened to be a NextLevel investor, promoter, officer and co-owner of an company with Whitaker organized in 2013 to attract state healthcare contracts, especially those for Medicaid.

In addition to being organized and run with Centene personnel, no newcomers to state Medicaid contracts, NextLevel had landed a $30 million loan from Centene, the firm that later took over NextLevel's contracts.  (Centene has been repeatedly sued for fraud and anti-trust violations, to be discussed further when we look later at what happened behind-the-scenes of the 2020 membership transfer and Centene's overall settlement-as-part-of-the-cost-of-profiting-from-taxpayer-money strategy.)

Eagleson and Whitaker alike both understood that the contract, especially as supervised by HFS, provided little incentive for NextLevel to accurately report its data.  $600,000 in fines was chump change relative to the hundreds of millions of unaccountable taxpayer funds NextLevel was hauling in. 

Eagleson also knew that HFS protections for the firm being minority-owned were already baked into the limited competition for the bid and the cushy 20% administrative payment allowance, 25% higher than the cut-off the federal government advised. And, Eagleson knew Whitaker was no new-comer to Medicaid, and indeed was on an HFS committee that coordinated health care policy.  What Eagleson left unmentioned was that NextLevel's noncompliance was a feature not a bug of the HFS contractual incentives.  

One might have expected Eagleson's colleagues to take umbrage, especially those tasked with prioritizing the health of Illinoisans, not friends of the Obamas. That would make sense. Yet when Medical Director Arvind Govyal read the article, he forwarded it to his boss Eagleson and wrote, "Great Quotes Director!"  

***
On June 5, 2020, Whitaker announced NextLevel was going out of business. "Insurance is a very capital-intensive business," Whitaker said in her release, "COVID-19 has exacerbated the difficulty of black-owned businesses to access capital."

Whitaker's announcement hid the real reason for the company ending operations.  The State of Illinois was suing the firm so that it would be run by the Department of Insurance (DOI), the possibility of which Whitaker had been on notice since at least March, 2020.  According to the second order, sent in May, NextLevel's own annual statement "reports that it is insolvent by an amount of ($2,794,769) as of December 31, 2019."  The DOI noted that NextLevel was "operating in a manner that could lead to, or is in, a financial condition, which, if continued, would make it hazardous to the public, and its policyholders.”  DOI specified obligations for NextLevel that, if not followed, could result in penalties and the DOI intiating proceedings for the conservation, rehabilitation, or liquidation of the Company. The order was based on revenues and outlays that long predated the pandemic.

On June 3, 2020, the Illinois Attorney General went ahead and filed a complaint requesting the court order NextLevel be removed from the control of Whitaker and other officers and placed under the control of the DOI, on the grounds that "NextLevel is statutorily insolvent; a situation which justifies the entry of a court order for the conservation of NextLevel."  In other words, Whitaker and other top officials could not be trusted to run NextLevel. "The Director further alleges that, not only is it the case that the interests of creditors, policyholders or the public will probably be endangered by delay, the facts alleged support a finding that the interests of creditors, policyholders or the public will be endangered by delay" (emphasis in original). 

The Complaint was filed under seal and has not been previously reported in the media.  Whitaker, perhaps believing that the information about the true reasons for the firm's demise would remain under wraps, blamed the failure on COVID and her race, the very attribute that won her and her White business partners the contract in the first place. 

Questions about discrepancies between the circumstances of NextLevel's insolvency and Whitaker's public statements, the amount she took home from Medicaid contracts, the nature of the work performed by Lauren Underwood, and discrepancies between Whitaker's Declaration claiming the takeover by Centene was conducted at "arms length" and the overlap of Centene and NextLevel officers and promoters sent to an email address Whitaker is known to use went unanswered.  The email, however, was forwarded to NextLevel attorney Stephen Schwab.  Schwab did not respond to my questions, but he did threaten me with a contempt of court proceeding if I published certain documents that were in the public record after being ordered sealed.  (The DOI Order is not among these.)


TO BE CONTINUED

Thanks to Douglas Lee, Political Science Department Farrell Fellow, class of 2025, Northwestern University. Douglas provided extensive research and analysis for this report. Thanks also to Farrell Fellow Lorenzo Garcia, class of 2024, for his more recent contributions to our analysis of NextLevel's stupefying contracts.      



Friday, April 22, 2022

ICE Letter Destroys GEO's Ninth Circuit Appellate Claims

 

                          ICE to GEO, June 21, 2018


Last fall, a federal jury found GEO's practice of paying one dollar/day for work performed by those in their custody under immigration law violated the Washington State Minimum Wage Act.  The jury calculated GEO owed the workers $17.3 million in unpaid wages.  A few days later, Judge Robert Bryan announced GEO needed to disgorge an additional $5.9 million to the State of Washington for its unjust enrichment going back to 2005. 

Last month, GEO submitted its appeal to the Ninth Circuit.  It tracks legal arguments Judge Bryan found unpersuasive, including GEO's claim that it was operating at the behest of the federal government. GEO is asking the appellate court to consider:

1. Does the WMWA require GEO to pay the State’s minimum wage to federal detainees participating in the Voluntary Work Program (VWP)?
2. Assuming Washington law requires paying federal detainees the minimum wage, does it violate the doctrine of intergovernmental immunity because it impermissibly discriminates against the Federal Government or because it directly regulates federal activities?
3. Assuming Washington law requires paying federal detainees the minimum wage, is it preempted by federal immigration law?
4. Assuming Washington law requires paying federal detainees the minimum wage, does it violate GEO’s derivative sovereign immunity?
5. Is GEO liable to the State for unjust enrichment on the ground that detainee participants in the VWP received payment of $1 per day?

Judge Bryan found that the Immigration and Customs Enforcement contract reimbursing GEO one dollar/day for those paid in the work program meant ICE would be reimbursing GEO for this program at the rate of one dollar/day, not that this was legal rate for paying those in GEO's custody.  

GEO is hoping it can persuade the appellate court that it was just doing what ICE told it to do, and so GEO can derive immunity from state laws.  But several letters ICE sent to GEO in 2018 make it clear that ICE read the contract the same way Judge Bryan read it. 

A while back ICE released a letter of June 21, 2018 rebuffing GEO's request for equitable adjustment to its contracts in order to cover legal fees and possible payments of wages to its detained workforce.  The line at the end revealed this information but the analysis behind this was redacted

My attorney Nicolette Glazer and I pushed back and today we received the letters in their entirety.  ICE is providing GEO the same legal analysis they encountered in Judge Bryan's orders.  In three separate letters for GEO's facilities in Aurora, Colorado, Tacoma, Washington, and  Adelanto, California, respectively, ICE gives the same three reasons for rejecting GEO's request.

1.  GEO did not demonstrate any change to the contract since they signed it: "This is a firm-fixed price performance-based contract. As such, the risk of performance, including the burden of administering the contract, falls to the contractor. Where there is no change to the contract, whether expressly or constructively, an equitable adjustment is not appropriate."

2.  The performance specifications and standards are not "incomplete" and are not defective. The Contract, as awarded in 2011, included a requirement to house detainees and perform related detention service in accordance with the Performance Based National Detention Standards (PBNDS). (Contract, Section H-5, item 10.). Specifically, the contract is clear about the terms and conditions of the Voluntary Work Program. The PBNDS outlines the purpose, scope, and expected outcomes of the program (PBNDS 2008 at Part 5, § 33 and see PBNDS 2011(2016 Revisions) at Part 5.8, as incorporated in Mod P00026).  Furthermore the award document and contract line item structure set forth the rate of
reimbursement for the program. (OF 336, CLIN x004, dated September 15, 2011).  Accordingly, the service provider has been on notice about these terms since contract inception, when the performance based contract was negotiated.

3.  GEO's legal fees and expenses are not cognizable costs under the contract terms or under FAR 31.205-47. Under the terms of the contract, GEO is required to provide detention services and ensure compliance with all applicable federal, state, and local work safety laws and regulations. (Contract, Section 11-5 and H-17). GEO's defense of these private lawsuits is a defense of its contract performance.

Two portions of this are especially important.  First, ICE parses the contract the same way that the plaintiffs and judge read it: GEO agreed to run a work program (pt. 2) and agreed to "ensure compliance with all applicable federal, state, and local work safety laws and regulations" (pt. 3).  In the trial GEO claimed the contract exempted it from state laws, but it's clear here that ICE lawyers disagree.  

ICE is not making this call on its own.  Communications here and in another recent release indicate that ICE had been in touch with the Department of Labor.  Bottom line: even the Trump administration couldn't save GEO.  (GEO could of course continue to insist that ICE forced GEO to pay those in ICE custody one dollar/day; but if the agency you claim is making you do something illegal denies this, and the contract does not actually state this, that's going to be a tough sell to a judge.  Also, did GEO inform shareholders that the federal government rejected its legal defense of the work program? Pretty sure they did not disclose this.) 

As more pieces of the work program puzzle are laid out, including staffing plans recently received for a different facility, it is becoming clear that GEO was paying those in their custody one dollar/day for the work GEO told ICE was being done by full-time employee and then pocketing the difference.  

In addition to questionable staffing plans for facilities I recently recieved, the most conclusive evidence is the paltry sum of $10 million/six months assessed last summer by the House Appropriations Subcommittee on Homeland Security as sufficient to cover the increase between current dollar/day/worker for all facilities across the country and wages paid under the Service Contract Act (SCA).  The rates of the SCA are far higher than minimum wage; for certain skilled labor more than $100/hour.  If GEO is telling the government that it is already paying these rates for staffing, then it cannot justify further increases. 

GEO told the Tacoma jury that if ICE were obligated to pay the much lower minimum hourly wages the increase in overall expenditures would mean that if GEO kept constant its profit rate, its absolute profits would increase.  GEO's attorneys and witnesses dared the jury to find them guilty so that ICE would need to pay them more and bill the U.S. taxpayers, i.e., the jurors. 

Anyone in the court room paying a little bit of attention, and especially the diligent jurors, had noticed that GEO could easily pay increased labor costs from its $18 million annual profits from the Tacoma facility.  As GEO has had work performed at these higher rates either by those in communities adjacent to the facilities or those in GEO's custody, the firm will be receiving a small increase in funds from the federal government.  However, if the labor laws are enforced, the money will be going to those doing the work GEO contracted to perform and the profits will be substantially reduced. 

If the outcome leaves ICE jails in place and paying more to the local work force, detained or otherwise, then the litigation will not have advanced the policy goal of thwarting deportations.  But if banks and financiers no longer find this a lucrative sector, then there is no reason for them to lobby for minimum bed mandates and more ICE prisons, and the deportation laws that keep them filled and degrade all of us.  

Thank you to the Deportation Research Clinic research assistants for 2021-22 at Northwestern University whose hard work drafting FOIA lawsuits, coding, reviewing redactions, and uploading documents make it possible to unveil an important document ICE tried mightily to withhold: Farrell Fellow Lorenzo Garcia, Minji Kim, Grant Li, Kristi Park, and a special thank you to Farrell Fellow and Eva Jefferson Paterson Fellow Caleb Young, class of 2022.    

Friday, March 4, 2022

Evidence of ICE Pattern and Practice of FOIA Non-compliance


 

 ICE Tracking Us

Perfect Citizen: US to set up secret 'Big Brother' surveillance system to  monitor internet for cyber-attacks | Daily Mail Online


ICE Tracking ICE

Office Photos ~ 1930s-1950s

ICE's failure to comply with the mandatory deadlines of the Freedom of Information Act is a feature not a bug of an agency that chooses to fund programs to collect information about the public while refusing to fund programs on how the agency itself operates.  
 
ICE internal spreadsheets show that in 2016 - 2021 ICE spent less than 1/10th of one per cent of its budget on its statutory FOIA obligations.  
click to enlarge
The first column sums the "General Expenses," almost all spent on contractors.  The second column sums salaries for ICE's FOIA employees.  
 
The Excel spreadsheet from which these numbers were calculated were produced pursuant to litigation: Jacqueline Stevens v. Immigration and Customs Enforcmeent 1:21-cv-2232.

The data here could be used in FOIA litigation to show ICE has a pattern and practice of violating the FOIA by consistently failing to solicit and spend  funds necessary to fulfill its FOIA mission.  For instance, in a 2018 affidavit an ICE FOIA officer acknowledges the agency did not spend funds sufficient to comply with its mandatory FOIA obligations and suggests the problem will be remedied.  

ICE budget requests along with these expenditures reveal an ongoing pattern of ICE knowingly avoiding eliciting funds necessary for its mission.
 
Similar information can be obtained from other agencies.  The FOIA question that elicited the production is here:

  

Click to enlarge

Thanks to Northwestern Farrell Fellow Caleb Young for research assistance.