California offers its Medicaid Drug program to a company. Then came a business venture.

SACRAMENTO, Calif. – Medication costs for California’s largest Medicaid program are running out of the state treasury, so in 2019 Gov. Gavin Newsom asked the private sector for help.

The new Medicaid drug program began this January, with a private company to take care of it. But they were unprepared, and thousands of humble Californians were left without essential medications for weeks, some waiting for hours when they were called upon for help.

What took place in the two years between the agreement and the start of the project was a case study of what could go wrong when the government puts serious efforts into the private sector.

California offers the Medi-Cal Rx program to a team of Magellan Health, an organization with expertise in medical and mental health benefits. But Magellan has been fired by Centene, a $ 50 billion company, seeking to boost its mental health portfolio.

Centene is a major player in state Medicaid medical programs – but also with a dubious history. The company has been sued by six states for expanding their Medicaid program for prescription drugs and medical services and is valued at $ 264.4 million. Three other states filed a similar lawsuit and agreed with the group, but no funding was disclosed. Centene refused to regulate civil affairs.

KHN learned that California health officials were investigating Centene.

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In his 2019 announcement, Newsom vowed to use “market power and our right to demand reasonable prices” from “pharmaceutical companies to appeal to Californians with high costs.”

The state’s drug spending for its Medicaid, prisons, state hospitals, and other programs has risen by 20% in one year since 2012, so the former Democrat issued an order implementation requiring California to make its own pharmaceutical companies and shut down companies. with other counties and states buying prescription drugs in bulk. He also ordered the state to purchase prescription drugs for California that are enrolled in Medi-Cal, the state’s Medicaid program, which covers about 14 million people.

Newsom no longer wants to allow the state’s two Medi-Cal health care programs to provide medical coverage to their subscribers, arguing that the state will get the best out of the companies. medicine by exercising its purchasing power.

That December, California awarded a $ 302 million competitive agreement to the Magellan Medicaid Administration, a subsidiary of Magellan Health, to ensure the availability of California’s most expensive drugs. Magellan provides medical services to public health programs in 28 states and the District of Columbia.

While mental health insurance is Magellan’s largest funder, it has fulfilled a key requirement of the state’s call for bills: It does not provide health insurance to Medicaid subscribers in California.

Magellan is expected to take the wood program in April 2021. But in Jan. 4 of that year, Centene – which is seeking a major stake in the health insurance market – announced plans to buy Magellan.

St. Centene, however, is one of the largest Medi-Cal providers in the state, a factor that was rejected from voting for a basic agreement. Centene provides health coverage to an estimated 1.7 million low -income Californians in 26 counties through its Health Net and California Health & Wellness affiliates. It will receive 11% of its revenue from California businesses in 2019, according to its 2021 report to the U.S. Securities and Exchange Commission.

But the state bowed back for the project, delaying implementation of the project when Magellan built the fire barriers, split its business operations from Centene, and was paid for the supervision of all three.

State officials watched the meeting at a 30 -minute public hearing in October 2021. They did not discuss Centene’s legal dealings with other states.

The State Department of Managed Health Care agreed to the Dec. meeting. 30. Two days later, the state began its new drug program with Magellan in control.

Centene’s legal problems

Over the past 10 months, Centene has decided with nine states to sue and its pharmaceutical company, Envolve, to expand their Medicaid program for medications and services: Arkansas, Illinois, Kansas, Mississippi, New Hampshire, and Ohio, according to news from attorneys general in those states. The three states are not identified by Centene or the states themselves.

The company has set aside $ 1.25 billion for those upcoming fixes and litigation, according to its 2021 report to the SEC.

Centene, who has denied wrongdoing in public, did not respond to many of KHN’s requests for interviews, nor did he respond to email inquiries. Magellan did not respond to interviews.

From the beginning, other California health insurers have opposed the state’s adoption of the Medi-Cal medical program, in part to take over a line of business. They were even more angry when the state allowed one of their biggest rivals to be grabbed by the neck – even more so by giving in to his legal obligations.

The state health care provider, which runs Medi-Cal, told KHN in March that it was investigating the company but declined to provide details. The state is investigating Centene’s role in providing medical benefits before the state takes over the work from health care providers.

“DHCS seriously investigates all allegations of fraud, vandalism, and abuse and investigates allegations if necessary,” department spokesman Anthony Cava said in a statement.

A sale to begin with?

When Medi-Cal Rx started in Jan. 1, thousands of Californians are unable to fill essential – sometimes life -saving – medications for days or weeks. Doctors, paramedics, and patients calling for help were often tired of being confined for eight hours.

Magellan complained of problems with staff shortages during the covid-19 omicron surge and the loss of patient data from insurance plans. State health officials went to great lengths to resolve the issues and appeared before legislative committees to provide lawyers with assurances that the contractor would not be paid in full.

But Medi-Cal patients remain in the dark.

Shortly after Magellan took over the Medi-Cal California pharmaceutical program, news came out on Axios and other publications that Centene was selling Magellan’s pharmaceutical business.

Centene officials did not confirm the sale. But it will be in line with the industry’s recent moves to reorganize its drug practices before state courts – such as finding an outside agency to start managing its drug costs.

“When you tell a PBM they need to do it, that’s when there’s no money in it. Now is the time to go,” said Antonio Ciaccia, president of the drug store 3. Axis Advisors, which refers to the services of economic managers.

Another change of overhaul of the medication program in California could further affect the state’s best residents, some of whom are having difficulty accessing their medication and supplies. special treatment after taking Magellan.

“I don’t know what instability will work in when this amount changes,” said Linnea Koopmans, CEO of Local Health Plans in California, citing testimonials. Medicaid has driven many in the state to compete against Centene. “It’s just an open question.”

Koopmans and other Centene critics note that California has long relied on personal insurance plans to provide medical and prescription drug coverage to Medi-Cal subscribers and that the state should not be surprised by changes that will come with the integration of the health care industry. For example, Centene has a history of taking on California contracts after acquisition – it did when it acquired Health Net in 2016.

But consumer advocates for the Centene fiasco say the state needs to improve its oversight of corporations if it chooses to assign responsibility for public projects.

“In a perfect world, these are all sorts of backroom routines that people don’t see – until they work, until the crisis,” said Anthony Wright, director of Health Access California. , a customer support group. “It just increases the need to make sure the look is there, the responsibility is there.”

This story was created by KHN, which publishes California Healthline, an independent editorial service of the California Health Care Foundation.

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