Passport ‘cautiously optimistic’ new Medicaid rates can avert insolvency

Mark Carter at Passport’s office on Commerce Drive. | Photo by Boris Ladwig

Passport Health Plan CEO Mark Carter said he is “cautiously optimistic” that the state’s new Medicaid disbursement rates, which will provide Passport with another $80 million annually, will be enough to avert the nonprofit’s insolvency.

However, Carter also told Insider in an emailed statement Wednesday that the state’s low rates over the last year “substantially depleted” Passport’s cash reserves and that the nonprofit’s lawsuit against the state to recover some additional dollars would remain in place.

“We appreciate that the state has implemented rates more closely reflective of current and rising health costs, particularly in the Louisville region, and we are cautiously optimistic these rates will help provide a path for Passport’s sustainability,” Carter said.

The state told Insider Tuesday that for the period through June 30, 2020, it is increasing its Medicaid base rate by 4.3 percent for Region A (a 16-county region including Jefferson), and by 2.9 percent for Region B (all other counties.)

The Centers for Medicare & Medicaid Services has projected that Medicaid costs nationally this year would increase 4.8 percent, largely because of a rising number of beneficiaries and higher health care costs.

The state told Insider that the distribution to Region A is increasing more than in Region B for reasons including higher prescription drug cost trends and higher care needs for new Medicaid beneficiaries.

Passport handles Medicaid benefits for about 305,000 Kentuckians, of whom two-thirds live in the Louisville area, including nearly 128,000 in Jefferson County, about 18,000 in Hardin County and 10,500 in Bullitt County. 

The idle construction site of Passport Health Plan’s proposed new headquarters at 18th Street and West Broadway. | Photo by Boris Ladwig

Passport had said that despite drastic cost-cutting, the state’s lower disbursement rates, which began last summer, were causing the nonprofit to lose about $60 million per year, and that without a significant increase, it would face insolvency as early as this summer. The nonprofit also had halted construction on a new $87 million headquarters at 18th Street and West Broadway, and while Carter said he hopes to complete the project, he did not have a timeline to resume construction.

Passport officials have said that the state last summer changed its rates arbitrarily and that they unduly harm Passport. The nonprofit has sued the state to restore previous disbursement rates. 

State officials have told Insider that they changed Medicaid distribution rates last year because of budget cuts and to bring profitability of Kentucky’s managed care organizations in line with the national average

Medical providers have told Insider that they fear Passport’s insolvency would disrupt care for Medicaid beneficiaries and force more doctors to stop accepting Medicaid patients.

Passport’s fiscal struggles had prompted the state to conduct a financial examination of the nonprofit, and Carter said Wednesday that Passport is “finalizing a detailed five-year plan, which we will submit to the state Department of Insurance by the end of this week.”

“The plan includes a series of steps to maximize efficiencies and streamline our network and our medical and administrative expenses,” Carter said. “We are taking these measures to further solidify our financial standing and help insulate against potential rate volatility in the future.”

Medicaid is a mostly federally funded health insurance program primarily for the poor, pregnant women and people with disabilities. As of this month, the program covered about 1.35 million Kentuckians. The number has increased by more than 300,000 since January 2014, in part because former Gov. Steve Beshear expanded the program under the Affordable Care Act.

Gov. Matt Bevin has sought to make changes to the state’s Medicaid program, such as adding work and volunteer requirements for some beneficiaries. While the U.S. Department of Health and Human Services had approved the changes, a judge vacated that approval last month, saying that it was “arbitrary and capricious” and violated the law. The federal government has appealed that ruling.