State Medicaid directors also wanted managed care companies to establish networks, negotiate with providers, oversee referrals to specialists, and control utilization, Baumgarten adds. One reason: “States want to be able to predict how much they will spend on their Medicaid programs,” he explains. They have done so for a variety of reasons, says Allan Baumgarten, a health policy analyst, consultant and expert in Medicaid contracting. Since the late 1980s, 40 states and the District of Columbia have contracted with comprehensive managed care programs. Simply put, state officials needed those companies to manage the care of more than 3 million state Medicaid beneficiaries, among the costliest members of any health system. It would have been impractical for Ohio to end its contracts with health plans. That investigation resulted in Ohio’s Medicaid program ordering five health insurers to end contracts they had with PBMs. One of the earliest investigations of Medicaid managed care insurers’ relationships with PBMs came in 2018 when reporting in The Columbus Dispatch newspaper prompted the Ohio legislature to investigate CVS Caremark, the PBM division of CVS Health. Importantly, this allows us to continue our relentless focus on delivering high-quality outcomes to our members.”
In response, the Centene spokesperson said, “The no-fault agreements we have with other states reflect the significance we place on addressing their concerns and our ongoing commitment to making the delivery of healthcare local, simple and transparent. In addition, three states-Georgia, South Carolina and Indiana-also are investigating the insurer over its now-defunct Envolve Pharmacy Solutions, a PBM, according to reports.
To date, Centene has disclosed that it set aside $246.4 million to settle allegations of fraud in four states: Arkansas, Mississippi, Ohio and Kansas. A Centene spokesperson said, “We have not reached a settlement with the state of California on this issue, and we respect the deep and critically important relationships we have with our state partners.” Under the state’s contract with Centene, California paid the company $6.8 billion last year to manage its Medicaid program and provide care for its 2.14 million California beneficiaries. In late April, California’s Department of Health Care Services said it was investigating Centene Corporation, the nation’s largest managed Medicaid contractor. Many of those investigations are concerned with how health insurers serving Medicaid members contract with PBMs. Over the past four years, officials in at least 13 states have investigated how managed care plans run their Medicaid programs, including Arkansas, Illinois, Kansas, Mississippi, New Mexico, Ohio, Oklahoma and the District of Columbia. A spokesperson for UnitedHealth Group said company officials believe the lawsuit is without merit and the company will defend itself, according to published reports. In a 57-page lawsuit, Landry said he was seeking to recover “billions of dollars in inflated prescription drug prices.” By inflating what it pays for drugs, the insurer could skirt federal oversight regulations designed to ensure that managed care plans spend at least 85% of state and federal Medicaid funds for patient care and services under the medical loss ratio (MLR) rules, Landry wrote in the lawsuit filed April 13. In the suit, Landry accused UnitedHealthcare of inflating the amounts it pays OptumRx for drugs to help United increase what it counts as medical losses in Louisiana’s Medicaid program. In April 2022, Louisiana Attorney General Jeff Landry filed a lawsuit against UnitedHealthcare of Louisiana and OptumRx, a pharmacy benefit manager (PBM) subsidiary of United’s parent company, UnitedHealth Group.