2022 -- H 7758

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LC004974

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2022

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A N   A C T

RELATING TO HUMAN SERVICES -- MEDICAL ASSISTANCE

     Introduced By: Representatives Henries, Morales, Potter, Cortvriend, and Cassar

     Date Introduced: March 02, 2022

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. The general assembly finds and declares the following:

     (1) Medicaid covers approximately 1 in 4 Rhode Islanders, including: 1 in 5 adults, 3 in 8

children, 3 in 5 nursing home residents, 4 in 9 individuals with disabilities, and 1 in 5 Medicare

beneficiaries.

     (2) Prior to 1994, Rhode Island managed its own Medicaid programs; directly reimbursing

health care providers by paying “fee-for-service (FFS).”

     (3) Currently, the state pays about one billion seven hundred million dollars

($1,700,000,000) to three (3) private health insurance companies, Neighborhood Health Plan of

Rhode Island, Tufts Health Plan and United Health care Community Plan (“Managed Care

Organizations - MCOs”), to “manage” Medicaid benefits for about ninety percent (90%) of all

Rhode Island Medicaid recipients approx. three hundred thousand (300,000); the other ten percent

(10%) remains FFS.

     (4) MCOs are not actual health care providers - they are middlemen who take set per person

per month fees from the state, pass some of that money to actual health care providers, and keep

the rest as MCO profit.

     (5) MCOs increase their profits by limiting health care goods and services for Medicaid

patients.

     (6) Theoretically, MCOs are supposed to help states control Medicaid costs and improve

access and health care outcomes; however, there is no significant evidence of this.

     (7) Peer-reviewed research, including two (2) separate literature reviews done in 2012 and

2020, concluded: "While there are incidences of success, research evaluating managed-care

programs show that these initial hopes [for improved costs, access and outcomes] were largely

unfounded.”

     (8) Since 2009, every annual Single Audit Report by the Rhode Island Office of the Auditor

General has found that the state lacks adequate oversight of MCOs.

     (9) In 2009, Connecticut conducted an audit which found it was overpaying its three (3)

MCOs (United Health care Group, Aetna, and Community Health Network of Connecticut) nearly

fifty million dollars ($50,000,000) per year.

     (10) In 2012, Connecticut returned to a state-run fee-for-service Medicaid program and

subsequently saved hundreds of millions of dollars and achieved the lowest Medicaid cost increases

in the country and improved access to care.

     (11) In 2015, the RI Auditor General found that Rhode Island overpaid MCOs more than

two hundred million dollars ($200,000,000) and could not recoup overpayments until 2017.

     (12) In 2015, Governor Raimondo began efforts to “Reinvent Medicaid” that led to

increased Medicaid privatization, including the UHIP/RI Bridges project and MCO five (5) year

contracts.

     (13) In the Fiscal Year 2017, Fiscal Year 2018, and Fiscal Year 2019 Single Audit Reports,

the RI Auditor General bluntly concluded, "The State lacks effective auditing and monitoring of

MCO financial activity.”

     (14) In its latest Fiscal Year 2020 Single Audit Report, the Auditor General notes that

EOHHS failures to collect adequate information from MCOs has had the “effect” of, “Inaccurate

reimbursements to MCOs for contract services provided to Medicaid enrollees.”

     (15) The federal Center for Medicaid and CHIP Services (CMCS) determined that in 2019,

Rhode Island spent the second highest amount per capita for Medicaid patients out of all states and

had a, “High overall level of data quality concern.”

     (16) The RI Executive Office of Health and Human Services (EOHHS) has not taken

sufficient actions to address problems with MCO oversight, for example:

     (i) Until 2021, EOHHS made RI 1 of only six (6) states with MCO contracts that had not

required MCOs to spend at least eighty-five percent (85%) of their Medicaid revenues on covered

services and quality improvement (i.e., have a Medical Loss Ratio, MLR, of 85%);

     (ii) Unlike thirty (30) other states, EOHHS failed to require MCOs to remit to the state

Medicaid program excess capitation revenues not adequately applied to the costs of medical

services;

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     (iii) EOHHS failed to file annual Medicaid reports; publishing FY 2019 data in a report

dated May 2021; and

     (iv) EOHHS failed to ensure that FY2020 MCO quarterly reports were made in a

“Financial Data Reporting System,” as set forth in a response to criticisms raised by the RI Auditor

General.

     (17) Other states that more recently adopted Medicaid MCO managed care, such as Iowa

and Kansas, have suffered cuts in health care, far less than expected savings, and sacrificed

oversight and transparency.

     (18) During the COVID-19 pandemic, RI Medicaid enrollments increased about twelve

percent (12%) as people lost their jobs and health insurance.

     (19) During the pandemic, MCO private insurance companies earned record profits while

health care providers such as hospitals suffered severe financial losses from deferred elective

medical procedures.

     (20) RI EOHHS wants to continue to help private MCO insurance companies by giving a

set per person per month fee to health care providers so that health care providers assume “full risk

capitation.”

     (21) Rhode Island is the only state in the country that has an “Office of Health Insurance

Commissioner” whose top listed priority is to, “Guard the solvency of health insurers.”

     (22) Private health insurance companies have more government funding and support than

any other type of business in Rhode Island.

     (23) The Centers for Medicare and Medicaid Services (CMS) has issued guidance intended

to help states monitor and audit Medicaid and Children’s Health Insurance Program (CHIP)

managed care plans to address spread pricing and appropriately incorporate administrative costs of

the Pharmacy Benefit Managers (PBMs) when calculating their medical loss ratio (MLR).

     (24) States that chose to establish minimum MCO MLRs with requirements to return

monies may recoup millions of Medicaid dollars from plans that failed to meet the State-set

minimum MLR thresholds.

     (25) Given the one billion seven hundred million taxpayer dollars ($1,700,000,000) given

to MCOs and the current lack of adequate monitoring and oversight, the costs of audits set forth by

this legislation are justified and necessary.

     SECTION 2. Chapter 40-8 of the General Laws entitled "Medical Assistance" is hereby

amended by adding thereto the following section:

     40-8-33. Medicaid programs audit, assessment and improvement.

     (a) The Rhode Island auditor general, in consultation with the Rhode Island executive

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office of health and human services (EOHHS), shall hire and supervise an outside contractor or

contractors to audit the state's managed care organizations (MCOs) in order to determine whether

managed care organizations (MCOs) are providing savings, access and outcomes that are better

than what could be obtained under a fee-for-service program managed by the state;

     (b) RI MCOs shall provide information necessary to conduct this audit, as well as all legally

required audits, in a timely manner;

     (c) Failure of MCOs to provide such information in a timely manner shall permit the state

to seek penalties and terminate the MCO Medicaid contract;

     (d) EOHHS staff and outside contractors working on the audit shall not have relevant

financial connections to MCOs or the outcome of the audit;

     (e) The Rhode Island auditor general shall present the results of the audit to the public and

general assembly within six (6) months after the passage of this section;

     (f) If the audit concludes that a fee-for-service state-run Medicaid program could provide

better savings, access and outcomes than the current managed care system, EOHHS and the Rhode

Island auditor general shall develop a plan for the state to transition to a state-run fee-for-service

program within two (2) years from the date of this section's passage.

     (g) EOHHS contracts with MCOs shall include terms that:

     (1) Allow the state to transition to a fee-for-service state-run Medicaid program within two

(2) years of the date of this section's passage;

     (2) Require MCOs to meet a Medical Loss Ratio (MLR) of greater than ninety percent

(90%), net of primary benefit manager (PBM) costs related to spread pricing;

     (3) Require MCOs to remit to the state Medicaid program excess capitation revenues that

fail to meet the ninety percent (90%) MLR; and

     (4) Set forth penalties for failure to meet contract terms.

     (h) The attorney general shall have authority to pursue civil and criminal remedies against

MCOs to enforce state contractual obligations and other legal requirements.

     SECTION 3. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO HUMAN SERVICES -- MEDICAL ASSISTANCE

***

     This act would require the auditor general to oversee an audit of Medicaid programs

administered by managed care organizations. The auditor general would report findings to the

general assembly and the director of the executive office of health and human services (EOHHS)

within six (6) months of passage. The director of EOHHS would provide the general assembly with

a plan within two (2) years of passage to end privatized managed care and transition to a fee-for-

service state-run program if the audit demonstrates the plan would result in savings and better

access and health care outcomes.

     This act would take effect upon passage.

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