FRANKFORT — Sometimes it’s all in the eyes of the beholder.

On Wednesday, the House budget subcommittee on human resources heard reports on how well the new managed care system of delivering Medicaid is working — and how terribly it’s working.

Sharon Clark, insurance commissioner, told the committee that the first quarter of Medicaid implementation “was kind of rocky” as complaints about failure to pay or late payment of fees rolled into the Department of Insurance.

But since then, Clark said, complaints about Medicaid and managed care “are not totally out of line” with the number of problems or complaints about private insurance.

Audrey Haynes, secretary of the Cabinet for Health and Family Services which oversees Medicaid, told the same committee that 14 years ago when managed care was introduced into Jefferson County and surrounding areas, there were similar complaints.

Now Passport (and recently three other companies offering managed care in the same region) is viewed as a model of care and gets good reviews from patients and providers. That’s no excuse for today’s problems, she told the lawmakers, but it does show the change “is a major culture shift” and such early problems shouldn’t have been unexpected.

But Daniel Parietti, senior vice president of Centene, the parent company of Kentucky Spirit, a managed care company which wants out of its contract in Kentucky, said the system and Kentucky face “an imminent financial crisis.”

Kentucky last year moved to a managed care system in which the state pays companies a contracted per-patient amount to cover all Medicaid services rather than reimburse medical providers on a standard fee-for-service basis.

The idea is to save money and offer more up-front preventive care which should save costs for later treatment of conditions which might have been prevented or at least managed better if treated earlier.

Nearly 15 years ago, the state began a similar system in Jefferson County with Passport, a collaborative between major medical providers in the area which now treats patients in about 15 counties. The Passport program suffered some image problems when an audit uncovered questionable spending on management perks, but it has almost universally received good grades for the services it provides and their costs.

That was Haynes’ point in quoting from articles about Passport when it was first implemented. The report in 1999 by The Courier-Journal identified problems almost identical to those being hurled at the system which is now under way in the rest of the state.

Providers — especially hospitals and pharmacies — have complained bitterly about late payment of fees from the MCOs or refusal to authorize and pay for services.

On top of that, Kentucky Spirit wants to break its contract and leave the state, claiming the state misled the company about the scope, nature and cost of Kentucky Medicaid patients.

Haynes said Wednesday that the cabinet “continues to challenge (Kentucky Spirit’s) ability to break its contract but that’s all we can say because it is in litigation.”

Haynes and Medicaid Commissioner Lawrence Kissner painted a picture of early problems as the change was made from fee-for-service to managed care but said ongoing, nearly constant meetings between the cabinet, providers and the MCOs are reducing those complaints.

Kissner, who worked in private insurance for 30 years and for 17 in managed care service delivery, said most issues the cabinet has reviewed aren’t really concerned with prompt payment but because of denials of service for lack of pre-authorization or lack of medical need.

But Parietti’s frustration and anger were almost palpable.

He said the state provided faulty data on patients and costs and worst of all required the MCOs to pick up costs for several months’ treatment prior to the patients’ enrollment with Kentucky Spirit. He said all three MCOs are losing millions and complained when contracts were approved recently for the four MCOs, including Passport, in the Louisville region the state approved payments 30 percent higher than those in the rest of the state.

Michael Murphy of Coventry, one of the other statewide MCOs, said his company is also losing money so far in Kentucky, but “we are still here and we don’t plan to leave.”

Murphy, Parietti, and Michael Minor of WellCare touted significant cost savings for the state the MCOs have achieved in pharmaceuticals and emergency room visits, savings confirmed at an earlier legislative hearing by Kissner.

And Parietti said Kentucky Spirit has dramatically reduced “doctor shopping” among its Medicaid patients, a practice of seeing multiple doctors for pain prescriptions. Pain medication abuse is a major problem in Kentucky.

RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.