, Corbin, KY

State News

August 1, 2013

State auditor releases report on managed care system

CORBIN — By Ronnie Ellis / CNHI News Service

The number of Medicaid providers in Kentucky dropped by 8 percent since the introduction of a managed care system of delivering medical services to Kentucky’s poor and disabled, according to a report released Tuesday by Auditor Adam Edelen.

His examination also called into question the system’s preparedness to bring in an additional 300,000 clients as the state expands its Medicaid rolls as part of the federal Affordable Care Act.

A spokesman for the Cabinet for Health and Human Services which houses Medicaid said Edelen’s report “is a limited and somewhat outdated review of anecdotal data which doesn’t fully and accurately reflect the scope of the current managed care environment.”

Two years ago, Gov. Steve Beshear and the cabinet announced it would implement a managed care system which pays independent Managed Care Organizations (MCOs) an annual, per-member fee to contract with front-line medical providers to offer treatment to Medicaid clients as a cost savings measure.

Under the previous fee-for-service system, the providers — hospitals, doctors and pharmacies — directly billed the state for each service. Now they bill MCOs while those organizations have a contracted amount they receive from the state. Managed care is designed both to lower costs and to provide more preventive care and improve health outcomes.

But critics said the plan was implemented with too little lead time and providers almost immediately complained the MCOs were late making payments for services or in some cases disallowed medically necessary services.

After legislators heard from providers and clients in their communities, House Speaker Greg Stumbo introduced a bill to set up a mediation process for such claims but after the General Assembly passed the bill, Beshear vetoed it but acknowledged problems and set up a system-wide review.

Subsequently, Beshear and Medicaid Commissioner Larry Kissner have maintained the problems and a backlog of delayed claims have been methodically reviewed and most of the problems either brought under control or soon would be.

Then this spring, Beshear announced he would expand the system to include about 300,000 more Kentuckians eligible under the ACA guidelines. While those new costs will be largely paid for by the federal government — all of them for three years and then 90 percent thereafter — providers and lawmakers expressed concerns the already troubled managed care system and an existing shortage of medical providers could not handle the influx.

Edelen said Tuesday he believes managed care is the right way to deal with rising costs and the large number of uninsured people in Kentucky “but it has to be a fair deal for providers, members and taxpayers.”

His report expresses concern about whether rural hospitals can continue to wait on delayed reimbursements from the MCOs and the subsequent cash flow problems those delayed claims cause.

The report makes several recommendations:

—Establishing a formal advisory panel of members and stakeholders;

—Requirements for retaining claims records;

—Establishment of an approval process for subcontracts with MCOs, including third party providers for dental, vision and behavioral health services;

—Improved monitoring of MCO accounts payable;

—Establishing a way to estimate the cost savings of managed care for the state.

Spokeswoman Jill Midkiff said the cabinet welcomes the examination by Edelen’s office but said it doesn’t accurately reflect improvements which have occurred since Beshear set up the review.

“The move to managed care was not simple or painless, but our records show evidence of health care providers and managed care organizations working together to adapt to the new Medicaid system,” she said. “Medicaid members are receiving prompt, effective medical services with measurable improvements in health outcomes.”

Kissner has reported to legislative committees reviewing problems in managed care that emergency room visits and the number of prescriptions have decreased dramatically under managed care while health outcomes and preventive services such as diabetes screenings have gone up.

He also has maintained that the cabinet is resolving most of the disputes over late claims or disallowed claims and that many were simply the result of misreported claims.

Midkiff said Tuesday other issues cited in Edelen’s report are not the result of managed care because they existed before its implementation, including the adequacy of medical providers in Kentucky and it does not belie the need to expand Medicaid services.

“Medicaid expansion does not expand the population of Kentuckians in need of healthcare, it simply provides a source of payment for those services,” she said.

Edelen’s review also found the number of hospitals has dwindled since Medicaid managed care was implemented but Midkiff said the reductions are all out-of-state providers while the MCO provider networks have actually widened.

She said the cabinet agrees with the report’s finding that local health departments are owed money from the MCOs for services such as school nurses and has gone to court to force the MCOs to make those payments.

RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at Follow CNHI News Service stories on Twitter at

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