Catania Scrutiny Puts Breaks on $10 M Medicaid Settlement

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A week ago, District-based Chartered Health Plan was within days of ending a complicated lawsuit against the District. The suit sought $14.9 million in reimbursements for dental insurance Chartered provided to disadvantaged and disabled children under the D.C. Medicaid program. According to the D.C. Department of Health Care Finance (DHCF), which contracts with Chartered and another company to offer managed care health insurance to over 200,000 residents, the District was obligated to reach a settlement with Chartered to the tune of just over $10 million.

Today, the settlement is on hold and being reviewed by Irvin Nathan, the District’s attorney general. What happened in a span of a week? No one from the District government will say for sure, but apparently, the chill on the Chartered deal appears to be the work of D.C. At-Large Councilmember David Catania.

Catania, a former Republican who shed his party affiliation due to the GOP’s opposition to same-sex marriage, chairs the D.C. Council committee that oversees Medicaid and is widely believed to wield near-veto power over virtually all aspects of the District’s health care system, a multi-billion dollar operation.

Some advocates, such as one dental health professional who asked not to be identified, believe that Catania’s influence over D.C. health agencies such as DHCF is too far-reaching. However, according to Ben Young, chief of staff to Catania, scrutinizing deals between the District and managed care organizations (MCOs) such as Chartered is “what [his boss] was elected to do.” Young states that for years Chartered has been earning record profits off of its managed care business, citing a 2008 audit showing that Chartered’s profits were 15 percent (or approximately $15 million) well beyond the 2 percent profit margin that is the industry standard (known as the medical loss ratio). “Thus when the District required Chartered to expand dental health care insurance for EPSDT (Early and Periodic Screening, Diagnosis, and Treatment) children, and they cried about not having enough money, we said ‘tough, so what.’ Chartered is a company that entered into a risk-based contract, where they assumed the risk for services, despite the cost.”

Chartered’s take is that this is no way to treat a partner in the complex job of providing health care to the most vulnerable, according to Chartered’s court filings. Chartered representatives declined to offer direct statements for this article.

"Under any fixed-price contract, the District is required to set prices that 'provide for assumption of a reasonable proportion of the risk by the contractor.’… Thus, if the proportion of the risk born by the contractor becomes unreasonable, the contractor is entitled to an equitable adjustment," stated Chartered in a motion to the District of Columbia Contract Appeals Board, appealing the Board’s decision that the District did not breach its contract.

At the heart of this dispute between D.C. and Chartered is another case, Salazar v. District of Columbia. The court ruled in the 18-year landmark class action lawsuit brought by attorneys with Terris, Pravlik & Millian that the District was obligated to offer preventive dental care among other services to Medicaid children.

As a result of this court order, the District obligated Chartered to expand its Medicaid coverage of dental services to children. In fact, according to Kathleen Millian, lead Salazar attorney, the terms of the order were incorporated into the District’s MCO contract with Chartered, resulting in an “explosion” in the number of District children receiving free dental services, in the words of Catania’s aide, Young.

Yet, according to Chartered, the significant expansion of dental services was not properly calculated when the rates were set for how much it and other MCOs would be paid for insuring the District’s Medicaid population. As a consequence, Chartered contends that it covered $17 million more in services than what was bargained. Even Young admits that the Council only budgeted an additional $1.5 million for the expanded Medicaid dental services.

But Catania disputed last week’s proposed settlement, saying it was a retroactive pay increase. And, as for now, “the Chartered settlement is dead,” said Young.

Millian, the Salazar lawyer hopes that Catania’s scrutiny into this deal does not put a thaw on the District’s inclination to settle rather than litigate class action cases brought on behalf of the poor like hers. And where the Council chooses to probe into such settlements, Millian urges D.C. Mayor Vincent Gray to stand up to the scrutiny rather than backing down. “Public accountability and transparency are important in resolving such major disputes,” she said.