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Missouri Medicaid Contracts In Flux: Court To Hear Lawsuit

Update: Both parties - Molina Healthcare and the state - must file evidence and briefs with the court by the end of the day, Monday, May 7.   Once a motion is then submitted, Judge Drumm can issue a decision at any time. 


The decision following a Cole County Circuit Court hearing, scheduled for today, will affect the enrollment situation for tens of thousands of Medicaid beneficiaries in the Kansas City region and could impact hundreds of thousands more throughout the state.

Judge Bernhardt Drumm is holding a preliminary hearing this morning on whether to put a temporary hold on the state’s new Medicaid managed care contracts, totaling more than $1 billion. Medicaid participants, however, are already signing up for plans under the new contracts which, pending the court’s decision, begin July 1 of this year.

In February, the state awarded three Medicaid managed care contracts for the new coverage year, down from five contracts this past year. The new contracts went to:

  • Missouri Care Inc., a subsidiary of Aetna that already has a contract in Missouri
  • Health Care USA, a subsidiary of Coventry that has been expanding in the Kansas City region and already has a contract with the state
  • Centene Corp., which is also bidding for a Medicaid contract in Kansas

Molina Healthcare, which lost a contract covering about 80,000 enrollees, sued Missouri on March 29, alleging state officials violated competitive bidding laws when awarding a contract to St. Louis-based Centene – which hasn’t held a contract in the state since 2007 – instead of Molina, which is headquartered in California but has been in the state for 16 years.

Who's Affected

Through a Medicaid managed care program covering select parts of the state, Missouri pays insurance companies a monthly amount for each enrollee they serve, as opposed to paying companies a fee for each service they provide.  About 430,000 residents are currently covered under the program. Most are either children or pregnant women.  86,712 participants live in Jackson county.

Along with Molina, Blue Cross Blue Shield of Kansas City also unsuccessfully bid for a contract in the coming year.  Brian Burns, a senior vice president, said the company was "disappointed with the State's decision." He says Blue Cross currently covers 40,000 Medicaid managed care beneficiaries in the Kansas City region and has been providing such services in the state for 27 years.

"Turmoil" Ahead?

The changes mean Medicaid participants must choose from a plan that’s available through the new contracts.  Details on these contracts have already been mailed to beneficiaries. The period when they can enroll began April 19 and runs through June 16.

In a deposition first obtained by the Associated Press, Missouri’s Medicaid Director, Ian McCaslin, said a court decision to block the new contracts would lead to “mass confusion” and “turmoil” for beneficiaries and providers. The Associated Press summarized McCaslin's comments:

“If this injunction is granted, I don’t have a contract to run managed care at all July 1.  I have a nuclear scenario on my hands”… McCaslin said in the deposition that there is no guarantee Missouri would be able to negotiate an extension of coverage with the existing contractors, or that it would receive favorable terms, if a rebidding process pushes the start of the new Medicaid contracts past July 1. Making matters worse, Medicaid recipients already have received packets of information about the new plans, and insurers already are negotiating new deals with doctors, hospitals and other medical groups, he said.

Alleging Favoritism, Improper Evaluation

As the Kansas City Star reports, Molina has taken issue with, among other things, the state's decision to cap the number of contracts awarded:

The state is trying to “artificially limit competition” among managed care plans by capping the number of companies given contracts, and is doing so without following the proper procedure for rule changes, Molina says.”

The Missouri agency overseeing the purchasing and handling of  contracts for the state is the Office of Administration. State officials say they used quality measures to determine which companies got Medicaid contracts. They also contend limiting contracts to three companies, as opposed to five, will save the program more than $40 million through reduced administrative expenses and reimbursement rates. The program currently costs $1.1 billion, with the federal government covering $700 million.

Molina further alleges that political favoritism has clouded the state’s decision-making process. Centene has donated tens of thousands of dollars to candidate campaigns in the last two years, including those of Missouri Governor Jay Nixon, Attorney General Chris Koster, and Auditor Tom Schweich.

Meanwhile, Centene's Attorney, Chuck Hatfield - who was once chief of staff for Nixon when he was Attorney General - described Molina’s lawsuit as “sour grapes” to the Kansas City Star:

Molina had no problem with the state capping the number of companies that would provide managed care, Hartfield argued, until they were not offered a contract. Molina’s complaint that Centene has no network currently in place is “nonsensical,” Hartfield said since denying a contract on that basis would mean no new company could ever win a contract in the future.

Legislative Scrutiny

The situation has also caught the attention of several state lawmakers. A Senate committee has been charged with reviewing the state's bidding process.  Meanwhile, earlier this week, the Senate floor voted down a measure aimed at preventing the state from capping the number of contracts it gives out if more companies meet certain standards.


This story is part of a reporting partnership that includes KCUR, NPR and Kaiser Health News.


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