Md. Awards $16 Billion, 10-Year Contract for Health Insurance - Southern Maryland Headline News

Md. Awards $16 Billion, 10-Year Contract for Health Insurance


By Len Lazarick, Len@MarylandReporter.com

Top state officials on Wednesday, Aug. 13, approved spending $16 billion over the next 10 years on health insurance for over 200,000 state employees, retirees and their dependents.

One of the largest contracts ever granted, the three-member Board of Public Works approved it at a meeting dominated by discussion of the positives and negatives of health care delivery in Maryland, including serious patient care problems at a state hospital in Hagerstown.

Comptroller Peter Franchot repeatedly objected to the size and length of time in the health insurance contract. “Who knows what’s going to happen to health care over the next 10 years?” Franchot complained. He noted that just six years ago there was no Obamacare, and there is political uncertainty about the future.

In the end Franchot joined Gov. Martin O’Malley and State Treasurer Nancy Kopp in approving the $16 billion award to CareFirst of Maryland, United Healthcare Services of Minnesota and Kaiser Foundation Health Plan of the Mid-Atlantic States.

Aetna Life Insurance Co. of Connecticut, one of the current contractors, protested its exclusion from the contract award, and is appealing the decision.

Focus on preventive care and wellness

The new health insurance contract emphasizes preventive care and patient wellness, rather than just fee for service, a plan pushed by O’Malley.

“Low preventive care use and poor treatment compliance cost the program over $700 million annually,” the Department of Budget and Management said in its submission to the board. “The new plans have participant incentives and penalties to encourage engagement.”

Franchot worried about what would happen if those incentives and penalties didn’t reduce costs. Would state taxpayers be left holding the bag? he asked.

O’Malley and Franchot went back and forth on the contract, addressing the audience but actually arguing with each other. Toward the end of the discussion, Franchot suggested the board get quarterly reports on the progress and costs of the new health insurance, which begins coverage in January. O’Malley, who leaves office in mid-January, thought that was a fine idea.

The $16 billion contract was approved unanimously, as was most of the rest of the board agenda which included scores of transportation projects, building projects and other state contracts which must get its approval.

Problems at Western Maryland center

The board also approved a small $806,000 emergency contract for a consultant to help the state health department correct serious problems with the state-run Western Maryland Hospital Center in Hagerstown. After an inspection in May uncovered “immediate jeopardies” to patient care, state Health Secretary Joshua Sharfstein said top management was fired and the private Meritus Medical Center of Hagerstown was contracted to help overhaul management of the facility.

The Western Maryland Hospital Center only has 123 beds but most of its patients have chronic diseases, traumatic brain injury or need skilled nursing care for months or years at a time.

After visits to the facility by Dr. Sharfstein and Dr. Mona Gahunia, chief medical officer of the Department of Health and Mental Hygiene, the department told the board:

“It was clear that an immediate change in leadership at Western Maryland Hospital Center was necessary. DHMH determined that the previous CEO did not possess the skills to develop, oversee, and monitor the systemic changes necessary to stabilize patient care. Furthermore, the hospital lacks a bona fide chief medical officer and chief nurse officer. These positions are crucial for the delivery of care. For these reasons, DHMH awarded an emergency management contract to Meritus.”

Sharfstein said the problems were due to the retirement of much of the senior staff.

Upbeat story in Cumberland

The situation there contrasts with a much more upbeat story that appeared Monday in Business Insider that touts“an amazing health care revolution in Maryland” that “almost no one is talking about.”

The story highlights one of the major achievements of Sharfstein’s tenure — creating a hospital reimbursement system that rewards facilities for keeping patients out of the hospital rather than paying them for patients staying there.

The article focuses on the Western Maryland Regional Medical Center, a private facility in Cumberland.

At Wednesday’s meeting, both Franchot and O’Malley praised the article, which quotes the governor at length, even while they argued about the problems with the health care exchange.

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