By RONNIE ELLIS

CNHI News Service

Frankfort — Gov. Steve Beshear announced Medicaid managed care contracts for three statewide providers Thursday and the renewal of Passport Health Plan’s contract to continue serving the Louisville are for at least one more year.

Passport cut its rates by about $36.7 million to serve 170,000 Medicaid patients in Jefferson and 15 surrounding counties for one year.

Most of the rest of the state’s 815,000 Medicaid patients will be enrolled by Oct. 1 in one of three managed care plans offered by CoventryCares of Kentucky, a subsidiary of Coventry Health and Life Insurance of Delaware; Kentucky Spirit Health Plan, a subsidiary of Centene Corp. of St. Louis; and WellCare of Kentucky, part of WellCare of Tampa, Fla.

Some nursing home patients, institutionalized mental patients and other “medically fragile” Medicaid clients will continue to be served through customary state services, according to Jill Midkiff, spokeswoman for the Cabinet for Health and Family Services which houses the Department of Medicaid Services.

Two of the three companies awarded new contracts have been engaged in recent litigation, but all three companies’ backgrounds were checked and any concerns about them were satisfied, according to Donald Speer, Executive Director of the Finance and Administration Cabinet’s office of Procurement Services.

WellCare was the subject of an 18-month Medicaid fraud investigation which led to charges in March against five former executives who were indicted earlier this year. The company also faced three whistleblower suits, two of which have been settled. Officials with the company said Thursday that the investigation has been settled and Speer said the company was “very upfront” and discussed the investigation and the company’s efforts to resolve it with Kentucky officials. In May of this year, Coventry settled a provider class suit against one of its subsidiaries in Louisiana.

“Background checks were done on all the companies to determine if these past issues have been settled and we were satisfied in all respects,” Speer said.

Cabinet Secretary Janie Miller said she could not provide contract amounts because the final amounts will be determined by applying a contracted per-patient rate against the number of enrollees that company acquires. But Centene, the parent company of Kentucky Spirit, published a news release on its website which indicated its contract is worth $700 million a year.

Midkiff, the Cabinet spokeswoman, said the amount is an estimate the company made by applying its contracted rate against about one-third of the Medicaid eligible population the three companies will compete to serve.

Beshear said the contracts are for three years and will save the state $375 million over that time and produce total savings, including federal matching funds, of $1.3 billion. Miller said the first goal of the transition to managed care is to ensure “continuity of care for our patients.”

Medicaid patients will be allowed to choose which of the three providers best suits their needs but the state will initially enroll them in the one which matches patients with their current medical providers. Some patients have multiple providers which could sign up with different company plans making that difficult, however.

The choice could be confusing and anxiety-filled for many Medicaid patients, according to Sheila Schuster, a psychologist and mental health and disabilities advocate.

“There’s a lot of anxiety on the part of people, particularly those with chronic conditions and disabilities,” Schuster said. She said there is also concern about diminished spending on services as the companies try to squeeze profit out of efficiencies and pay administrative costs.

And who will make those decisions between cost savings and medical procedures, Schuster asks: “providers, patients or the administrators?” She said the “jury’s still out” on whether coordination of care may improve patient outcomes and health, but she says advocates will work with the administration to try to see that happens.

Managed care differs from the usual practice of paying medical providers fees for each individual medical service. Instead, providers are paid a “per-patient, per-month” fee to manage the patients’ care efficiently, including prevention and wellness services.

“We believe the benefits will not only be financial but they will be medical in the form of better care,” said Beshear.

He also said the three new companies agreed to subject their Kentucky operations to the state open records laws. Passport already does.

He also said the budgeted savings proves “in black and white” his plan to manage a Medicaid budget shortfall was the proper way to deal with the problem rather than cuts to other services as proposed by the Republican-controlled Senate and its President, David Williams who opposes Beshear in this year’s governor’s race.

House Speaker Greg Stumbo, D-Prestonsburg, issued a statement saying the same thing, although it also said lawmakers will “maintain diligent oversight” of the managed care program and transition. But Williams said the announcment proved the Senate’s position “was absolutely correct – it was impossible for the Governor to implement managed care by July 1 and it is impossible for the new managed care system to save $140 million in FY12 as he promised all year long.”

As Williams predicted on Wednesday, Beshear said he will fly Friday to Bowling Green, Paducah and the Henderson-Owensboro area to explain the new system to Medicaid clients and providers. When asked if his campaign would reimburse the state for the costs, Beshear said he’d be traveling “as governor and would return to Frankfort as governor” – not as a candidate.

Ronnie Ellis writes for CNHI News Service and is based in Frankfort. He may be contacted by email at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com /cnhifrankfort.

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