The first page of the Passport letter.

Yesterday, insiders sent us the formal letter of protest from Passport Health Plan to Lori Flanery, secretary of Kentucky’s Finance and Administration Cabinet.

In the letter, Passport CEO Mark Carter charged the state used flawed contracting methods while adding new health insurers in Kentucky’s Medicaid Region 3, where Passport has had the contract for 15 years.

Those changes, scheduled to go into affect Jan. 1, 2013, will add millions in costs and disrupt care for many of the 180,000 Medicaid members in the region, which is Jefferson County and 15 surrounding counties, Carter wrote.

We gave state officials an opportunity to tell their side of the story.

Late last night, we got their response from Jill Medkiff, director of communications for the Finance and Administration Cabinet.

Their response is posted here in its entirety in a question and answer format:

IL: Mr. Carter’s most serious charge is that instead of saving money as Gov. Steve Beshear touted when he announced Medicaid reform during the 2011 gubernatorial campaign, the changes in Region 3 will add $80 million in costs while totally disrupting patient services.

JM: The healthcare of the citizens in the Medicaid program is the Cabinet’s highest priority. The Medicaid program is on track to achieve the budgeted savings for managed care assumed in the enacted budget. All four managed care organizations awarded contracts for Region 3 pursuant to the federal government’s requirement that Medicaid members have a choice of providers will be ready to provide needed services on January 1, 2013.

IL: Mr. Carter says at a meeting last week, Kentucky officials told Passport executives Passport would receive about 41 percent of the Region 3 Medicaid recipients after the new contracts adding Humana, WellCare and Coventry are in effect. Instead, they’re getting 27 percent.

 JM: Assignment of members is based on the Primary Care Physician, not the hospitals. To meet network adequacy the contractors must meet the standards for all types of providers. All MCOs in Region 3 knew prior to the contract of the model for the auto-assignment. Medicaid members in Region 3 are first auto-assigned. Following this process they will have 30 days to change to any of the other MCOs of their choosing prior to Jan 1, 2013. After Jan 1, 2013 members will have another 90 days to change MCOs. If members have been happy with Passport, it is reasonable to believe Passport will increase their membership from 27% to something more. Again members will have ample opportunity to choose a company/plan other than their auto-assigned plan. 27% is just the initial auto-assignment for Passport. One year ago in the other 7 regions Coventry Cares, Wellcare and Kentucky Spirit began with an auto-assignment and the membership has indeed shifted:

November 2011: Coventry Cares – 212,136 As of November 1, 2012: Coventry Cares – 207,174

Wellcare – 120,620 Wellcare – 208,416

Kentucky Spirit – 219,998 Kentucky Spirit – 142,944

Note: There is a difference in overall membership total due to Medicaid membership growth over the one year period in the 7 regions.

IL: Mr. Carter claims that state officials did not observe conventional contracting practices, awarding Humana, WellCare and Coventry contracts without proof of sufficient provider networks.

JM: All bidders were made aware that, due to the timing of the award of the bid and the start date of the contracts, the same process used last year for the other 7 Regions would be used. The bidders were advised that Letters of Intent would be counted for the purpose of the initial assignment, but that the MCOs had to convert those letters of intent to contracts to be in compliance with the Readiness Review, which will begin in a couple of weeks and be concluded before the January 1 start date. Therefore, if for any reason a Medicaid member’s provider is not contracted by January 1 by the MCO they are assigned, they will have 90 days to make a change to another MCO.

IL: Mr. Carter wrote in the letter that state officials actually encouraged Passport executives to increase their original bid by eight percent.

During the confidential Region 3 Managed Care bid process, the negotiations lasted for about 3 weeks with the 4 companies receiving contracts. It is our hope that our managed care companies see us as a partner of integrity and it is important for us to keep our bid process confidential. However, we will confirm that during negotiations no bidders were ever encouraged to raise rates, but all bidders were able to adjust rates if they so chose.