by Deborah Yetter, Kentucky Lantern
July 30, 2024

FRANKFORT — The state’s largest provider of drug and alcohol treatment is warning that looming cuts in Medicaid reimbursement to some providers could damage efforts to curb addiction that has engulfed Kentucky — just as the state is showing improvements.

“Kentucky has made significant strides in access to treatment,” Matt Brown, chief administrative officer for Addiction Recovery Care, or ARC, told a legislative committee July 30. “With these cuts, it could completely set back addiction treatment in our state 20 years.”

A handful of companies that provide substance use disorder treatment, including ARC,  have been notified they face cuts of 15% to 20% from some private insurers that handle most Medicaid claims, Brown told the committee.

Brown noted that overdose deaths in Kentucky have declined for the past two years after years of rising. Kentucky also has the most treatment beds per resident, most of them through ARC, he said.

The state’s latest annual overdose report, released in June, shows a decrease in deaths to 1,984 from 2,200 the year before, a decline of 9.8%.

Brown was joined by Deron Bibb, chief financial officer for Stepworks, a recovery program based in Elizabethtown, and ARC executive John Wilson, also executive director of the Kentucky Association ofIndependent Recovery Organizations, speaking to the interim joint Health Services Committee about the cuts.

The cuts have been announced by three of the six managed care organizations, or MCOs, private insurance companies that handle claims for most of the state’s $16 billion-a-year Medicaid program, Brown said. 

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Under their contracts with the state, the MCOs generally have authority to set rates they pay providers. The state pays MCOs a fixed amount per member to cover Medicaid costs.

One company also has begun notifying patients it will no longer cover addiction services at ARC effective Sept. 30, Brown said.

He did not identify the MCOs that have announced cuts and declined to do so after the hearing, saying ARC and other companies are still attempting to negotiate with them.

The Kentucky Association of Health Plans, which represents the MCOs, said in a statement released Thursday by spokesman Tyler Glick, that its members “are proud to work collaboratively with quality, trustworthy providers of behavioral health and substance use disorder treatment” and access to those services is “top of mind” to ensure those in need receive care.

“Health plans strive for the best networks possible and are encouraged by the state to prioritize plan member outcomes and value-based care,” it said.

Sen. Stephen Meredith, R-Leitchfield and co-chairman of the health committee, said Tuesday the lawmakers likely would seek more testimony on the subject, including from the MCOs.

“I know there’s two sides to every story,” he said.

Wellcare, with 420,000 members, is the largest of the six MCOs followed by Passport by Molina, Aetna, Anthem, Humana and United HealthCare. Together they oversee payment of Medicaid claims for about 1.4 million Kentuckians.

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Wilson said the recovery organization he represents wants to make sure lawmakers are aware of the situation and already has asked them to voice concerns.

“There’s going to be real world consequences and I think it’s important to let legislators know what’s taking place,” he said.

Some defenders benefitted from owner’s largesse

Several lawmakers have signed letters urging that the MCOs suspend any cuts to substance use treatment until the General Assembly can further review the matter. They include some in key leadership positions and some who have benefited from campaign donations from ARC founder and owner Tim Robinson and his employees.

ARC, a for-profit company based in Louisa, has emerged as the state’s largest and fastest growing provider of addiction services, financed largely by Medicaid, the government health plan with the majority of funds from the federal government. Growth took off after 2014 when substance use treatment was included in the Medicaid expansion authorized by the Affordable Care Act.

The Lantern reported the company took in about $130 million last year in Medicaid funds and was by far the largest recipient of the about $1.2 billion the state spent on substance use treatment.

The company and Robinson also have become among Kentucky’s major political donors with more than $500,000 in contributions over the last decade — with funds divided among Republican causes and those of Gov. Andy Beshear, a Democrat, the Lantern reported earlier this month, citing campaign finance and other public records.

Sen. Phillip Wheeler, R-Pikeville, who has received $19,900 in contributions from Robinson, his wife Lelia and ARC employees since 2016, on July 9 sent a letter to Kentucky Medicaid Commissioner Lisa Lee urging the cuts for addiction services be suspended “until the legislature fully understands the reasons behind them.”

“Kentucky has made great progress in tackling the addiction crisis that has touched so many of our constituents, neighbors, colleagues, friends and family members,” Wheeler said. 

Cutting reimbursement now “could negatively affect some of our most vulnerable citizens and prevent us from seeing these positive trends continue,” his letter said.

A similar letter addressed to “to whom it may concern” was signed by Rep. Patrick Flannery, R-Olive Hill, who has received about $17,000 in campaign contributions from Robinson and ARC employees.

Another letter was signed jointly by Senate President Robert Stivers, R-Manchester, House Speaker David Osborne, R-Prospect, Rep. Kimberly Moser, R-Taylor Mill and Meredith. Moser and Meredith are co-chairs of the joint Health Services Committee which heard from ARC and other treatment officials Tuesday.

Republican supermajorities control the Kentucky House and Senate.

Robinson has given $10,000 to the Kentucky House Republican Caucus, and $15,000 to the Kentucky Senate Republican Caucus in the last four years.

Robinson also has given other contributions to campaigns of Republican state legislators in the past decade including $4,100 to Moser and $2,000 to Osborne.

From 2021 through 2023, ARC companies and employees gave about $252,000 to a political committee supporting Beshear, whom Robinson, a Republican, has said he admires and would like to see run for president.

Bibb, Stepworks’ chief financial officer, gave $500 to Flannery in December 2023 and $2,500 to the Kentucky House Republican Caucus in October 2022, according to Kentucky Registry of Election Finance records.

Not asking for more money, just no cuts, says company official

Brown said that one concern of the MCOs is the cost of treatment, in particular long-term treatment for addiction.

ARC understands concerns about costs, but experience shows people with addiction benefit the most from long-term services, Brown told the committee.

“It is not just about surviving from their addiction but thriving in their communities,” he said. “Long-term treatment is vital.”

Without quality treatment, costs to the state will rise elsewhere, Bibb said.

“These costs will not go away,” Bibb said. “They simply will shift back to the emergency room, the judicial system, foster care, homelessness.”

ARC is willing to work with the MCOs and the state to ensure it is using money efficiently and effectively, Brown said after the hearing.

“Everybody’s got to be good stewards,” he said. “We’re committed to helping provide a solution.”

Brown and Wilson said representatives of treatment providers plan to meet with MCOs and state officials in coming weeks to try to resolve their differences.

“We’re not asking for more money,” Brown said. “We’re asking for no cuts.”

Wheeler, in an interview, said he appreciates the support of Robinson, a longtime friend since college together at the University of Kentucky, but that’s not why he sent the letter.

Rather he’s concerned about the impact of cuts of up to 20% on ARC’s services, which he said have helped many people in the region including a brother who benefited from its treatment program.

Also, he said, ARC is a major employer in the area where jobs have been scarce and also trains its clients for jobs.

This story has been updated with a statement from the Kentucky Association of Health Plans.

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