The secretary of the Kansas Department of Health and Environment struggled to earn legislative backing Tuesday for a proposed contract extension with a Medicaid application processing company that requires the state to spend $2 million more while assuming key administrative and training duties that have been the responsibility of the contractor.
Secretary Jeff Andersen told a joint House and Senate oversight committee of KDHE’s intention to expand a contract with Maximus Inc., the Reston, Va., company bedeviled by application backlogs, a high percentage of application mistakes and intense public complaints since hired in 2016. Maximus has been paid $25 million a year to handle applications for KanCare, the state’s privatized Medicaid program.
Andersen said the arrangement would involving KDHE assuming from Maximus responsibility for training of Medicaid clearinghouse staff on Jan. 1 and of application processing for elderly and disabled Kansans on July 1.
“There is some short-term pain to get us out of this hole,” the KDHE secretary said.
Republicans and Democrats on the committee struggled to understand why KDHE concluded it was appropriate to reduce expectations of Maximus, absorb key functions into state government and inject $2 million beyond the budget set by the 2018 Legislature.
Andersen said Gov. Jeff Colyer supported KDHE’s revised approach with Maximus, but the governor had reservations about moving ahead without expression of legislative support for the deal or authorization by legislative leadership of a supplemental expenditure.
Sen. Richard Hilderbrand, R-Baxter Springs, and a member of the Medicaid oversight committee, said the recommendation to extend the relationship with Maximus was “troublesome.”
“If there is a rebidding process, surely you’re not going to let Maximus rebid, right?” Hilderbrand said.
“Look, I’m trying to get a contract signed with Maximus,” said Andersen, referring to the negotiated one-year extension on the table. “I hope you can appreciate we’ll look at the best options for the state.”
Andersen revealed Maximus low-balled the original contract to secure the outsourcing work from Republican Gov. Sam Brownback, who made privatization of Medicaid a cornerstone of his administration. The KDHE secretary also said Maximus didn’t deploy the quantity of staff necessary to properly process applications and led to thousands of backlogged applications and a high error rate.
“In some cases,” Andersen said, “you get what you pay for. Technically, we’ll pay Maximus more because we need to do the job right.”
Oversight panel member Laura Kelly, a Topeka senator and the Democratic Party’s nominee for governor, said state government couldn’t afford to do business with companies that shirked obligations.
“I have a real problem with that,” she said. “It’s almost like we’re rewarding them for underbidding. That makes no sense.”
Rep. Dan Hawkins, R-Wichita, said he was inclined to embrace KDHE’s strategy for improving the application system for Medicaid. However, he said, the oversight committee didn’t have authority to approve a $2 million expenditure. He suggested the State Finance Council, which includes the governor and House and Senate leaders, could weigh in on the contract.
“I do agree with Sen. Kelly,” Hawkins said. “It seems kind of weird on a business standpoint ... to pay more but we’re going to take part of that burden on ourselves. That’s just a really foreign way to look at this.”
Andersen said a special appropriation would be used to increase compensation to Maximus and allow KDHE to hire employees, secure office space and acquire technology to handle the extra work.
It doesn’t make sense to part ways with Maximus on Dec. 31 and hire a new private contractor days before the state’s political landscape changes in January with inauguration of a new governor, Andersen said. In addition, the secretary said, it would be awkward to simultaneously sign a new contract with Maximus and file a lawsuit against the company for failure to meet previous contract mandates.
The state’s Medicaid system was privatized five years ago by the Brownback administration. The program is managed by three for-profit insurance companies, but portions of the work are done by Maximus and others. Outsourcing the $3 billion program serving more than 400,000 people was largely directed by Lt. Gov. Colyer, who became governor after Brownback’s resignation in January. Colyer didn’t win the Republican nomination for governor in the Aug. 7 primary.
In testimony to the KanCare oversight committee, the representative of a not-for-profit aging services association said the KanCare clearinghouse was so flawed it caused financial damage to nursing homes and other entities caring for seniors.
“While the backlogged applications has decreased, the system itself remains dysfunctional and ill-equipped to handle Medicaid applications for seniors,” said Rachel Monger, of LeadingAge Kansas.