Governor Steve Beshear's Communications Office
Governor Beshear’s Medicaid Plan to Save Taxpayers $1.3 Billion

Press Release Date:  Thursday, July 07, 2011  
Revision Date:  Thursday, July 07, 2011 
Contact Information:  Kerri Richardson
Terry Sebastian

Managed care expansion balances Medicaid budget, creates nearly 550 jobs

FRANKFORT, Ky.—Governor Steven Beshear announced today that the state’s expansion of managed care in the Medicaid program will save taxpayers $375 million in General Funds and $1.3 billion in all funds over the course of the new, three- year contracts.  The managed care contracts and other efficiencies will also balance the Medicaid budget this fiscal year, and will result in the creation of 543 new jobs in the Commonwealth.  The managed care plans are expected to improve coordination of care and reduce costs for the state’s Medicaid program.

The state awarded four contracts to managed care organizations (MCOs) to provide services to Medicaid recipients across Kentucky.  Three of those contracts are with new vendors, and will serve more than 560,000 recipients.  The annual contract with Passport, which had been Kentucky’s only managed care provider, has also been renewed to provide services to 170,000 Medicaid recipients in Jefferson and 15 nearby counties.

“We were confident that moving Medicaid from a mostly fee-for-service system to managed care would create significant savings, preventing unnecessary and devastating cuts to our priorities such as education and job creation.  These contracts show the savings are real,” said Gov. Beshear. “Managed care will provide consistent, comprehensive care to patients, so our vulnerable families will continue to get the quality medical services they need.”

The three new contracts were awarded to:

  • CoventryCares of Kentucky - a Medicaid product of Coventry Health and Life Insurance Company.  Coventry Health and Life Insurance Company is a subsidiary of Coventry Health Care, Inc.  Coventry companies currently offer Medicaid managed care services in eight states: Florida, Maryland, Michigan, Missouri, Nebraska, Pennsylvania, Virginia and West Virginia.
  • Kentucky Spirit Health Plan – a subsidiary of Centene Corporation headquartered in Missouri, which has 27 years of experience managing Medicaid plans, and currently provides services in 12 other states:  Arkansas, Arizona, Florida, Georgia, Illinois, Indiana, Maryland, Mississippi, Ohio, South Carolina, Texas and Wisconsin.
  • WellCare of Kentucky –  a part of WellCare Health Insurance of Illinois, which currently serves 2.2 million members in seven states:  Florida, Georgia, Hawaii, Illinois, Mississippi, New York and Ohio

All managed care firms will be required to have offices in Kentucky to administer member services and provider services.  The firms estimate that nearly 550 people will be hired in Kentucky by Jan. 1, 2012 to administer the managed care contracts.

The state must now receive federal approval of its Medicaid managed care plan from the Centers for Medicare and Medicaid Services. If federal approval is granted, Medicaid would begin enrolling patients in one of the three new managed care plans starting Oct. 1, 2011.

“As more people become Medicaid eligible, the Cabinet has aggressively sought ways to better manage health care services and control rising costs,” said Cabinet for Health and Family Services (CHFS) Secretary Janie Miller. “Over the last 3 ½ years, the Cabinet has worked diligently to restore program integrity; cooperated  with the Office of the Attorney General to pursue cases of waste, fraud and abuse; settled hundreds of hospital disputes dating back to the prior administration; and restored federal funding for Oakwood, all while reducing the Cabinet’s expenditures through eight rounds of budget cuts. All of this work was necessary to pave the way for us to be where we are today.”

Managed Care to Improve Health Outcomes at Lower Cost

In April 2011, a request for proposals (RFP) was issued by the Finance and Administration Cabinet seeking qualified MCOs to manage the health care services—including physical, mental and dental health—for eligible Medicaid recipients across the Commonwealth. Responses to the RFP were accepted through May 25 and evaluations of bids began immediately thereafter. Following completion of the evaluations, negotiations began with the highest scoring vendors.

The managed care strategy emphasizes a holistic approach to health care, which can be particularly effective in helping coordinate the care delivery needs of individuals with a variety of health issues and multiple health care providers. The goal of the contracts will be to improve health care outcomes, particularly as it relates to diabetes control, coronary artery disease, colon cancer, cervical cancer, behavioral health, prenatal care and oral health. The contracts also place a high priority on reducing inappropriate use of services, such as unnecessary ER visits; improving care coordination, especially for individuals with chronic illnesses; promoting wellness and healthier lifestyles; and lowering the overall cost of health care.

Contracts Meet Budgeted Savings Levels, Relieve Budget Pressure on Priorities

The state legislature mandated $97.3 million in General Fund savings in the Medicaid program for Fiscal Year 2012 – a savings figure which is met through the rates negotiated in the contracts that have been executed.  One of the key features of expanding the managed care model is to have predictability of costs.

“I am very pleased we are able to balance the Medicaid budget within the Medicaid program, and not at the expense of education and other priorities, or by jeopardizing critical services that our citizens expect and deserve,” said Gov. Beshear.

CHFS Implements Strict Oversight, Transparency Measures

In January, CHFS created a new Medicaid Managed Care Oversight Branch, which will oversee managed care providers to ensure services are delivered according to the mandates of the contracts.  Strict administrative guidelines have been built into the contracts to make sure taxpayer dollars are spent wisely and effectively, and to make sure consumers have adequate protections.

The health plans will be required to submit monthly, quarterly and annual reports to provide the Department for Medicaid Services (DMS) with managerial, financial, utilization, quality and program integrity data, which will enable DMS to assure quality, access to care, and cost effectiveness, and to evaluate contractual performance and utilization of service to Medicaid members.

In addition, transparency will be required for financial reporting, open meetings and records will be required relating to the contracts for audit purposes, and the contracts prohibit the use of Kentucky Medicaid funds on lobbying activities.

CHFS to Continue Monitoring Passport Services

The renewal of the one-year Passport contract, with $10.5 million in General Fund and $36.7 million in all funds savings, ensures there will be no break in coverage for Medicaid recipients in the Louisville region.

After last year’s audit outlining unnecessary spending by Passport executives, Gov. Beshear demanded immediate and significant changes at Passport - including replacing the entire administrative team to assure taxpayers that Passport would operate at a higher level of accountability.  Gov. Beshear also designed an 11-point corrective action plan for the new Passport team to implement immediately.  Passport has met the requirements of the corrective action plan, and continues to be closely monitored by CHFS.


Download charts on Medicaid budget (PDF)
Listen to Gov. Beshear's remarks at the press conference (MP3)