TOPEKA — Kansas hired subsidiaries of three multibillion-dollar, out-of-state health insurance companies Wednesday to manage its Medicaid program, and Gov. Sam Brownback's administration said the contracts should produce even greater cost savings over the next five years than previously anticipated.
The contracts are key to the conservative Republican governor's efforts to overhaul the state's $2.9 billion-a-year program, which provides health coverage to the poor, disabled and elderly. He and top administration officials have said the changes — moving all Medicaid participants into managed care — will provide better-coordinated care while controlling the state's costs.
"The current Medicaid program is financially unsustainable and provides fragmented services to our most vulnerable Kansans who deserve far better care," said Dr. Robert Moser, the state's secretary of health and environment.
The state awarded the contracts to subsidiaries of Amerigroup Corp., based in Virginia Beach, Va.; Centene Corp., which has its headquarters in St. Louis, and United Healthcare, based in Minneapolis.
Each contract takes effect Jan. 1, and the state has the option of extending it an additional two years. State officials said they include incentives to encourage the companies to pay claims quickly, improve the coordination of care and create innovative programs. Also, the contracts will allow the state to add coverage for preventative dental care for adults, heart and lung transplants and some weight loss surgeries.
The three companies will offer competing plans so that Medicaid participants have choices. The overhauled program will be called KanCare.
Brownback's administration had projected that the state would save $853 million over the next five years because of the overhaul, based on expectations that the changes would lower the annual growth in its costs. The administration said Wednesday that savings over the next five years should now exceed $1 billion, saying the companies' bids were better than anticipated.
Tom Laing, executive director of InterHab, which represents groups providing services to the developmentally disabled, said none of the companies is a surprising choice because of its size.
But he and other critics of the overhaul have questioned whether the state could achieve significant savings by having large, for-profit corporations manage Medicaid. Also, though Brownback's administration began discussing an overhaul shortly after he took office in January 2011, some legislators and advocates think it is still moving too quickly.
"We have the same concerns that we have always had," Laing said. "It's still a great set of unknowns."
The state still needs the federal government's permission to go ahead with the overhaul, because it provides a majority of the funds for Medicaid. The U.S. Department of Health and Human Services would have to waive some of its Medicaid rules.
Most of the nearly 385,000 Kansans receiving state medical assistance are covered by managed care through private contractors, but the Medicaid overhaul represents the first time the state has tried to include relatively expensive, long-term care for the disabled and the elderly, including those in nursing homes.
Advocates for the developmentally disabled have been vocal skeptics of the overhaul. Their concerns led Brownback to agree to wait until 2014 to deal with long-term services for the developmentally disabled in the contracts, while permitting pilot programs.
The unsuccessful bidders were subsidiaries Coventry Health Care, of Bethesda, Md., and WellCare Health Plans Inc., based in Tampa, Fla. Administration officials said the three successful companies submitted lower bids.
United Healthcare is the largest contractor in terms of total revenues, reporting $95.3 billion in 2011, according to its last annual report. Its state subsidiary will be the United Healthcare Community Plan of Kansas, but the company already covers about 250,000 people and employs about 2,000 people in Kansas.
"We look forward to expanding our support to ensure the state's Medicaid beneficiaries have access to the quality care that they need and deserve," said Russell Petrella, president of the firm's Medicaid operations.
Amerigroup Corp. reported $6.3 billion in revenues in 2011 and will operate in the state through Amerigroup Kansas Inc. It plans to set up offices in the state, though the firm isn't sure yet about the size of its staff.
"We applaud the state's comprehensive, visionary approach to providing access to quality coordinated care and services for its citizens," company Chairman and CEO James Carlson said in a statement.
Centene Corp. reported revenues of $5.3 billion last year, and Jesse Hunter, its executive vice president for operations, said it expects to bring more than 200 jobs to the state. Its subsidiary is Sunflower State Health Plan.
Hunter said the Kansas contract was attractive because it's an effort to cover a broad group of people and integrate their services, and, "What KanCare is all about is what we do."