Kentucky’s Governor Steve Beshear held a press conference today and announced a plan to balance the state’s Medicaid budget; thereby saving taxpayers $375 million in General Funds and $1.3 billion in all funds over the course of the new, three-year contracts. In addition to balancing this fiscal year’s Medicaid budget, the new managed care contracts and other efficiencies will also result in the creation of 550 new jobs in the Commonwealth. The managed care plans are expected to improve coordination of care and reduce costs for the state’s Medicaid program.
The state awarded four contracts to managed care organizations (MCOs) to provide services to Medicaid recipients across Kentucky. Three of those contracts are with new vendors, and will serve more than 560,000 recipients. The annual contract with Passport, which had been Kentucky’s only managed care provider, has also been renewed to provide services to 170,000 Medicaid recipients in Jefferson and 15 nearby counties.
In November of last year, a state audit cited "weak ethical policies and numerous conflicts of interest" in Passport Health Plan's policies. The Medicaid managed care provider, based in Louisville, was the state's largest contractor, and received $793 million in the last fiscal year. Kentucky State Auditor Crit Luallen reported that Passport's policies needed do more to control rising Medicaid costs, which was the goal of the provider's policies. It also called for "more accountability and transparency."
At the time of the audit, Luallen stated, "Auditors found that staff traveled frequently, stayed in luxury resorts, used limos, ate expensive meals, and purchased numerous gifts, all with funding received from Medicaid, and many without a clear business purpose." The report also indicated that Passport's original investors "significantly benefited from cash distributions" and favored certain organizations, mostly University of Louisville and Jefferson County providers.
After last year’s audit outlining unnecessary spending by Passport executives, Gov. Beshear demanded immediate and significant changes at Passport—including replacing the entire administrative team to assure taxpayers that Passport would operate at a higher level of accountability. Gov. Beshear also designed an 11-point corrective action plan for the new Passport team to implement immediately. Passport has met the requirements of the corrective action plan, and continues to be closely monitored by CHFS.
“We were confident that moving Medicaid from a mostly fee-for-service system to managed care would create significant savings, preventing unnecessary and devastating cuts to our priorities such as education and job creation. These contracts show the savings are real,” said Gov. Beshear today. “Managed care will provide consistent, comprehensive care to patients, so our vulnerable families will continue to get the quality medical services they need.”