Insider Louisville Medicaid story

February 8, 2012

Insiders are telling Insider Louisville Gov. Steve Beshear’s big plan to switch to managed care from fee for services – announced last spring during the gubenitorial race as a way to to close Kentucky’s $1 billion Medicaid budget gap – is looking like it will add to the pain on every possible level from personal to financial.

Those insiders are telling Insider Louisville Kentucky’s managed care system is in chaos after a rushed implementation, a situation that may take years to fix.

“If you’ve ever been in the military … you’ll know the term ‘FUBAR’ (fouled up beyond all repair). That comes as close to describing this as anything,” said one source who represents health care providers and pharmacies.

The Lexington Herald-Leader has reported on problems Medicaid members are having getting care, as well as on the problems providers are having getting paid by the managed-care insurers.

Insiders are telling us the story from the other side – the insurer side – and it’s not pretty, with one company shedding customers after its executives low-balled a bid under a state request for proposal last April.

A huge number of Medicaid-covered patients have dumped low-ball bidder, St. Louis-based Centene Corp. after they figured out the cut-rate provider network means their doctors aren’t included in their coverage.

Insider Louisville’s sources say about 40,000 Medicaid members in Kentucky who’d been assigned to Centene have bolted because they noticed their local docs or pharmacies AREN’T part of their plan.

One stock analyst who covers Centene said Centene officials confirmed during a Tuesday earnings conference call that the insurer’s managed care membership in Kentucky dropped by 40,000 – to 140,000 from 180,000 members – during a two-month open period in November and December, “and they didn’t give a good reason.

“They said it was a ‘benefit design adjustment,’ which makes no sense at all.”

A well-placed insider said Centene executives approached top Health & Family Services Cabinet officials last month, essentially asking for an adjustment on their contract.

“They were asking for more money,” the source said. “(The request) was not well received.”

The reason it’s not well received is in the grade-school math: Those 40,000 Medicaid Members who were going to cost the state $12 million per month at Centene’s $330 per member, per month bid now could cost as much as $17.2 million per month if they all went to Coventry, which is getting 40 percent more per member, per month.

Times 12 months, times the three year life of the contracts.


But the request for an adjustment also raises the specter of Centene walking away from its managed-care contract, willing to take a chance that a legal fight would be less expensive than sticking out the contract.

A report this morning by investment services giant Morgan Stanley raises questions about how the contract implementation in Kentucky will affect Centene.

But as Centene bleeds Kentucky Medicaid membership, it’s Bethesda, Md.-based Coventry Health Care that’s getting the negative publicity for not paying providers.

Sources confirm officials from Kentucky’s Director of Medicaid Services – part of Kentucky’s Department of Health and Family Services – descended on Coventry Health Care’s offices in Louisville yesterday in an unannounced visit related to Coventry’s failure to reimburse health care providers treating Medicaid patients.

State officials did not return Insider Louisville’s calls, which came just as Health & Family Services Cabinet Secretary Janie Miller resigned yesterday.

The Herald-Leader and other state newspapers– though not so much the Courier-Journal – have documented the big flaw in Beshear’s plan: Health care providers, pharmacies and others report they aren’t getting paid by Coventry and other health insurers that won billions worth of state contracts.

Those who are getting paid are having to negotiate long waits to get procedures approved, or to get denials of care reversed, according to media reports.

All of which are threatening to put providers out of business is a state that already is woefully short of docs and health care professionals.

Now, sources tell us CJ reporter Deborah Yetter is playing catch-up with a series of articles:

Her focus will be on the impact of the changes on providers and patients, but will miss an important point … whether the approach will generate the savings the Governor and Secretary of Health and Family Services Cabinet Janie Miller have touted.

Our sources say the answer is, “No.”

Here’s why:

So, the much-touted plan cut Medicaid costs by $375 million is on track to lose an additional $43. 2 million.

(Editor’s note: Miller resigned yesterday, though it’s not clear if her departure is related to the medicaid changes, or to the controversy growing out of the state’s refusal to release information related to the deaths of abused children.)

Back in April, Centene, Tampa-based WellCare and Coventry were among a number of health insurers bidding on about $6 billion in annual Medicaid managed care contracts for about 800,000 Medicaid members as Kentucky switched to managed care from a fees-for-services system.

Beshear’s plan was, critics say, grandstanding – a way to claim to be closing the state’s Medicaid funding gap during a campaign against Sen. David Williams, who called Beshear’s budget schemes “smoke and mirrors.”

Centene, WellCare and Coventry are 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 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 Beshear was touting.

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, for example, could actually get each member to spend less than $330 per month, they’d make a profit. But crucial to getting costs that low would mean lowering reimbursements to health care providers such as doctors and pharmacies, which meant losing some.

Sources in the meeting or with direct knowledge of events confirm state officials were congratulating themselves on implementation until a January meeting between Kentucky Hospital Association members and Miller.

Instead, “agitated” KHA members told Miller the implementation was a disaster, with providers from doctors groups to pharmacies not getting paid, said a source.

“What you’re seeing is, they slammed this thing through, and now it’s coming home to roost,” said an insider. “Any complex business transaction … when you rush it, you’re going to have a bunch of stuff happen that you didn’t anticipate.”

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, 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.


Kentucky Gov. Beshear Announces Resignation of Cabinet for Health and Family Services Secretary Janie Miller

Gov. Beshear Announces Resignation of Cabinet for Health and Family Services Secretary Janie Miller
Governor initiates search for replacement; interim Secretary named
FRANKFORT, Ky. (Feb. 7, 2012) –

Governor Steve Beshear announced today that Cabinet for Health and Family Services (CHFS) Secretary Janie Miller has resigned her position, effective Feb. 29, to seek other opportunities. Sec. Miller was among Gov. Beshear’s first appointments in his first term and brought a broad wealth of state government and health care program knowledge to this key area of human service programs.

“Janie Miller has done extraordinary work in an especially difficult time. In the depths of an economic recession, more and more Kentuckians turned to CHFS for needed services, and Sec. Miller found ways to meet those needs despite the challenges of a very lean budget,” said Gov. Beshear. “Her efforts to provide health insurance for children, to implement wellness strategies, and move more than half a million Kentuckians to a managed care health system in less than a year were enormous tasks. Her work has paved the way for generations of healthier Kentuckians. I am grateful for her tireless service.”

Current CHFS Deputy Secretary Eric Friedlander will serve as interim Secretary of the Cabinet. He has served in the Cabinet in a variety of roles since 1985. Gov. Beshear is initiating a search for a new Secretary.

“The Cabinet for Health and Family Services must be responsive not only to the needs of our people, but also be forward-thinking in order to help prevent some of the generational problems, such as obesity and smoking, that continue to hold our state back,” said Gov. Beshear. “I’m launching a national search for a Secretary who can bring in a dynamic vision to build on Sec. Miller’s work.”

Over the last four years under Sec. Miller’s direction, the Cabinet has made great strides in providing more efficient services to Kentuckians while also ensuring that our most vulnerable populations, especially children and elderly citizens, received the health care and protections they deserve.

Since 2007, CHFS oversaw the improvement of care for citizens at Oakwood and Central State facilities and replaced aging infrastructure at Eastern State Hospital, Central State and Glasgow Nursing Facility. As a result of Gov. Beshear’s directive to enroll more qualified children in health care, CHFS streamlined the qualification process and enrolled more than 60,000 children in the Kentucky Children’s Health Insurance Program (KCHIP) and Medicaid.

Sec. Miller devoted a great deal of attention to wellness initiatives, including adding smoking cessation treatments under Medicaid; developing strategies to fight childhood obesity; and creating partnerships to provide preventive dental care to thousands of school-age children in Eastern Kentucky.

Perhaps the most significant challenge to the Cabinet was the transition of 560,000 Medicaid recipients to a managed care program in less than nine months. Under Sec. Miller’s management, three new managed care providers are now operating in the state. The move is projected to save taxpayers $1.3 billion over three years, including $375 million in General Funds.

“I have been blessed with a long and fulfilling career in public service,” said Sec. Miller. “During these last four years during one of the country’s worst economic recessions, we have continued to move forward by looking to the future, with creativity and focus on alignment, integration and partnership across many sectors to improve the lives of vulnerable populations. I have been privileged to serve with CHFS employees who are some of the most dedicated, committed individuals in state government. I am excited about the future.”

Sec. Miller has more than 35 years of experience in various public administrative and regulatory roles, including 21 years in development and administration of health care programs for the state.

Deputy Secretary Eric Friedlander has worked in variety of CHFS programs, including the Office of the Inspector General; the Division of Family Resource and Youth Services Centers; the Commission for Children with Special Health Care Needs; and the Department for Behavioral Health, Developmental and Intellectual Disabilities. This broad array of experience within the Cabinet gives him the foundation to lead the Cabinet through this interim period.