 |
| 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.
