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HELENA — State lawmakers Tuesday queried the Schweitzer administration's top health official about plans to hire a private company to manage part of Medicaid, asking why the administration hasn't had a more public discussion on the proposal.

“Why wouldn't we reach out as early as possible to include people who had experience with prior managed care, the providers and the recipients of services?” asked Sen. Dave Wanzenried, D-Missoula.

The Legislative Finance Committee also heard from health care providers and former officials who experienced the state's 1995 foray into private management of Medicaid for the mentally ill — and how it became a disaster for its low-income patients and their providers.

Kathy McGowan, who represents several mental health centers in the state, said the East Coast contractor promised greater access to services for patients and no cuts in care. Instead, the system devolved into a mismanaged mess where patients often couldn't get care and providers weren't getting paid, she said.

“Yes, there is a lot of cynicism out there,” she said. “I think we have to be careful about our next relationship. ... The best thing about their plan was when we saw their taillights going east. That's not an exaggeration.”

Anna Whiting Sorrell, director of the state Department of Public Health and Human Services, told the panel that the Schweitzer administration hopes to ask for contract proposals by January for a private firm to manage Medicaid in a five-county region.

The demonstration project would cover all Medicaid services in Cascade, Lewis and Clark, Pondera, Teton and Judith Basin counties.

Medicaid is the state-federal program that pays medical bills for the poor and disabled, covering about 100,000 Montanans statewide.

The private company likely would be paid a certain amount of money per patient and then “manage” care for those patients, directing them to lower-cost care and saving money for the state and the company.

Sorrell said the contract will require at least a 10 percent savings and coverage of all Medicaid services.

She said she knows managed care has a “bad reputation “ in Montana and that the proposal is a bold plan, but that the Medicaid program will be facing rising costs and requires “bold action.”

The Gazette State Bureau reported last month that the Schweitzer administration had discussed possible managed-care plans for Medicaid as early as August 2009, with one proposal coming from managed-care giant Centene Corp., based in St. Louis.

Montana health care providers said they hadn't been involved in any of the talks and knew nothing of the plan.

When asked why the administration hadn't reached out to include providers and consumer groups in the discussion, Sorrell said outreach occurred “as early as possible,” and that doing it before the governor had formulated the plan “would not be appropriate.”

Schweitzer invited some provider groups and consumers to a meeting last week at the Capitol, where, in front of reporters, he lectured them about the benefits of the plan and how Medicaid costs need to be examined and contained.

Providers said afterward that they still hadn't seen details of any plan.

Rep. Jon Sesso, D-Butte, also asked whether a new, private managed-care contractor might disrupt programs already in place that are working, such as a statewide effort by community health centers to manage high-cost patients on Medicaid.

Sorrell said private insurers already have many “provider networks” and that the new contractor would be working through or arranging its own network of providers, and doing so with a cost benefit to the state. She also suggested that the contractor might look to incorporate the health centers' program in its management plan.