Aetna Better Health Threatens to Terminate Medicaid Contracts If Illinois Funding Crisis Continues

Healthcare

Illinois’ budgetary troubles have pushed Aetna Better Health, the managed care subsidiary of Hartford, Connecticut-based Aetna Inc (NYSE:AET), to give notice that it could terminate its four Medicaid contracts with the state due to $698.0 million in outstanding payments.

If the state can’t come up with the $698.0 million (and counting), it could force Aetna Better Health’s 235,000 Medicaid beneficiaries to find new coverage.

At least two other Medicaid managed care organizations (MCOs) in Illinois have slowed or ceased payments to providers.

Illinois has been without a budget for two years. As a result, the state has racked up an eyewatering $15 billion in unpaid bills. Specifically, it owes Medicaid MCOs like Aetna Better Health, $3.1 billion.

Aetna left room to withdraw its decision to terminate the contracts if the state takes care of its Medicaid funding crisis.

“If Aetna Better Health is compelled to exercise its termination rights under the state contracts, it would do so with the hope that those terminations would ultimately be unnecessary upon an interceding, mutually agreeable resolution of the pending Medicaid-funding crisis before year end – either through a Fiscal Year 2018 budget or through state compliance with this court’s orders,” said Laurie Brubaker, chief executive offer of Aetna’s Medicaid business.

The state of Illinois needs to pass a budget on or before July 1, 2018 that guarantees a reliable source of revenue or Aetna Better Health could terminate its contracts as of December 21, if not earlier.

The $698.0-million backlog in unpaid bills started in October 2016. Some of the money owed to the company is for unpaid premiums, plus $13.0 million in interest. Each month, an additional $115.0 million gets added to that total.

That said, the state of Illinois has been making some Medicaid payments. The state has paid Aetna Better Health approximately 20% of what the company is owned for 2017. That works out to around $21.5 million each month, compared to the $115.0 million due monthly.

In the court filing, Brubaker said Aetna hoped that the terminations wouldn’t be necessary, either because the state would pass a budget that addresses the shortfall or because it would comply with a recent court order.

In May, a federal judge ordered the state to start paying $293.0 million toward Medicaid bills each month, in addition to another $1.0 billion over the next year. The judge’s ruling came after lawyers representing Medicaid patients and attorneys for the state couldn’t agree on how to start paying the $3.0 billion owed to healthcare providers.

Sources:

Aetna Better Health threatens to terminate Medicaid contracts in Illinois over $698M in unpaid bills,” Healthcare Finance, July 7, 2017.

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