Ohio to rebid costly private Medicaid contracts

Feb. 06--Gov. Mike DeWine wants to rebid the state's contracts with private health insurance companies that manage billions of dollars of Medicaid benefits.

About 1 in 4 Ohioans -- 2.8 million people -- are covered by Medicaid, which has a $28.2 billion budget for fiscal year 2019. The low-income insurance program is funded with a mix of state and federal dollars.

But the majority of the money spent isn't directly paid out for health care services. Instead, the money goes to private health insurance companies that are contracted to the state to manage those health care dollars.

DeWine on Friday ordered Ohio Department of Medicaid to rebid those contracts.

There are no details yet on what could changes could be coming, but rebidding the contract lets state officials look for cost savings and explore ways to improve health care by tying payments to quality outcomes.

"The goal is to obviously save taxpayers' dollars and try to get a better deal for the state of Ohio," said Dan Tierney, spokesman for DeWine.

Tierney said one of the reasons for revisiting the contracts is to look at the subcontractors who manage pharmacy benefits for the insurance companies. The five insurers all subcontract with either CVS Caremark or OptumRX to manage pharmacy benefits, and those two companies have been accused by pharmacists of keeping too much of the money they manage and paying pharmacists too little.

Amid the criticism, Ohio Medicaid already made a major change to how pharmacy benefits are paid by switching to a more transparent business model. The pharmacy middlemen used to make a profit by marking up drug prices but didn't disclose details. Starting Jan. 1., the pharmacy middlemen now charge an explicit fee for administrative services and will charge the insurance companies exactly what they pay pharmacies for prescription drugs and dispensing fees.

Separately, House Speaker Larry Householder, R-Glenford, said he is concerned about how Ohio Medicaid spends money with insurance companies and pharmacy benefit managers.

"I think that's something we're going to look at hard. Not talking about doing away with them. I'm talking about we need to look very hard at the way those dollars are allocated to the systems and make sure they're being done effectively and efficiently," Householder said. "I'm worried that there is money being lost in the system."

The last time the contracts were rebid was in 2011 and that process took about a year and a half.

Any changes to the contract would affect Dayton-based CareSource, which manages over half of Ohio's private Medicaid plans and receives the largest check the state of Ohio writes each year. The company employs around 2,800 people in Dayton.

CareSource's revenue has grown from $3.7 billion in 2012 to $8.9 billion in 2017, with most of that money coming from Medicaid plans.

"We look forward to working with the new administration to continue to drive quality outcomes and value in the state's Medicaid managed care programs," said Steve Ringel, president of CareSource.

Medicaid represents 23 percent of the state's 2018-19 general fund budget, according to Policy Matters Ohio.

Ohio Medicaid spokesman Tom Betti said the department is immediately moving forward with the process and they "look forward to an open discussion with many of our consumers, advocates, and partners to explore innovative ways to improve the quality of services and care to those we serve, as well as securing the best deal for Ohio taxpayers."

Ohio's population lags when it comes to health outcomes and new contracts are a good opportunity for the state to make sure it is doing everything it can to spend Medicaid dollars on improving health, said Loren Anthes, Medicaid researcher with Center for Community Solutions, a Cleveland-based think tank.

"I think it's very valid to say 'What are we getting from those dollars? and 'how are costs contained without sacrificing quality of care?'" Anthes said.

Reporter Laura Bischoff contributed to this story.

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