Health Politics

State lawmakers this week grilled representatives of Kentucky’s five Medicaid managed care organizations (MCOs) over profits the companies make from Medicaid. And one lawmaker said she plans to introduce legislation to better protect providers. 

Wednesday’s committee hearing followed a scathing report from health providers late last year that said that Kentucky MCOs see profits that are too large and that they deny medical claims arbitrarily.

MCOs are paid by the state and the federal government to administer Medicaid benefits. Five companies administer the program in Kentucky: Anthem, Aetna, Wellcare, Passport and Humana.

Representatives from the five MCOs testified before legislators about the companies’ role in reducing Medicaid costs and managing health services. Stephanie Stumbo, acting executive director of the Kentucky Association of Health Plans, said the companies have saved the state a lot of money.

“MCOs not only play a key role in the reduction of Medicaid program costs, but they better manage the utilization of health services,” said Stumbo. “They yield improvement and health plan performances and health care quality.”

But lawmakers — Democrats and Republicans — asked tough questions. And some accused the companies of painting an unrealistic picture that doesn’t align with what they are hearing from providers.  

“You guys come in and you give us an hour and a half infomercial on how everything is awesome … and then we continue to hear from all our providers and constituents that they’re not getting their payments and they’re not getting their services,” said Sen. Morgan McGarvey, a Democrat from Louisville.

Rep. Kimberly Moser, a Republican from northern Kentucky and new chair of the House Health and Welfare Committee, said she will introduce legislation to hold the insurance companies accountable for some of the barriers that keep providers from being paid and patients from getting care.

“If it can’t be worked out behind the scenes, then I think our job is to protect our constituents and make sure that the care is being provided,” Moser said, adding that the Medicaid program needs providers who accept the insurance.

Kentucky Association of Health Plans Chairman Lawrence Ford defended the insurance companies, saying that they are required by the state to put 90 percent of every dollar from the government on patient care and quality improvements. He said another 9 percent goes to administrative costs, and 1 percent is kept by the company as profit. This is known as a “medical loss ratio.”  

The MCO’s profit margin in Kentucky was at 11.3 percent in 2015, the highest in the nation. The national average that year was 2.6 percent. In 2017, the state put in place some reforms and profits went down to 3 percent that year, but that was still ahead of the national average of .9 percent.

During Wednesday’s hearing, Sen. Danny Carroll, a Republican from Paducah, questioned how the MCOs were using the Medicaid dollars.

“I’m talking from a provider’s standpoint,” Carroll said. “Of the 90 percent that goes to medical reimbursement and quality improvement, what percentage goes toward paying claims?”

He then asked if the insurance companies systematically deny claims or delay paying them to keep medical costs under 90 percent. Insurance companies leaders all said no.

Sen. Stephen Meredith, a Republican from Leitchfield, said the companies make it hard for providers to get paid and that not enough of that 90 percent goes toward fairly compensating health providers. KAHP Chair Ford said that they don’t set the payment rates – those are set by the federal government and the state.

“If it is the will of the General Assembly to put more money in what is already an $11 billion budget…” Ford said, before being interrupted by Meredith.

“I think the Medicaid budget is as big as it needs to be if we’re spending our money appropriately. But we’re not doing that,” said Meredith.

Lisa Gillespie is WFPL's Health and Innovation Reporter.