State will seek repayment from contractor accused of lavish spending

FRANKFORT — The state Cabinet for Health and Family Services will attempt to recover some of the money a private contractor spent on questionable travel, entertainment and other expenses, officials said Tuesday.

Earlier in the day, Kentucky House Speaker Greg Stumbo said he expects the cabinet to aggressively seek repayment from Passport Health Plan, which administers Medicaid in the Louisville area.

Stumbo, speaking to a legislative committee considering ways to control costs in the state and federal Medicaid program, said Tuesday he read the contract with Passport, and it seems clear the state could ask Passport to repay money the state says was not spent correctly.

Vikki Franklin, a spokeswoman for the cabinet, said officials plan to ask Passport to repay the state for some of the questionable expenses identified last week in a scathing audit by State Auditor Crit Luallen.

"We plan to require repayment by Passport of any funds that were identified in the audit that were not directly attributable to and expenses related to carrying out the provision of health care services for Medicaid recipients," Franklin said.

It's not clear exactly how much money the state plans to ask Passport to repay. The cabinet is still planning a full audit of Passport to determine just how state taxpayer dollars were spent.

Over the past three years, Passport has received more than $2.5 billion in state and federal taxpayer dollars to manage health care services for 164,000 people on Medicaid in the Louisville area.

Luallen questioned why over the past three years Passport spent more than $1 million dollars on lobbying and public relations, $230,000 on travel, gifts and other entertainment and $420,000 on sponsorships and donations.

Stumbo said Tuesday that if the state is going to pursue more contracts with private vendors to manage Medicaid it needs to step up its oversight and enforcement of those private contracts.

"They should have been monitoring (this contract)," Stumbo said.

Gov. Steve Beshear announced Monday the state intends to expand managed care programs to other parts of the state as a way to reduce costs in the cash-strapped program. Beshear's plan also includes moving about $139 million from the fiscal year 2012 budget to fiscal year 2011, which began July 1. The transfer allows the managed care companies time to begin operating and generate savings, Beshear said.

Beshear and cabinet officials have said they are asking for immediate corrective action from Passport and said many of the excessive expenses in the state audit were not detected by cabinet officials because Passport had mis-classified some of those expenses. In its response to the audit, cabinet officials said they would ask for more detailed information about those expenses in the future.

Passport board members and officials are expected to sit down with the cabinet soon and go over Passport's corrective plan.

Stumbo and Senate President David Williams, R-Burkesville, grilled cabinet Secretary Janie Miller at a legislative meeting on Monday about Beshear's plan to expand managed care and the cabinet's handling of the Passport contract.

But Stumbo said Tuesday he was not just chiding the Beshear administration's handling of the contract.

"I believe it goes back through several administrations," Stumbo said.

Passport was started in 1997.

Both Stumbo and Williams said Tuesday that if the cabinet does not step up oversight of large state contracts, the legislature should look into strengthening its own powers so it can monitor contracts more closely.

This story was originally published November 17, 2010 at 12:00 AM with the headline "State will seek repayment from contractor accused of lavish spending."