The amended regulations, if adopted, will have significant impact on all stakeholders in Kentucky’s Managed Care program, including providers and Medicaid beneficiaries.

Background

The amended regulations come less than three weeks after the Franklin Circuit Court Enjoined DMS’ attempt to modify Managed Care policy through amendments to its contracts with the Managed Care Organizations (MCOs). The Court concluded that DMS should have instead enacted the modified policy through a new or amended regulation. On that basis, the Court declared the amended provisions of the MCO contracts void and permanently enjoined DMS from enforcing them. You can view the injunction here.

The Proposed Amendments

The proposed amendments to 907 KAR Chapter 17 appear to codify DMS’ approach to policymaking through contract. The amended regulations delete large portions of the regulatory text and the accompanying Statements of Necessity indicate that “[t]he amendments to this administrative regulation are necessary to remove provisions that are established in the negotiated contracts.” DMS has inserted new language throughout the amended regulations that appear to give DMS the authority to modify the application of the regulations through provisions in the MCO contracts. Examples of these new provisions include: “[a]ll aspects of managed care and the requirements of 907 KAR Chapter 17 shall be governed and controlled by the applicable federal and state laws . . .and the negotiated terms of the contract between a managed care organization and the department” (emphasis added). Another amendment provides that “the MCO shall. . .make utilization decisions using InterQual, unless otherwise negotiated in the MCO Contract” (emphasis added).

The injunction issued by Franklin Circuit Court illustrates how easily the terms of the MCO contracts can fluctuate. The provisions struck down by the Court were amendments inserted into the contracts as part of the 2017 renewal process, and were not part of the original contracts issued through the 2015 request for proposal. While requests for proposal involve some degree of public participation, through the possibility of protest challenges by disappointed bidders or suits by aggrieved taxpayers, contract modifications made as part of a renewal are more sheltered from public comment and oversight.

Impact

Medicaid stakeholders should be concerned about the potential impact and unforeseen consequences of the proposed amendments. If the proposed amendments to 907 KAR Chapter 17 are adopted, DMS will be able to craft Medicaid policy through private contract-renewal negotiations, which would leave the Kentucky General Assembly, Governor’s Office, Medicaid beneficiaries, providers, and the general public unable to participate in the process. The new language in the amended regulations would subject all major aspects of Managed Care to the terms of the contracts between DMS and the MCOs, including utilization management, pharmacy benefit management, and enrollee rights and responsibilities.

The potential impact to every Medicaid stakeholder, and all of Kentucky generally, could be enormous, and at the same time, impossible to predict. Every contract renewal period could potentially bring massive sea changes in Managed Care policy, with no transparency through public participation, comment or oversight. It is possible that Medicaid providers and beneficiaries will have little to no advance warning of major policy changes in the Managed Care program until DMS releases the latest version of each privately-negotiated MCO contract.

The comment period of the amended regulations begins December 1 and ends December 31, 2017. A public hearing is scheduled for 9 a.m. on December 21, 2017, at the Health Services Building in Frankfort, Kentucky. Individuals interested in attending the hearing should notify DMS in writing by December 14, 2017.