Bevin gets bill to create third-party appeals process for denied Medicaid claims, which sponsor says are all too common

By Melissa Patrick
Kentucky Health News

A bill to create an independent process for Kentucky health-care providers to appeal claims denied by Medicaid managed-care organizations is on its way to the governor’s desk for his signature.

Sen. Ralph Alvarado

The only appeals process for providers now is through the MCOs themselves, and the only recourse for denied claims is through the courts.

“We are looking at almost 20 percent of the claims that are out there through Medicaid being denied to providers,” the bill’s sponsor, Republican Sen. Ralph Alvarado of Winchester, told Kentucky Health News. “So with that there are millions of dollars that all of those providers are losing out on. This finally gives them an opportunity to keep the MCOs accountable.”

WellCare of Kentucky, one of the MCOs Alvarado targeted last year while trying to get a similar bill passed, denied that it has so many disputed claims, but says it will work with the Cabinet for Health and Family Services if Senate Bill 20 is enacted.

“WellCare of Kentucky rarely disputes claims for medical necessity, with only 1 percent of claims being denied for this reason,” spokesperson Charles Talbert said in an e-mail. “We are supportive of initiatives that help to ensure our members get the right care, at the right time, in the right setting.”

Another MCO that Alvarado targeted last year as having a high rate of denied claims, Aetna Better Health of Kentucky, formerly CoventryCares, said in an e-mail, “We work tirelessly, along with our network of providers to improve access to and quality of care for our Medicaid members and we are committed to continuing these valuable collaborations.”

CareSource, another MCO, declined to comment.

Kentucky implemented managed care in 2011 mainly as a way to save money. In managed care, an MCO gets a lump sum per patient, a system that encourages them to limit payments to providers. Providers have complained about denied claims and slow payments, causing some to suggest that managed care creates an incentive to deny care.

“Kentucky Medicaid MCOs have a denial rate that is four times the national average,” Alvarado said in an e-mail. “These MCOs, in general, are garnering massive profits on the backs of our providers by simply not paying for services; and then claiming that they are ‘managing care’.”

MCOs serve about 1.1 million Kentuckians and account for about 69 percent of the state’s Medicaid budget, according to a state news release.

Last year the state renegotiated all MCO contracts in hopes of decreasing the number of disputes over rejected claims, but health-care providers told the Senate Health and Welfare Committee Jan. 13 that this is still an ongoing problem, especially with behavioral health.

Nina Eisner, CEO of The Ridge Behavioral Health Systems, told the committee that there are examples all over the state of patients with homicidal thoughts unable to get their care paid for by MCOs.

Senate Bill 20 says that after providers exhaust an MCO’s internal appeals process for denied claims and a final decision has been made, the provider can then seek a third-party review from an administrative hearing tribunal in the cabinet. The appeals process would apply to all contracts or master agreements entered into or renewed on or after July 1, 2016.

Alvarado said the proposed appeals structure is very similar to the one for commercial insurance appeals at the Department of Insurance. He noted that Kentucky’s commercial denial rates are around 6 percent, which are close to the national average, and said he hopes this independent appeals process will bring the MCO denial rates more in line with this.

“If we go from 20 percent to 6 percent, I think most providers will accept that,” he said. “This is fair. It is fundamentally American to have an appeals process and it is needed.”

Alvarado sponsored a similar bill last year, but it died in the House. A similar bill passed both chambers in 2013, but then-Gov. Steve Beshear vetoed it. Alvarado said he is confident Gov. Matt Bevin will sign this year’s version.

Alvarado said that once this “fractured relationship between providers and Medicaid” has been mended “it might actually open up the door for more providers to participate with Medicaid.”

Sheila Schuster, a Louisville mental-health advocate, agreed, and said that while Medicaid reimbursement rates are “not great,” not being paid at all for services rendered is not acceptable and has been a deterrent for providers to participate.

She said the Kentucky Mental Health Coalition and the National Alliance on Mental Illness support SB 20 because “they want providers to be fairly treated and to be able to provide the services that they need.”

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