Four vendors want in on managing Rhode Island’s Medicaid program

Let the bidding wars begin.

Four private health insurance companies are competing for a piece of the state’s $3.5 billion Medicaid program under a new, six-year contract. And no more than three will be chosen, as decided by the Rhode Island Executive Office of Health and Human Services when it issued the competitive solicitation in December.

The determination to cap payees at three vendors was made based on the state market, Kerri White, an agency spokesperson said in email on Thursday. The Centers for Medicare & Medicaid Services lets states decide how to structure their contracts with private health insurers, or managed care organizations, who oversee Medicaid services.

Christina O’Reilly, a spokesperson for the Rhode Island Department of Administration, confirmed in an email on March 26 the names of the vendors that submitted bids, but declined to share their proposals until a “tentative selection” has been made — a date for which has not been set.

Bidders included the same trio of vendors who manage the state’s medical assistance program now — Neighborhood Health Plan of Rhode Island, Tufts Health Public Plans Inc., and UnitedHealthcare of New England Inc. — along with one newcomer: Blue Cross Blue Shield of Rhode Island.

It’s the first time since 2016 that the state has put its massive Medicaid contract — equal to about 25% of its fiscal 2024 budget — out to bid. Stakes are high, not only given the 10-digit line item, but also because one-third of the state’s residents are served through the medical assistance program geared toward low-income and disabled children, adults and families.

Already, the solicitation appears to have achieved at least one of its intended goals: making the selection process more competitive, which will drive down costs for the state and the patients. 

“Someone will not be a winner,” Sen. Lou DiPalma, a Middletown Democrat, said in an interview on Thursday.

DiPalma, chairman of the Senate Finance Committee, was reluctant to describe the solicitation as an improvement based solely on the number of bidders. Instead he touted other requirements included in the RFP and forthcoming contract as the real benefit: conditions like greater financial transparency and accountability, and ensuring stability in rates paid to providers. Lack of adequate compensation to Medicaid providers, most of whom are paid through managed care organizations (MCOs) like Tufts and Neighborhood, has been a source of growing concern among lawmakers and administrators, who cite uncompetitive rates compared with neighboring states as reason for Rhode Island’s provider shortage.

“The new Managed Care RFP will strengthen the services that our state’s Medicaid members receive and ensure increased oversight and transparency of awarded vendors to deliver value for Rhode Island taxpayers through a performance-based contract,” Gov. Dan McKee said in a statement at the time the solicitation was published Dec. 15, 2023.

Earlier this week, a new report by the Office of the Auditor General raised new alarm bells over Medicaid spending, finding that the state paid $38.4 million to Medicaid managed care organizations to cover services for patients who don’t live in Rhode Island, and therefore should not be covered under the state’s medical assistance program. The report, which reflected Medicaid spending from 2019-2021, offered several recommendations aimed at preventing this unnecessary spending, centered around greater accountability and oversight.

For DiPalma, the findings only amplified existing concern over the behemoth, multibillion-dollar program.

“There’s been a lot of concern by the General Assembly, and interest by the General Assembly, that we need more insight into what Medicaid managed care organizations are seeing, and doing,” DiPalma said. “This is the single biggest expense, or investment, the state has. And at the end of the day, even though we contract out, the state is the one responsible for who’s on Medicaid and who’s not on Medicaid.”

The Rhode Island Executive Office of Health and Human Services in a response included in the auditor general’s report pointed to pandemic-era restrictions on removing people from its Medicaid program if they were found to be enrolled in other states, as well as operational constraints included limited staffing.

The new contract for Medicaid vendors also includes provisions for stronger financial sanctions, performance metrics and “corrective actions” against “non compliant” managed care organizations.

Contract period would start July 1, 2025

The health and human services agency did not return inquiries seeking additional comment on Thursday. It is reviewing the bids from the four Medicaid vendors, following the Feb. 23 submission deadline, according to O’Reilly. The state expects to award a contract in 2024, with a July 1, 2025 start date. The new contract would run through June 30, 2030, with the option for a five-year renewal. 

Blue Cross Blue Shield, the only bidder not already contracted with the state for Medicaid managed care services, remained tight-lipped about its interest in the contract.

“In pursuit of our vision to improve health and well-being by leading access to high quality, affordable, and equitable care across Rhode Island, Blue Cross & Blue Shield of Rhode Island recently submitted a proposal in response to the State of Rhode Island’s Medicaid Managed Care Organization program procurement,” Rich Salit, a company spokesperson, said in an emailed statement. “It is our policy not to comment on proposals while they remain under regulatory review.”

Tyler McCollum, a spokesperson for Neighborhood, also declined to comment specifically on its new proposal.

“However, we welcome state oversight and transparency around health plan performance,” McCollum said in an email Thursday.  “Neighborhood is proud of the services that we deliver on behalf of the taxpayers and our commitment to the communities we serve.”

Kathleen Makela, a spokesperson for Point32Health, the parent company of Tufts,  said in an email Thursday the company was “excited about the prospect of continuing to serve Rhode Island Medicaid members and bringing our expertise to members who are dual eligible.”

The new solicitation seeks to expand managed care to patients dually enrolled in Medicaid and Medicare so that they can access all services under the same health plan.

United Healthcare did not respond to inquiries for comment on Thursday.

In fiscal 2022, the most recent data available, Neighborhood was responsible for more than half of the state’s Medicaid patients, while UnitedHealthcare had 30% and Tufts had 5%. The remaining 6% was paid directly to providers through a fee-for-service model, rather than through the managed care organizations.

The new solicitation does not state specific reimbursement rates vendors should offer to providers.

However, the Executive Office of Health and Human Services and the Office of the Health Insurance Commissioner have recommended rate increases for Medicaid providers, though their recommendations differed in how quickly the rate hikes should be implemented. Gov. Dan McKee’s fiscal 2025 budget spread out rate increases over the next three years, except for those who offer special services to infants and toddlers with developmental disabilities. 

All three vendors will keep their existing contracts with the state through June 30, 2024. The agreements were extended after a prior attempt for a new round of competitive bidding in 2022 went awry. The solicitation for a five-year, $7 billion contract was canceled due to late and incomplete submissions from two bidders, WPRI-12 first reported. 

The relaunched bid in December did not include a dollar value, but Medicaid costs have been steadily rising in recent years. McKee’s fiscal 2025 budget proposal allocates $3.7 billion for medical assistance programs, including $1.4 billion from state coffers (the rest is covered by federal funding). That’s nearly a 20% increase from the $3.1 billion spent on Medicaid in fiscal 2020, according to the state’s spending report from that year. 

Updated to include responses from Neighborhood Health Plan of Rhode Island and Point32Health, the parent company for Tufts Health Plan.