DHHR must bid MCO contracts

A lawsuit brought against the West Virginia Department of Health and Human Resources (DHHR) by five West Virginia residents has been settled, and will force the agency to competitively bid its contracts with managed care organizations (MCOs) that cover Medicaid beneficiaries in the state.   Five people filed a petition earlier in 2015 claiming DHHR violated state code by not competitively bidding contracts with the MCOs, and that the failure of the Bureau for Medical Services to comply with the laws governing the procurement of contracts places the state at risk of a significant negative impact to its budget and places a substantial burden upon West Virginia taxpayers.

The lawsuit was resolved by an agreement in Kanawha County Circuit Court in November.  The Bureau for Medical Services (Medicaid agency) will submit all Medicaid managed care contracts to the WV Department of Administration, Division of Purchasing, to be competitively bid and procured beginning in fiscal year 2017.  The agreed settlement notes that DHHR must comply with transparency laws, in regard to its Medicaid program, and must issue public performance summaries on the MCOs each year.

The Circuit judge pointed out the Legislature “explicitly” mandated bidding on all state health care contracts.   He also said the no-bid strategy has resulted in “excessive profits” for the managed care organizations.    The petition put before the judge stated the MCOs currently under contract with Medicaid are realizing profits ranging from 8 percent to 13 percent, compared to a national average of 1.2 percent.   The MCOs subcontract with pharmacy benefit managers to administer Medicaid’s prescription drug program.

The settlement requires Medicaid managed care contracts not exceed 48 months and have medical loss ratio of at least 85 percent, meaning the MCOs must spend at least 85 percent of their Medicaid payments on services to recipients, leaving no more that 15 percent for the companies’ profits and administrative costs.   Any MCO failing to meet the 85 percent “medical loss ratio” requirement would have to rebate the difference.