For second time, judge throws out Medicaid contracts that govern care for 1 in 3 Kentuckians, faulting state bidding process

For the second time, a Frankfort judge has thrown out the state's $8 billion in Medicaid managed-care contracts, saying many irregularities in the second round of bidding "cast a cloud over the process's legitimacy."

The administration of Gov. Andy Beshear had no indicated whether it will appeal Circuit Judge Phillip Shepherd's ruling or re-bid the contracts, for companies that manage the health care of the one-third of Kentuckians. Shepherd left the six contracts in effect so Medicaid coverage would not be disrupted.

"Shepherd cited errors by the state in the latest round in scoring the bids, its refusal to consider all aspects of bids, and a potential conflict of interest at one of the successful companies as reasons for ordering a new round of bids," reports Deborah Yetter of the Courier Journal. He also noted that state officials wouldn't let companies make oral presentations, as allowed by law, and told state employees who scored the bids to "dispose of their notes."

The judge said the selection process met the primary standard for invalidation, "arbitrary and capricious," noting that state law "provides that public procurements must be conducted in a manner that increases public confidence in procurement procedures, that insures fair and equitable treatment of bidders, and that maintains quality and integrity in the procurement process."

The process has been the most complex and contentious ever. Soon after taking office, Beshear threw out contracts awarded by predecessor Matt Bevin, "but another bid evaluation under his administration resulted in a virtually identical outcome of awards to the same five companies," Yetter notes.

The same companies won in both rounds of bidding: Aetna Better Health of Kentucky, Humana Health Plan, Wellcare Health Insurance of Kentucky, insurance giant United Healthcare and Molina Health Care of Long Beach, Calif.

United and Molina displaced two previous contract holders, Anthem and Passport Health Plan of Louisville. "Passport initially protested the loss of the contract along with Anthem but later announced plans to sell its assets to Molina and continue business under its name," Yetter notes. "One dispute in the current litigation was whether Molina could keep Passport's customers." Shepherd said it could.

Anthem, which Shepherd added to the contractors as a result of the latest lawsuit, argued that Molina should be disqualified because it hired a health-policy expert who had worked for Beshear's transition team. Shepherd said Emily Parento had violated the executive-branch ethics code by taking the job, but "the violations were not sufficient to disqualify Molina," Yetter reports.