Kansas legislative committee jumps into battle over selection of Medicaid contractors

A committee of the Kansas Legislature opened an inquiry into the Kelly administration’s replacement of one of three Medicaid contractors with a Blue Cross and Blue Shield entity linked to the disgraced company that stiffed Kansas health care providers for millions of dollars when forced out of the program in 2018.

The Kansas Department of Health and Environment announced in early June the retention of two KanCare contractors — Sunflower Health Plan and United Healthcare Community Plan — and ouster of the third incumbent contractor Aetna Better Health Kansas. KDHE chose Healthy Blue, which had joined forces with a holding company associated with Amerigroup, the company that burned bridges in Kansas by refusing to pay millions of dollars to service providers after it failed to win renewal of its KanCare contract.

“I cannot imagine why on earth they (Amerigroup) would ever be considered to be brought back in,” said Rep. Susan Concannon, R-Beloit. “I’m just appalled that we … are reentering into a contract, with the way they behaved when they exited.”

Rep. Barbara Ballard, a Lawrence Democrat and also a member of the Medicaid oversight committee, told KDHE officials during a statehouse hearing on KanCare that her constituents were concerned Healthy Blue was affiliated with a company that didn’t have a good reputation.

“Did you totally disregard past performance?” Ballard asked.

KanCare provides health coverage to approximately 450,000 low-income children, parents, pregnant women, people with disabilities and seniors in Kansas.

The method deployed by KDHE to award three-year deals worth more than $1 billion annually to each of three contractors led to an initial third-place tie between Aetna Better Health and Healthy Blue. The administration of Democratic Gov. Laura Kelly broke the deadlock in favor of Healthy Blue. That prompted Aetna Better Health to formally challenge the decision. It also triggered the inquiry by the Republican-led House and Senate committee responsible for oversight of the state’s Medicaid program.

In addition to Aetna Better Health, another of the seven bidders — CareSource Kansas — filed a protest with the Kansas Department of Adminstration. The agency’s secretary said reviews of the two complaints could be completed around the Fourth of July.

The pending complaints limited KDHE’s ability to comment on the controversy and hindered release of documents associated with awarding of the contracts. In reponse to questions posed by legislators, KDHE secretary Janet Stanek defended integrity of the selection process.

“It was the entire picture,” Stanek said. “As the leader of the agency, I’m very confident in the process that was used. It was much more comprehensive than the past process. I’m not worried about the move forward.”

The hunt for documents

The joint committee of the Legislature voted to ask Attorney General Kris Kobach to prepare a memorandum articulating what information about the KanCare procurement process could be obtained by legislators. In part, lawmakers want access to documents showing how KDHE scored applicants on a series of questions posed to each bidder. Two Democrats on the Medicaid oversight committee expressed reservations about calling in Kobach.

“We have a responsibility to the people of the state of Kansas and 450,000 Medicaid folks,” said Rep. Will Carpenter, an El Dorado Republican.

Aetna Better Health, the company at risk of losing a KanCare contract after holding it five years, filed requests under the Kansas Open Records Act for detailed records on the scoring of rival companies on 36 questions submitted to each. A summary of scoring among bidders has been made public. An executive with Aetna Better Health said the company may go to court to force prompt release of KDHE documents.

On June 7, KDHE announced selection of the three managed care organizations to serve the Medicaid program from Jan. 1, 2025, to Dec. 31, 2027.

Medicaid was privatized under the KanCare banner by Republican Gov. Sam Brownback in 2013. He extended the initial KanCare contracts by issuing an executive order, rather than seek permission of the Legislature. Sunflower State Health Plan and United Healthcare have been KanCare contractors from the start.

In the second round of KanCare contracting, the administration of GOP Gov. Jeff Colyer announced seven months before Colyer’s term as governor ended that Aetna Better Health would replace the third original KanCare contractor Amerigroup Kansas. The change accompanied implementation of KanCare 2.0 on Jan. 1, 2019.

In the years since, KanCare contracting became a larger political football in the Legislature. Rep. Brenda Landwehr, R-Wichita, and her peers blocked Kelly from moving ahead with development of new KanCare contracts. The objective was to push Medicaid managed-care decisions beyond the 2022 election in anticipation Republican Derek Schmidt would be elected governor. However, Kelly defeated Schmidt.

In 2023 and 2024, Kelly administration officials at KDHE and the Kansas Department of Aging and Disability Services collaborated on the request for proposals and evalution of bidders for KanCare 3.0. During the Legislature’s Medicaid oversight meeting Monday, several Republicans on the panel appeared eager to support reversal of Aetna Better Health’s ouster as a KanCare contractor.

‘Why did this happen?’

Jane Brown, president and CEO of Aetna Better Health, said the company was protesting KDHE’s “arbitrary and capricious” approach to breaking the scoring tie with Healthy Blue because the process was unfair to participants.

“The basis for the protest is simple,” she said. “One cannot make up grading criteria after a bid has already been opened and graded.”

Brown also raised Healthy Blue’s connection to Amerigroup and argued Healthy Blue was unlikely to stand up an acceptable service delivery system by Jan. 1. In the company’s formal complaint, Aetna Better Health recommended the contract award to Healthy Blue should be rescinded.

Brown suggested that one alternative would be to make Aetna Better Health the state’s fourth managed care contractor.

“I am being asked the question: Why? Why did this happen?” she said. “I do not, at this time, have a good answer. By the time this process is over I think we’re all entitled to know why we have to have over 100,000 people go through this disruption. This is a moment for passion, and I feel strongly that we did not deserve to lose this bid.”

‘Conflict of interest’

Chad Moore, president of CareSource Kansas, said it was disappointing the company wasn’t chosen to help manage KanCare. He objected to KDHE’s procurement process, the decision-making criteria applied to contracts and potential complications of alleged underbidding by successful applicants. In the scoring process, CareSource trailed Aetna Better Health and Healthy Blue.

Moore raised an alarm on behalf of CareSource Kansas because Healthy Blue wasn’t disqualified early in the process despite evidence of “significant conflict of interest concerns” at Blue Cross and Blue Shield. Comparable assertions of an apparent conflict of interest associated with Healthy Blue’s bid were raised by attorneys for Aetna Better Health in a lengthy document challenging KDHE’s contract award.

In the past three years, at least four former state employees were hired by Blue Cross and Blue Shield or entities related to Healthy Blue.

The list included: Sarah Fertig, state Medicaid director at KDHE from 2022 to 2023, as BCBS Kansas director of government relations; Ashley Jones Wisner, senior director of public affairs at KDHE from 2019 to 2021, as director of corporate communications at BCBS Kansas; Clay Britton, chief counsel to the governor from 2019 to 2021, as general counsel for BCBS Kansas; and RJ Wilson, chief of staff to the Kansas House Democratic leader from 2023 to 2024, as director of government relations for Elevance, which is a joint venture linked to Healthy Blue and Amerigroup.

“CareSource was placed at a competitive disadvantage to successful bidders,” Moore said. “Our protest highlights procedural and evaluative concerns in the KanCare contract award process. Ensuring a transparent and fair evaluation process is essential for maintaining the integrity of KanCare, its providers and the quality of services provided to its beneficiaries.”

And, a response

Adam Proffitt, secretary of the state Department of Administration, said the written contract protests by Aetna Better Health and CareSource Kansas would be considered separately by the state’s director of purchases.

The decision of the director regarding the appeals would be considered the “final agency action,” Proffitt said, because no other mechanism existed for an administrative appeal. The director’s decision could occur around July 4, he said.

He said unsuccessful bidders on the new KanCare contract who objected to the agency’s final ruling could file a lawsuit to challenge the outcome. In 2018, that’s what transpired when Amerigroup was dropped as a KanCare contractor by the Colyer administration. Amerigroup unsuccessfully sought to force KDHE to repeat the bidding process.

“Any petition for judicial review should be served on the director of purchases on behalf of the Department of Administration,” Proffitt said.

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