It's not a full-fledged love affair, but states lately have had a serious crush on managed care plans. With budgets in crisis from coast to coast, states have turned to suitors to help them better manage as much as a quarter of their budgets.

The MCO suitors are contracting with Medicaid programs at an unprecedented clip in 2011-2012. Kentucky, Louisiana, Missouri, Ohio, Texas and Virginia are all launching new or expanded managed care programs. In some places, it's relatively smooth sailing, like in Texas, which has recently signed new contracts with more than a dozen health plans. But then, there's the other extreme Kentucky.

It is not an understatement to say that Kentucky is the poster child for managed care growing pains. One of the three MCOs contracted with the state to enroll Medicaid beneficiaries, Coventry, took a hit in the stock market last week when it revealed its medical costs are so high in Kentucky that it's paying out $1.21 for every $1 the company receives in premiums.

Or in the words of Coventry CEO Allen Wise, we're getting our tails kicked in Kentucky.

Coventry probably won't get much sympathy about its medical loss ratio from Appalachian Regional Healthcare, the largest healthcare system in Eastern Kentucky, which has sued the state, Coventry and Kentucky Spirit Health Plan, which is the operating name for Centene Corp.'s state plan. ARH says in its suits that the MCOs have inadequate networks and owe the system millions of dollars in overdue claims payments.

The sentiment against managed care plans could be summed up in a report from the state auditor of public accounts, who said on Feb. 29 that three MCOs the third one is WellCare are sitting on more than a quarter of a billion taxpayer dollars while small-town doctors, hospitals and other healthcare providers have had to open or extend lines of credit to keep their doors open. In addition, ARH claims that the MCOs are disrupting medical care for cancer patients, pregnant women and others because they have not assembled large enough networks of providers for them to see.

The mess in Kentucky is not a surprise to anyone who is familiar with that state. In the 1990s the state tried to expand managed care through a mixture of MCO and provider involvement, but that experiment failed, along with a series of so-called healthcare reforms in that decade.

Until recently, only one Medicaid MCO operated in the state, Passport Health Plan in the Louisville area, and it was restructured after auditors uncovered multiple instances of excessive spending, conflicts of interest and other issues. In 2011, Kentucky signed contracts with new MCOs covering the remainder of the state, and also ended Passport's exclusive arrangement for Louisville.

In the meantime, Kentucky's residents have severe medical needs, and it is one of the unhealthiest states in the country. It may be that the profit-making requirements of publicly held MCOs and the long-entrenched medical problems of a largely rural populace can't mesh with a state's budget bind. Figuring out how to solve this will take the smartest healthcare minds in the room, and maybe more money than Kentucky has to spend.


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