Lawsuit Challenges Medicaid Managed Care Decision In Missouri

Which marketplace is better: a crowded one with lots of choices or a streamlined one with just a few options? Those competing ideals are the backdrop of a legal battle playing out this month in Missouri, where the state’s efforts to winnow contracts for its Medicaid managed care business are being challenged by one of the companies left out in the cold.

Molina Healthcare is suing the state arguing that Missouri changed the rules in the midst of a competitive bidding process. Molina is one of five companies currently managing care for about 430,000 of the state’s Medicaid beneficiaries, who are mainly low-income children and pregnant women. 

Molina’s contract was not renewed for next year. Instead Missouri awarded contracts to two insurers already active in the state and one new company. 

Judge Bernhardt Drumm of Cole County circuit court could rule on the case any day now, and the dispute adds an element of uncertainty for beneficiaries, as it comes smack in the middle of open enrollment, which runs April 19 through June 16.

In Missouri’s managed care system, instead of paying doctors and health facilities directly for services, the state contracts with companies to oversee patients’ care in 54 counties. 

“From the state’s point of view — and this is why it [managed care] is attractive to the state — it’s very easy for them to manage their costs,” says Dr. Corrine Walentik, a neonatologist in St. Louis and head of the state’s Medicaid oversight committee.

The state pays these insurance companies a fixed member-per-month fee. The companies negotiate rates with a network of physicians and hospitals to provide that care. They also have people who specifically help enrollees navigate the system. The model is similar to an HMO, where patients have a primary care doctor who makes referrals when needed.

“It becomes the managed care plan’s job to make sure they do a good job managing these patients, so that they don’t have their costs accelerated at a higher rate than they should, and run out of money. Cause then they’d go under,” says Walentik, who has worked with the managed care program since Missouri started it in the mid-90s, but was not involved in the state’s recent contract selection and review process

For the first time, the state has limited the number of managed care contracts it awarded to just three, instead of granting a contract to any company that meets certain requirements. Having a cap could save the state $16 million over two years, according to officials with the state, through reduced administrative costs from having to work with fewer companies. The state also expects money to be saved from better rates that companies will be able to negotiate with providers because each company will have more members and more leverage.

Walentik says St. Louis may provide a good lesson for why less is better. When Missouri started its managed care program there in 1995, seven plans participated. “That was a disaster,” says Walentik. “There were too many plans and not enough lives. Part of way the it works in any place is you have to have a big enough population to spread the risk across the population.” She says three plans ultimately survived.

The new awards, issued in February and effective July 1, didn’t include Molina Healthcare. Molina was founded in California 30 years ago, specifically to manage healthcare for low-income people in government health programs. It has been in Missouri since 2007. The company currently manages about a fifth of enrollees in the program (including around 13,000 people in the Western region), and was one of five companies currently with a contract in Missouri.

The state instead awarded a new contract to Centene’s Home State Health Plan. Based in St. Louis, the company hasn’t had a contract in Missouri for six years. The other two companies awarded contracts – Missouri Care, an Aetna health plan, and HealthCare USA, a Coventry health care plan– are already operating in the state. In March, Molina filed a lawsuit, challenging the state’s contract decisions.

“We believe the state changed the rules after proposals had been submitted and is illegally limiting the number of health plans serving Medicaid members in the state of Missouri,” says Amy Dobberteen, an attorney with Molina.

Molina wants the court to put a halt on the new contracts. The contracts total about $1.1 billion (with the federal government footing about $700 million of the bill). 

Wanda Seeney, a spokesperson with the Missouri Office of Administration, said the state “conducted a competitive bid process for the managed care contract. Points were awarded for each bid based on quality; the method of performance; organizational experience; and most importantly, access to care.” 

Molina didn’t score as high as the other plans on the various quality and access measures 

At least one provider concurs with the state’s motives to limit contracts. “We always felt having five options was more than necessary,” says Bob Finuf, an executive with Children’s Mercy Hospital, the main children’s hospital in Kansas City. “It’s not efficient and added complexity for providers.” 

The whole legal dispute comes at an inopportune time for beneficiaries. The state has already sent out information on the new contracts, and people are starting to choose plans for the coming coverage period.

“I’ve had patients tell me they’re in Harmony but are switching to HealthcareUSA,” says Walentik. “So people are making decisions already.”

As of late last week, the state had documented nearly 52,000 people enrolled in new plans, so the vast majority of the 430,000 beneficiaries still have to choose plans.

Ian McCaslin, the state’s Medicaid director, said in a court deposition that putting a hold on these new contracts would cause “turmoil” and confusion in an enrollment process that’s already underway. He said the state could also have trouble extending its current managed care contracts.

In the Kansas City area, the locally-based nonprofit insurance company, Blue Cross Blue Shield of Kansas City, also didn’t get a new contract, so the some 31,000 people who’ve been with the company are starting to choose a new plan. 

“We would be happy to continue to serve this population, to continue to serve these members until things are worked out,” says Bryan Camerlinck, a financial services director for Blue Cross, who was also disappointed the company didn’t get a new contract. He says some of the insurer’s Ob-Gyn providers may not be covered on the new plans.

In St. Louis, Walentik worries about what would happen if the contracts are blocked.

“It would really put things in chaos,” says Dr. Walentik. “Because I think it takes a while to get patients educated and to get providers up and running, and it would be really hard if we had to cancel everything that’s been done and start all over again.”

Monday marked the court’s deadline for all parties to file certain evidence and briefs, so Judge Drumm could now rule at any time on whether to grant an injunction to stop the enrollment process or dismiss the case.

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