How Is KanCare Managed and How Are The Companies Chosen?

Since 2013, managed care companies (MCOs) have administered the day-to-day delivery of services to almost all Kansans who have Medicaid or CHIP (Children’s Health Insurance Program) coverage through the state, under the umbrella of the KanCare program. Over the next several months, the state will be working through the complex selection process (known as “procurement”) to choose the next set of companies for this program.

Selecting which MCOs the state will use is an important decision; different companies may have different coverage policies and practices that can significantly impact Kansans’ access to coverage. Understanding managed care offers a deeper understanding of the re-procurement process in the months ahead.

What is KanCare?

KanCare is the state’s managed care insurance program administering both Medicaid and CHIP coverage. KanCare provides health insurance to low-income children, pregnant women, and adults; seniors; and people with disabilities across the state. Different age, income, and asset limits apply for each of these populations.

What Is a Managed Care Organization (MCO)?

A Medicaid managed care organization (MCO) is a type of insurance company that contracts with a state Medicaid agency to deliver covered services to those enrolled in Medicaid (in Kansas, this includes those enrolled in the CHIP program). In Kansas, three MCOs are contracted for the KanCare program: Aetna, Sunflower Health Plan (a subsidiary of Centene), and UnitedHealthcare. 

Under a managed care contract, the state agency pays the MCO a fixed amount each month (known as a “capitation payment”) for each person enrolled in the program (known as “per member per month” (PMPM)), regardless of whether or how much the member uses the MCO’s services that month.  

Payments can differ based on those being served. For example, the payment for a child is different from an elderly adult, because their overall anticipated average costs are very different. In exchange for the state’s payment, the MCO takes on the responsibility for managing all care and provider payments, as well as the risk that the payment may not cover all services provided to an enrollee.  

The MCO has an incentive to help enrollees reduce health care costs by improving their health outcomes, and contracts may include financial incentives for improving these outcomes (or financial penalties if certain outcomes are not improved). The MCO is also responsible for creating and maintaining a provider network to deliver services covered under the contract to its enrollees, pay providers predetermined amounts, and ensure network providers do not balance bill enrollees (i.e., add extra impermissible charges) for covered services. 

The theory of this capitation payment model is that MCOs are incentivized to reduce the volume of services that it pays for by managing the care delivered by its network providers to its enrollees while also increasing the quality of care and improving overall health outcomes. 

Why Do States Contract with MCOs?

Managed care helps the state control its budget and reduces the administrative complexity of managing care for a large number of Kansans. For states, managed care models lead to improved budget predictability, since the yearly payments to the MCOs are predetermined, and it is the MCO that is at risk if costs spike. With KanCare being the second-highest expenditure – only behind K-12 education funding – it’s important for the state to be able to estimate how much the program will cost in the upcoming fiscal year. Generally, more than $1 billion in State General Fund (SGF) money goes to KanCare, which represents almost 20 percent of the entire state budget.   

States also choose managed care models with the hope of improving the quality-of-care outcomes for enrollees and to outsource the responsibilities to organize provider networks, provide case management, pay network providers, and handle prior authorization.  

What Is the State Responsible for and What Are MCOs Responsible for?

Following federal rules and laws that are overseen by the Centers for Medicare and Medicaid Services (CMS), the state designs its Medicaid program through a State Plan and determines what services will be covered. Some are mandated by the federal government (like the Early and Periodic Screening, Diagnostic and Treatment [EPSDT] benefit for children), and some are an option that states can choose (like 12-month postpartum coverage for pregnant women).  

The state designs a managed care contract that includes health goals and quality measures and sets capitation payment amounts each year for different types of enrollees. State payment rates and contracts are subject to CMS approval.  

States are required to contract with external quality review organizations (EQROs) to evaluate the quality, timeliness, and accessibility to care provided by the MCOs. They improve states’ abilities to oversee and manage the MCOs they contract with, as well as help the MCOs improve their performance. These evaluations must be made publicly available and can improve the accountability of state managed care programs. 

As previously described, MCOs administer day-to-day contact with enrollees, determine how to deliver covered services to enrollees, and maintain a provider network to deliver services. One of the premises of managed care is that MCOs should proactively coordinate care for enrollees. MCOs may also choose to offer more services than the contract requires to work toward the goals of attracting enrollees and improving health outcomes.

Why and How Did Kansas Choose to First Implement KanCare?

According to the state’s historical timeline, in January 2011, Gov. Brownback assigned a team to reform Kansas’ Medicaid system to improve health outcomes and establish financial sustainability in the face of mounting economic uncertainty. After studies, reports, public forums, and internal working groups, the first MCOs were selected in mid-2012 (Amerigroup, Sunflower, and UnitedHealthcare), and KanCare went live on January 1, 2013. The original contracts ended December 31, 2017. 

In advance of the state implementing what became known as “KanCare 2.0,” the contracts were extended one additional year through December 31, 2018. In 2017-2018, the state worked through the process of selecting the next KanCare MCOs, and contracts with Aetna, Sunflower, and UnitedHealthcare went live January 1, 2019.  

The current MCO contracts were originally supposed to end December 31, 2023, and the state began conversations in early 2022 to gather input for the next round of contracts. However, the 2022 Legislature required the Executive Branch to wait until after January 31, 2023, to begin this process. As a result, the state requested a one-year contract extension from CMS, and the current contracts now expire December 31, 2024.

	In the Weeds Originally intended to be a demonstration (or pilot) project, KanCare has operated under a temporary federal 1115 demonstration waiver since its inception to cover using a managed care model for delivering the state plan requirements, providing any optional services, and addressing the nuances of the seven home and community based services (HCBS) waivers, including those for technical assistance (TA), autism (AU), physical disability (PD), and intellectual and developmentally disabled (IDD). That waiver authority will end December 31, 2023, as Kansas’ managed care authority transitions to the more permanent State Plan, and a different waiver (1915b) will provide the authority to add managed care to the State Plan.

Conclusion

As about 62% of KanCare’s current members are children and an additional 15% are their parents, KanCare is an important program that provides health care access and impacts the health outcomes of hundreds of thousands of Kansans. Additionally, kids account for 25% of total spending and parents account for 9.5% of total spending. That means 77% of the KanCare population spends 34.5% of the money. Understanding the roles of MCOs, how states contract with MCOs, the responsibilities of the state versus MCOs, and milestones in Kansas’ first decade under managed care will help advocates follow and monitor the procurement process ahead.