Medicaid Meltdown update: Passport files formal complaint against state over Medicaid contracts

Mark Carter, Passport CEO.

Another salvo has been fired in the widening war over the Beshear Administration’s Medicaid reforms.

Passport Health Plan, the Louisville-based non-profit Medicaid managed care organization, filed a formal protest yesterday opposing how patients are being divvied up its area, Region 3, after state officials brought other MCOs into the region.

Region 3, which includes Louisville and 15 surrounding counties, covers about 180,000 Medicaid members.

Passport executives filed the protest after “discussing concerns around the assignment of members to health plans with officials from the Cabinet for Health and Family Services’ Department for Medicaid Services,” according to a news release.

Kentucky officials announced in May they would issue a request for proposal to add other MCOs in Region 3 despite the fact that the National Committee for Quality Assurance and even state officials rated Passport the state’s most efficient and problem-free Medicaid managed care provider.

The move added Humana, WellCare Health Plans and Coventry Health Care to Region 3, potentially cutting Passport’s business by 75 percent.

Now, Passport executives are saying the patient assignment plan is flawed.

From the release:

The assignment of members was arbitrary and will cause unnecessary and harmful disruption of patient’s continuity of care and, moreover, inappropriately increase the cost of providing Medicaid services to the Commonwealth and ultimately the taxpayers. “Passport exists for one reason and that is to help Kentuckians lead healthier lives, which is embodied in our mission statement of improving the health and quality of life of our members.” said Mark B. Carter, Chief Executive Officer. “Our organization doesn’t exist to generate a return for shareholders. We exist as forceful advocates for some of the least fortunate people in our community. I am convinced that patients will be harmed if the arbitrary assignment process is utilized. I am also concerned that the cost of providing care in Region 3 will be materially increased to the detriment of Kentucky tax-payers.” continued Carter. “We shared this information with the Commonwealth and the DMS went forward with the assignment process. We felt compelled to take this action.”

What this all means is unclear. CHFS officials were not in their offices when Passport executives announced the complaint Thursday evening.

This is the latest skirmish after the Beshear Administration implemented a new Medicaid managed care system one year ago, replacing a fees-for-services system.

Medicaid managed care contracts were awarded in July, 2011 to three bidders – St. Louis-based Centene Corp., Tampa-based WellCare Health Plan and Bethesda, Md.-based Coventry Health Care – in the other seven Medicaid regions in Kentucky outside Region 3.

The result has been that outside Passport’s area, doctors and other providers have gone unpaid and physicians groups and clinics have been ejected from insurer networks in the poorest parts of Kentucky as the insurers struggled to deal with huge and mounting losses.

There have been suits and counter-suits. Late last month, Centene, which operates in Kentucky as Kentucky Spirit, announced it was terminating its Kentucky contract and suing the state after $120 million in losses.

In the suit filed in Franklin Circuit Court, Centene executives charged state cabinet officials misled Centene officials about the overall health of Kentucky’s Medicaid members during the period leading up to the awarding of $6 billion in  contracts back in November 2011.

The Centene suit also claims Kentucky officials submitted incorrect data to the insurer after rushing to stand up a Medicaid managed care system.

More as we know more.

The back story on Kentucky’s Medicaid Managed Care Meltdown:

In April 2011, state officials asked health insurers to submit managed-care proposals for the $6 billion worth of care 800,000 poor and elderly Kentuckians receive annually under the federal/state Medicaid program. At the time, Gov. Steve Beshear touted the switch to managed care from fee-for-services as saving the state $375 million over the life of the initial three-year contracts. Insiders said officials in other states such as Georgia took as long as 18 months to make the change while Kentucky tried to do it in less than six months.

The three companies receiving MCO contracts were Centene, WellCare and Coventry Cares, all publicly traded companies. (Passport Health Plan, a Louisville-based non-profit controlled by providers, is the managed care insurer for Jefferson County and 17 surrounding counties.)

Each bid for the Kentucky MCO business was based on per-member, per-month health care costs projections. Low-bidder Centene bid $330 per member, per month, according to documents submitted to Insider Louisville. WellCare bid was based on $400 per member per month, and Coventry bid $436 per member per month.

The algorithm state officials used to choose the winners favored the low-cost plans, obviously, because therein lies the savings.

The state methodology initially assigned members to a plan, with the two lowest cost plans getting more members than the highest.

If Centene’s manged care system actually got each member to spend less than $330 per month, they’d make a profit. But crucial to getting costs that low would mean cutting reimbursements to health care providers such as doctors and pharmacies, which meant losing some.