State health officials are siding with large insurance companies to block a federal court decision supporting claims the state government is neglecting its responsibility to oversee billions of dollars spent on health care for the poor.

In an Aug. 2, 116-page petition filed with the U.S. Court of Appeals for the 7th Circuit, Illinois Department of Healthcare and Family Services Director Theresa Eagleson said the court made a mistake that could end up costing taxpayers hundreds of billions of dollars.

The filing asks the entire Court of Appeals to reconsider the July 5 opinion rendered by a three-judge panel. The opinion rejected lower court rulings siding with the state and reinstated a lawsuit against the state filed by a South Side safety-net hospital.

At issue is the state’s privatization of Medicaid billing procedures, which since 2018 has given authority over reimbursement decisions to several major insurance companies under contract with the state.

Since then, those insurance companies — including such corporate titans as Blue Cross Blue Shield, Centene Corp., CVS Health Corp. and Molina Healthcare Inc. — have collected hundreds of millions in profits while delaying, denying and reducing reimbursements to the frontline doctors, hospitals and caregivers, according to a Better Government Association investigation last year called “Milking Medicaid.”

The three-judge appellate panel cited the BGA probe last month when it ruled in favor of Saint Anthony Hospital, which claims the new system left it unable to pay its bills or to adequately care for its patients.

Illinois Department of Healthcare and Family Services Director Theresa Eagleson.

“To sum up, Saint Anthony has alleged a viable right … to have HFS act to try to ensure timely payments from MCOs, and that right is enforceable … against HFS Director Eagleson in her official capacity.”

But Illinois Attorney General Kwame Raoul, who filed the petition on behalf of Eagleson, alleged the ruling was a mistake that creates a “watershed moment” for America’s Medicaid program.

“It presents a question of first impression for federal circuit courts with immense practical importance for Medicaid managed-care programs nationwide, involving dozens of States and hundreds of billions of dollars in spending each year,” Raoul wrote.

“Beyond just establishing precedent in this circuit, this court’s interpretation … will likely be cited as persuasive authority in future cases elsewhere,” the filing says. “And on a question of such extraordinary significance, it is crucial to get the answer right.”

The state’s position appears to counter a recent legislative hearing conducted to address the concerns of health care providers, now required to arbitrate disputes against private insurance companies on every delayed or denied reimbursement.

Chicago Democratic state Rep. Mary Flowers said the system is largely bereft of government oversight.

“Doctors went through the storms of the pandemic without getting paid,” Flowers said at the hearing. “It’s appalling.”

Seventeen state lawmakers attended that joint hearing, in which three safety-net medical providers testified the insurers are boosting their profits by deploying bureaucratic dodges and opaque billing error codes to skirt the federal rule, make partial payments, pay years late or deny claims without explanation.

“We have struggled mightily,” testified Tim Egan, president and CEO of Roseland Community Hospital on the South Side.

Ben Winick, Eagleson’s chief of staff, testified HFS is working with the insurers to put these billing problems behind them and make sure the safety-net providers get paid on time and in full. “We’ve worked diligently to resolve provider disputes. We take those extremely seriously. We’ve made a lot of progress,” Winick said.

“I recognize that our current situation is not perfect, but progress is being made,” testified Samantha Olds Frey, CEO of the insurers’ trade association. Olds Frey declined to comment on the pending Saint Anthony’s litigation.

Earlier this year, Illinois state Sen. Celina Villanueva introduced a bill that would provide more oversight, but Senate Bill 3916 was referred to the Senate Assignments Committee and hasn’t moved since then, state records show.

Before becoming Illinois’ attorney general, Raoul was a state senator for 14 years, in which he worked to expand access to Medicaid.

“Ensuring that every Illinois resident has access to affordable health care is particularly important for Kwame,” according to his campaign website. “Kwame is also grounded by the work of his father, a community physician who spent 30 years on Chicago’s South Side caring for patients regardless of their ability to pay.

“Watching his father’s dedication to providing care to all patients instilled in him that health care is a right for all of us and not a privilege for the few.”

His office did not immediately respond to a request for comment on Wednesday.

The Medicaid insurers’ annual reports for last year show they earned substantial profits from their Illinois contracts. Three of the four state Medicaid contractors — subsidiaries of Centene, CVS and Molina — reported combined profits of $433 million for 2021, and that came after paying hundreds of millions of dollars in administrative fees and dividends to their national parent corporations. Comparable figures were not available for the fourth contractor, an affiliate of Blue Cross Blue Shield.

Petitions like the ones Raoul and the insurers filed – for an “en banc” rehearing before the entire Appellate Court – are rarely granted, according to the Seventh Circuit’s guide for lawyers, the Practioner’s Handbook for Appeals. Saint Anthony’s responses are due to be filed by the end of this month.

HFS Media Relations Officer Jamie Munks said the agency would not comment about ongoing legal proceedings.

“It should be noted that the hearings to date have only been to determine whether Saint Anthony can move its case forward in legal proceedings,” Munks said. “No judgment has been made about whether their claims have any merit.”

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David Jackson

David Jackson is a Pulitzer Prize-winning reporter and four-time Pulitzer finalist whose work has focused on lifting the voices of neglected people amid life-threatening government failures.