Judge refuses to halt new KanCare contracts, will consider whether bids were improper

photo by: KanCare logo

KanCare

TOPEKA – A Shawnee County judge on Thursday refused to issue a temporary injunction that would have blocked the state of Kansas from moving forward to implement new contracts for managing KanCare, but he will hear arguments later this month on whether the process of awarding those contracts violated federal law.

Judge Franklin Theis issued that ruling at the end of a hearing where attorneys for Amerigroup Kansas, Inc., argued that Gov. Jeff Colyer’s administration violated a provision of a budget bill that lawmakers passed this year when it awarded new contracts to administer KanCare that would make major changes to the program that Kansas lawmakers had specifically prohibited.

KanCare is the name of the state’s privatized Medicaid program that provides health coverage to more than 400,000 low-income families, elderly and disabled individuals.

Under the program, Medicaid beneficiaries select one of the insurance companies, known as managed care organizations, or MCOs, to provide their health coverage. The companies, in turn, are paid a flat, per-person rate, to manage those people’s health care and to reimburse providers.

Amerigroup is currently one of three private insurance companies that has administered KanCare since it was launched in 2013. The company is asking the court to halt the process of implementing those new contracts, saying they were awarded in violation of restrictions lawmakers included in the budget bill they adopted earlier this year.

In fiscal year 2017, Amerigroup was paid just over $1 billion in state and federal funds, or about one-third of the cost of the entire Kansas Medicaid program.

The program was launched in 2013 during then-Gov. Sam Brownback’s administration, but it was largely designed by his lieutenant governor, now current Gov. Jeff Colyer. It was authorized by the federal government under a waiver that is set to expire on Dec. 31.

As part of the process for renewing that waiver, the Brownback administration announced plans last year to launch what it called “KanCare 2.0.” That program, the administration said, would offer Medicaid beneficiaries more kinds of services. But it would also impose new resrictions on working-age, non-disabled individuals, including work requirements and lifetime benefit caps.

The administration then issued new requests for proposals, or RFPs, from insurance companies to administer the new program.

Kansas lawmakers, however, moved to block the administration from going forward with those plans. In January, bills were introduced in both chambers to block the administration from making any significant changes to KanCare without legislative approval, and on Jan. 24, Brownback and Colyer issued a statement saying they were halting full implementation of KanCare 2.0, although they planned to move forward with the work requirements and benefit caps.

Many lawmakers still objected to that plan, however, and in May, lawmakers passed a budget bill that included a proviso saying the administration could not sign new contracts or apply for another federal waiver to operate KanCare in a way that was substantially different from how it was operating currently.

What Amerigroup’s motion does not mention, however, is that Colyer, who by that time had become governor following Brownback’s resignation Jan. 31, used his line-item veto authority to strike that provision, saying it was “unnecessary.”

On June 22, the Kansas Department of Health and Environment, which administers the financing of KanCare, awarded three new KanCare contracts. Two of those went to existing contractors, Sunflower State Health Plan, Inc., and United Healthcare Midwest, Inc. But it rejected Amerigroup’s proposal and instead selected Aetna Better Health of Kansas, Inc., as the third contractor.

Amerigroup protested that decision to the Kansas Department of Administration, and it filed a motion in court seeking an order to block the state from going forward with the new contracts, which would effectively force the state to start the bidding process all over.

Amerigroup argues that it submitted a proposal based on the November 2017 RFP, and that it should have been allowed to change its proposal based on the Legislature’s actions.

But the state and the three companies who were awarded contracts said halting the process now would wreak havoc on the entire Medicaid program and would threaten the health care of the more than 400,000 Kansas Medicaid beneficiaries.

Brian Vazquez, an attorney for KDHE, also told Theis that the state needs to have a new waiver in place before the end of the year, when the current one expires. Otherwise, the Kansas Medicaid program would revert to the traditional fee-for-service model, which he said would be a “nightmare” because the state is not equipped to put that kind of system back in place in such a short amount of time.

Vazquez also said in an interview after the hearing that KDHE cannot apply for a new waiver until it has valid contracts in place, and Amerigroup’s efforts to restart the bidding process threaten the state’s ability to do that before the end of the year.

In his ruling Thursday, Theis accepted that argument, saying the potential harm to Medicaid recipients that would result from issuing an injunction outweighed any harm that Amerigroup might suffer from an allegedly improper bidding procedure.

However, Theis did not rule out the possibility that the bidding process could have been flawed, and he said he would schedule another hearing to hear evidence on that issue. A date for that hearing was not immediately available.

The case now involves so many lawyers that each one has been assigned a number, and when they appear in court, they are required to wear an identification card on a lanyard displaying their number. One attorney in the courtroom Thursday wore the number 120.

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