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Mo. Judge rejects challenge to Medicaid contracts

Mo. Judge rejects challenge to Medicaid contracts

May 12th, 2012 by David A. Lieb, Associated Press in News

A judge dismissed a legal challenge Friday to Missouri's new Medicaid contracts, brushing aside an attempt to halt an enrollment period for 430,000 low-income residents picking among three insurance providers.

Special Judge B.C. Drumm Jr. rejected all aspects of a lawsuit brought by Molina Healthcare Inc., which currently covers about 80,000 Medicaid participants but lost out in a new round of bidding when the state capped the number Medicaid managed care providers at three firms.

Drumm described Molina's plaintiffs as "disgruntled bidders" raising "disingenuous" claims as taxpayers that the new contracts are disrupting care for tens of thousands of patients. To the contrary, Drumm cited the assertion of Missouri Medicaid director Ian McCaslin, who testified in a deposition that a "nuclear scenario" of "mass confusion" and "turmoil" could result if the new contracts were blocked from taking effect July 1. Enrollment for the insurance plans began April 19.

"Stopping the implementation of the contracts even on a temporary basis will hurt Medicaid participants, damage the system, cost taxpayers hundreds of thousands of dollars, and take several weeks or months to implement - and not provide the plaintiffs any relief," Drumm said in a ruling rejecting a preliminary injunction.

The judge issued a separate order Friday dismissing the lawsuit.

"We are disappointed with the court's ruling, and are evaluating our grounds for appeal," Molina spokeswoman Kathleen O'Guin said in an emailed statement.

Missouri has about 900,000 Medicaid recipients, nearly half of whom are covered under managed care contracts in the St. Louis, Kansas City and Columbia/Jefferson City areas. In other parts of the state, medical providers are paid a fee for each time they treat a patient.

Since Missouri began using a managed care model in certain parts of the state in 1995, any insurer who has met the state's criteria has been able to participate. But in the latest round of contracts, Missouri capped the number of participating insurers to three. The intent was to save money in administrative oversight and, by allowing insurers to use larger patient pools, to negotiate better rates with hospitals and medical groups.

The Department of Social Services has said it expects to save $40 million from better rates in the first year of the new contracts and an additional $16 million over two years from reduced administrative costs.

"We are pleased that the court has rejected attempts to block us from moving forward with these critical services," department spokesman Seth Bundy said in an email Friday.

The three contracts were awarded to HealthCare USA of Missouri (a subsidiary of Coventry Health Care), Missouri Care Inc. (a subsidiary of Aetna Inc.) and Home State Health Plan Inc. (a subsidiary of Centene Corp.) Of those, only Centene was a new insurer in Missouri's managed care plan.

All three winning bidders intervened in the lawsuit to oppose Molina's claims.

Among other things, Molina asserted that the state wrongly capped the number of winning bidders and illegally altered the bidding materials after the initial proposals were submitted. The judge described the changes as "at best, procedural technicalities" to which Molina did not object until after it lost the bid.

"Molina didn't really present a legal case - they were instead a failed bidder who was complaining that they weren't awarded the contract, and that's not a reason to sue," said Chuck Hatfield, an attorney for Centene.