Senate passes bill to cut Medicaid managed-care firms from 6 to 3

By Melissa Patrick
Kentucky Health News

The nearly 1.6 million Kentuckians with managed-care Medicaid health coverage would choose from three companies next year instead of the current six, under a bill the state Senate passed without dissent Tuesday, Jan. 16. 

Sen. Stephen Meredith (LRC photo)

Senate Bill 24, sponsored by Sen. Stephen Meredith, R-Leitchfield, went to the House on a 32-0-1 vote, with Floor Leader Damon Thayer passing and five senators not voting. 

Meredith, a former hospital administrator, said decreasing the number of managed-care companies to three would create much-needed administrative savings to health-care providers and the Medicaid program. 

"There's tremendous expense involved in trying to manage and provide oversight to six managed care organizations," he said.

Meredith said at the Jan. 10 Senate Health Services Committee meeting that the burden of dealing with six MCOs is substantial because each has their own contract, credentialing, pre-authorization process,  documentation requirements, and billing and claims processes.

Providers, he said, "have to carry this burden of six different set of rules for the same service," he said. He then read from comments submitted by providers who told him of the administrative burden caused by having to deal with six companies that essentially provide the same services and said they have had to increase staff to deal with it. 

He said the savings would be particularly important to rural communities, allowing them to have greater access to health care.

In the committee meeting and on the Senate floor, Meredith pointed to the $285 million in savings that the state saw from moving from six pharmacy-benefit managers to one as a reason to decrease the number of managed-care companies to three. 

"I guarantee we're gonna see a savings comparable to what we did with single source PBM," he told the Senate.

Kentucky managed-care client numbers as of Nov. 30, 2023
For a list by county, click here. (State table adapted by KHN)

The federal government requires the state to have at least two managed-care companies. Meredith said he is suggesting three in case one of them was no longer able to provide services.

He pointed to Tennessee, which has three companies to serve 1.7 million Medicaid members.

Sen. Karen Berg, D-Louisville, a physician at the University of Louisville, told Meredith during the committee meeting that she agreed with him wholeheartedly. 

“The administrative burden placed on our health-care providers at this point not only cost us dollars that should be sent to direct patient care, but they contribute to the lack of providers, to the burnout, to the fact that people are leaving this profession because it's just too frustrating,” said Berg.

On the Senate floor, Berg said, "Health-care delivery and the need to allow health-care providers in this state some room to breathe so they can actually take care of patients is a nonpartisan issue."

Advocates of the current system argue that it increases competition among the managed-care companies, all but one of which (Passport by Molina) are subsidiaries of for-profit insurance firms. They bid a set rate per member for coverage, and profit by limiting claims from Medicaid clients.

Bills similar to Meredith's have passed the Senate in six consecutive legislative sessions but died in the House.

In the House, bills must be requested by a committee chairman to be placed in a committee. Asked if she was planning on requesting the bill in the House Health Services Committee she chairs, Rep. Kim Moser, R-Taylor Mill, said she might. 

"I am considering that and having conversations over here on the House side," she said, noting that the bill passed the Senate "overwhelmingly" and quickly. "So I think it's absolutely worth considering. And I'll have some conversations over here on this side and see what the appetite is for moving it."

The bill would take effect Jan 1, 2025, which is the effecitve date for the next round of contracts with the companies that manage Medicaid for the state.