Medicaid managed-care firms get new contracts with new rules aimed at resolving health-care providers’ issues with program

Kentucky has signed new contracts with five managed-care firms that will manage Medicaid coverage for more than 1.1 million Kentuckians. Contracts were awarded to Anthem, Coventry Cares, Humana, Passport and Wellcare.

Kentucky changed Medicaid to managed care from a traditional fee-for-service model in 2011 to save money, and officials say it has worked. Health-care providers remain unhappy about denial and delay of claims by the managed-care organizations (MCOs).

“Statistics confirm that moving to a managed-care model has saved Kentucky taxpayers more than $1.3 billion in state and federal funds while simultaneously improving the delivery of health-care services to our Medicaid population,” Health Secretary Audrey Haynes said in a news release.

At the same time, managed care has been a good deal for the companies, except Humana. “Last year, [they] cleared more than $500 million in income above expenses, according to statements companies must file with the Kentucky Department of Insurance,” Debby Yetter reports for The Courier-Journal. “Some of the profits ranged from 7 percent to nearly 18 percent in 2014,” but the new contracts limit that to about 6 percent.

They also require 82 to 87 percent of the payments to the MCOs to be spent on direct services to its members. The payments are per-person fees, based on the number of people whose care is being managed.
Haynes said the contract improvements “should please consumers, advocates and our health care providers” and “will translate into more options and improved services from our managed care companies.”

The new contracts also address many of the issues about which hospitals and other providers have been unhappy, such as slow and reduced payments, complicated paperwork and other procedural differences among the companies.

The new contracts require a standardized contract and standardized forms for prior-authorization requests, grievances, appeals and claims.

Two passionately debated bills in the recent legislative session challenged some of the practices of the current MCOs: one seeking an appeals process for denial of payment and the other removing a cap of “triage fees” for emergency room services that MCOs later deem not to be emergencies.

Both issues were addressed in the new contracts. Now, MCOs must make sure they are using appropriate medical specialist to determine “medical necessity,” initially and in any review process, and the cabinet will be responsible for reviewing denials of “medical necessity” appeals and denials of payment for emergency-room use.

Sen. Ralph Alvarado, R-Winchester, co-chair of the joint House-Senate Medicaid Oversight Committee, told Yetter that “he hopes the new contracts will clear up the problems” and he also hopes “the state succeeds in controlling profits of the managed-care companies, calling it an outrage that some companies are reaping millions off the program while denying care or delaying payment.”

The new contracts also include incentives for MCOs and Medicaid members to decrease use of emergency rooms, and encourage the expansion of behavioral health services.

They offer incentives to to MCOs to continue to improve health outcomes for their members, and spells out new, stringent standards for companies that don’t comply with their contracts.

The contracts are for one year beginning July 1, with the option of four annual renewals.

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