Long-term recommendations from the State Auditor, and a “Modest Proposal” from me.

Two days ago, Adam Edelen, Kentucky’s new Auditor of Public Accounts, began his term in office with a bang by releasing the results of his initial investigation of the performance of Kentucky’s four Medicaid managed care vendors. There is obviously a practical limit to the amount of information that can be collected and analyzed in a short time, and the Auditor’s office appropriately acknowledged this. Nonetheless, the results were consistent with anecdotal reports and legislative hearings, and were correspondingly very discouraging. The State Auditor offered suggestions in hopes of improving future services.

In early February, Mr. Edelen asked the Commonwealth’s four Medicaid Managed Care Organizations (MCOs) to provide his office with information from the months of November and December of 2011. He asked for basic statistics such as: the number of members served, the number of claims filed and paid, the dollar value of those claims, and the number and value of rejected claims with the reasons for rejection. (Note that we are only talking about two months.)

In a press release of February 29, the Auditor noted that the managed care organizations had received $708 million while paying out only 420 million as of February 15. That is a float of $288 million! Although there was plenty of criticism of the MCOs, the Auditor also shared some of the blame on the Cabinet which was said to have failed to learn the lessons of the difficult transition to Passport 14 years ago and was ill-prepared to monitor and enforce its contracts with the new MCOs.

The 10 preliminary recommendations made by Mr. Edelen are basically exhortations to do the job you were supposed to be able to do. These recommendations were aimed at both the vendors and the Medicaid Cabinet. You can read both the press release, and the letter to the MCOs here. Nothing was said about the number, nature, and value of denials.

Auditor Edelen found enough problems, and was concerned enough, that he has set up a special unit in his office, a “Medicaid Accountability and Transparency Unit.” Good for him! I could not agree more with his final conclusion: “all parties involved in managed care, from the state to providers and their billing agents to MCOs, must work together to provide our most vulnerable with reliable health care system that is fair and accountable to taxpayers.”

A Modest Proposal.

To Mr. Edelen’s recommendations I would like to add my own modest proposal that would have more immediate impact than the operational and structural changes proposed. The managed-care vendors have had control of a surplus $288 million dollars of public money that they have not paid out. Insurance companies invest the premiums they collect. I suggest that as a minimum, the profits on investments of any Medicaid money received since the inception of the new programs be paid out immediately to cover all claims in the order they were submitted until that amount is exhausted. I trust the auditor’s office to name a reasonable expectation of the investment profit on the entire $708 million provided to the MCOs over this first quarter. That money should not end up as bonuses for the executives of companies who have manifestly failed in their jobs.

In my personal life, if I failed to pay my bills for four months, my water would be shut off and my health insurance canceled. It seems to me these insurance companies need to have more skin in the game. I propose that since the MCOs are unable to process the bills sent to them in a reasonable time, that they should pay some bills as submitted. Yes, this will result in some unnecessary medical care and even fraud being paid for. On the other hand, there are even more legitimate practitioners and their employees suffering as a result of the incompetence of others and yet have stepped up to the plate and continued to take care of their patients. I therefore suggest, as a minimum, all bills for the month of November be paid in full. At the end of March, I suggest that all bills outstanding for the month of December be paid. Surely Kentucky has some legislation or policy relating to timeliness of payments. If it does not, our legislators, many of whom seem more concerned about whether or not they will keep their own paycheck next year, still have enough time to do the right thing.

Peter Hasselbacher, M.D.
March 2, 2012