FRANKFORT — Private companies will manage care for the vast majority of Kentucky's 815,000 recipients of Medicaid, the health insurance program for the poor and disabled that has been a financial nightmare for the state, Gov. Steve Beshear announced Thursday.
Starting in October, Medicaid recipients in much of the state will choose among three companies that will compete to manage their care. A massive education program must start immediately, advocates said after the announcement.
"At this point, the national experience with managed care has been both positive and negative," said Lacey McNary, deputy director of Kentucky Youth Advocates. "In some cases, managed care has produced dramatic savings and improved health outcomes. In other cases, the reverse has occurred, and the cost-saving strategies used by managed care companies have compromised the well-being of plan members."
Beshear described the expansion of managed care as "a major sea change" in the $6 billion-a-year program.
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"Managed care will provide consistent, comprehensive care to patients, so our vulnerable families will continue to get the quality medical services they need," he said at a Capitol news conference.
Medicaid patients who are in nursing homes or extremely disabled will not fall under managed care plans.
The expansion of managed care will save $375 million in Kentucky's General Fund, which pays for most state programs, during the course of new, three-year contracts, Beshear said. The federal government pays about 70 percent of the cost of Medicaid, so state and federal government will save $1.3 billion over three years, Beshear said.
The contracts with managed care companies, which will begin enrolling recipients Oct. 1, and other efficiencies will balance the state Medicaid budget in the fiscal year that began July 1, Beshear said.
As a bonus, the contracts will create 543 jobs, he said.
The state has awarded four contracts to managed care organizations.
Three of those contracts are with new vendors and will serve more than 560,000 people. The three companies will offer services throughout the state except in the area covered by Passport, which provides services to 170,000 Medicaid recipients in Jefferson and 15 nearby counties.
An annual contract with Passport, which had been Kentucky's only managed care provider, has been renewed.
The three new contracts were awarded to:
■ CoventryCares of Kentucky, a division of Coventry Health and Life Insurance Co., a subsidiary of Coventry Health Care Inc. Coventry companies provide Medicaid managed-care services in eight states: Florida, Maryland, Michigan, Missouri, Nebraska, Pennsylvania, Virginia and West Virginia.
■ Kentucky Spirit Health Plan, a subsidiary of Missouri-based Centene Corp., which has 27 years' experience managing Medicaid plans. It 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 serves 2.2 million members in seven states: Florida, Georgia, Hawaii, Illinois, Mississippi, New York and Ohio.
State Health and Family Services Secretary Janie Miller said she could not provide the total cost of the contracts, saying the final numbers will depend on how many Medicaid members each company enrolls.
But Centene's Web site said it expects to serve 180,000 Kentuckians, generating revenue in excess of $700 million a year.
Centene's contract has the potential for four, one-year extensions, the company said. It said it will place its Kentucky headquarters in Lexington.
The St. Petersburg, Fla., Times reported last year that WellCare Health Plans agreed to pay $137.5 million to the U.S. Department of Justice and other agencies to settle civil lawsuits accusing the company of overcharging for its Medicaid and Medicare programs.
Mike Minor, president of WellCare of Kentucky, said at Beshear's news conference that the issue involved former employees and that the company was pursuing litigation against them.
In May, Coventry Health Care announced it had resolved a class-action lawsuit in Louisiana.
Forbes reported that a court approved a $150.5 million settlement of the lawsuit, which accused the insurance company of violating notice provisions related to the treatment of injured workers with workers' compensation claims.
Kentucky officials said Thursday they thoroughly reviewed each company before awarding the contracts.
The renewal of the one-year Passport contract, projected to save $10.5 million in General Fund money and $36.7 million in state and federal funds, ensures there will be no break in coverage for Medicaid recipients in the Louisville region, Beshear said.
Last year, state Auditor Crit Luallen found unnecessary spending by Passport executives. Beshear made immediate changes at Passport — including replacing the entire administrative team and more monitoring by the state Cabinet for Health and Family Services.
The state now must get federal approval of its Medicaid managed care plan from the Centers for Medicare and Medicaid Services.
Beshear said his administration will begin an educational campaign to inform Medicaid recipients about the changes.
He plans to fly Friday to Paducah, Bowling Green and Owensboro to explain the changes. He said he will conduct no events for his campaign for re-election during the fly-around.
Beshear, a Democrat, faces Republican Senate President David Williams in the November general election. Gatewood Galbraith, a Lexington attorney, is trying to get on the ballot as an independent candidate.
Williams, who has been critical of Beshear's handling of the Medicaid program, said Beshear's "history of playing fast and loose with budget numbers is on display" and "there is no certainty" the managed care system will be in place by Oct. 1 and true savings will be realized.
Kentucky's Medicaid budget was sharply debated during a special legislative session this year that Beshear called after the House and Senate could not agree during the regular 60-day session on a fix for it.
The Senate sought $100 million in cuts across state government to balance the budget. The House allowed Beshear to move $166 million in the Medicaid budget from fiscal 2012 to fiscal 2011 to solve the problem.
Beshear said he could generate enough savings, primarily through managed care, to make up the $166 million.
House Speaker Greg Stumbo, D-Prestonsburg, said Beshear's announcement Thursday is "concrete proof" that Beshear and the House "took the right approach earlier this year when we fought to make up the Medicaid shortfall within that program and not needlessly cut classroom funding or other necessary state services."