FRANKFORT — State Auditor Adam Edelen said Wednesday that Kentucky and three private companies that manage care for more than 560,000 Medicaid patients were unprepared for the switch to managed care on Nov. 1.
After a review of preliminary information provided by the managed-care companies, Edelen sent the Cabinet for Health and Family Services 10 recommendations to improve the transition to managed care in the federal-state health care program for the poor, disabled and elderly.
Medical providers and patients have complained that managed-care companies have been too slow to reimburse providers and have cumbersome preauthorization processes that delay treatment. Some pharmacies have had to lay off employees. Other providers have had to get loans to cover their payroll.
The three companies "are sitting on more than a quarter of a billion taxpayer dollars while small-town doctors, hospitals and other health care providers have had to open or extend lines of credit to keep their doors open," Edelen said.
The companies have received about $708 million from the state since managed care started Nov. 1. As of Feb. 15, they have paid $420 million in claims, Edelen said.
His office requested information from the companies — Coventry Cares, Kentucky Spirit and WellCare of Kentucky — on Feb. 3 after hearing widespread complaints.
Edelen also announced Wednesday that he would create a Medicaid auditing unit that would focus on improving the $6 billion Medicaid system, one of the largest health insurance programs in the state.
Edelen said the cabinet did not learn from the 1997 launch of Kentucky's first managed-care contract — Passport in the Louisville area — and seemed ill-prepared to monitor and enforce the three new managed-care contracts.
In turn, the managed-care companies did not have adequate staffing or infrastructure to handle the transition, Edelen said.
His recommendations include:
■ Adjusting staff at the managed-care companies to clear backlogs in claims payments and authorizations for treatment.
■ Ensuring that pharmacists understand the process for appealing the denial of a claim for a prescription and ensuring that the appeals process is timely.
■ Developing a measurement system to determine whether payments are being made in a timely manner.
■ Considering the removal of mental health services from the managed-care contracts. Those services have been a particular managed-care problem.
Jill Midkiff, a spokeswoman for the cabinet, said officials were considering Edelen's recommendations.
"With any change of this magnitude, it is not unexpected to experience transition issues, and the Department for Medicaid Services is methodically working ... to resolve those issues as quickly as possible," Midkiff said.
Medicaid is conducting on-site reviews of each of the managed-care companies to ensure compliance with their contracts, Midkiff said.
Kelly Gunning of the National Alliance on Mental Illness of Lexington told the Senate Health and Welfare Committee last week that including mental health in managed-care contracts hasn't worked in other states.
The managed-care companies are asking psychiatric patients to go off of medications that work and switch to ones the companies approve, mental health advocates said. Gunning said switching and denying medications has resulted in more people becoming destabilized and having to return to psychiatric hospitals.
Midkiff said mental health was included in managed care because the state did not want to have patients' mental health needs handled by one insurance system and their other health needs handled by another.
The managed-care companies have told legislators in recent weeks that providers are being paid more promptly. Wait times for preauthorization of services also have improved.
Coventry said Wednesday that it already had taken steps to implement some of Edelen's recommendations and that its backlog of payment claims had been eliminated.
"We are now paying over 99 percent of provider claims within 30 days," Coventry spokesman Matthew Eyles said in a statement. "In addition, our medical review teams are meeting the required 48-hour turnaround for prior authorization."
Officials with WellCare and Kentucky Spirit said they were reviewing Edelen's recommendations.
Managed care is expected to save the state and federal government more than $1.3 billion during the next three years.