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Idaho Awards $1.2 billion Contract for MCO to Oversee Behavioral Health But Not Without Controversy

Lawsuits ensue as Idaho awards a multi-billion dollar contract to overhaul behavioral health services

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July 7, 2023Behavioral health services in Idaho are in a whirlwind of change and legal controversy. Two lawsuits have emerged in the wake of the state awarding a sizeable $1.2 billion contract to a managed care organization to oversee mental health and substance abuse treatment Idahoans.

This monumental contract will influence how approximately 425,000 Idaho residents, or one in five people in the state, receive behavioral health care. Magellan Health was awarded the contract to manage this care for those with private health insurance, Medicaid, and the uninsured. This expanded contract covers inpatient care, such as hospitalization for mental health issues, and goes a step beyond the previous contract that only included outpatient care.

Managed care organizations like Magellan Health are essentially companies tasked with overseeing health benefits and the provision of care to patients. However, not all are content with the state’s decision. Two companies who didn’t secure the contract, Beacon Health and Optum Health, argue the selection process was flawed, asserting the state made mistakes in assessing proposals.

The lawsuits claim that the revamped contract has broadened its scope significantly, and Magellan, the successful bidder, does not meet the necessary qualifications. Optum’s suit contends that the contract’s bidding process was flawed and requests that Magellan’s contract be nullified and awarded to them instead. They allege that the state applied weights to information submitted in the bids without previous disclosure, leading to unfair competition.

On the other hand, some Idaho analysts see promise in the new contract structure, as it makes a single company accountable for the total cost of a patient’s mental health care. This shift to a one-provider model for both inpatient and outpatient behavioral care aligns the organization’s interests with providing quality care rather than passing patients into inpatient care, where the state bears the costs and risks.

“Everything we’ve seen, all the research we did about how managed care is supposed to work, was that you want to bundle substitute services together because of the big risks with managed care is the way the state pays managed care organizations on a per member, per month rate,” Ryan Langrill, analyst for the Idaho Office of Performance Evaluations, said. “And if the managed care organization can deliver services at less (cost), then they get to keep some of the money.”

While the legal wrangling continues, the new contract is set to be operational by June 16, 2023, with Magellan beginning to provide services in March 2024. Magellan’s new contract will last for four years, ending February 29. 2028. 

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