Schmidt: Legislature possesses power to delay rebidding $4 billion KanCare contracts

TOPEKA — Attorney General Derek Schmidt issued a nonbinding legal opinion Friday declaring the Legislature possessed authority to delay work on rebidding the state’s Medicaid contracts and push that financial and health decision past the re-election campaign of Gov. Laura Kelly.

Schmidt is the likely Republican nominee for governor in 2022, while Kelly is seeking re-election to a second term as governor.

Schmidt was asked by four Democratic House members in February to consider whether the Legislature had the power to add another year to the life of contracts allocating $3.9 billion among three KanCare insurance companies. The managed-care companies operate networks delivering Medicaid health services to 500,000 Kansas elderly adults, low-income children and people with developmental, intellectual or physical disabilities.

“There is neither a constitutional nor a statutory mandate that all contracts with the state go through a competitive bid process, and the Legislature, as the appropriating authority for the state, has the constitutional power to determine how state funds are allocated and spent,” Schmidt said in the opinion.

He issued the document one day after the House approved a budget bill requiring the Kansas Department of Health and Environment to halt work on new KanCare contracts and to negotiate extended contracts with Sunflower State Health Plan, United Healthcare and Aetna Better Health of Kansas. Existing contracts were scheduled to expire in December 2023, but the budget bill would push that to December 2024.

House members considered a bill that would require a one-year freeze in KanCare contracts during Public Health and Welfare Committee meetings chaired by Rep. Brenda Landwehr, R-Wichita. The Kelly had administration planned to put out a request for contract proposals in October and select the KanCare providers next year. If Schmidt were to win the election, Landwehr said, his administration would need time to prepare for the bidding process.

Other than Landwehr and her Republican peers, no supporter of postponing the rebidding has stepped forward. The identity of the bill’s author hasn’t been disclosed publicly.

“It’s the first time in my 12 years in the Legislature that I’ve seen a bill that actually has no proponent,” said Rep. Kathy Wolfe Moore, a Democrat from Kansas City, Kansas. “This smells bad and I’m certain if this goes forward there will be some kind of investigation into this.”

Instead of moving through the House and Senate contents of House Bill 2463, which featured the bidding postponement, House GOP members inserted the change into a state budget bill.

“This proviso circumvents the procurement process. Seems to me, that’s illegal,” said Rep. Susan Ruiz, D-Shawnee.

Under the budget bill adopted 73-49, top Republican and Democratic legislators would be required to convene as the Legislative Coordinating Council to approve meaningful adjustments in KanCare recommended by KDHE during the contract extension. Currently, KDHE has the ability to quickly pivot Medicaid programs to reflect advances in prescription medicines or medical devices.

More than a dozen members of the House signed a statement opposing the budget provision on Medicaid: “There is no competition, no room for questions, no accountability. This is wholly irresponsible and I refuse to spend taxpayer dollars in such a reckless manner.”

Schmidt said in the five-page legal opinion the Legislature had relied on its authority to revise procurement statutes in recent years by granting preference to businesses owned by veterans with disabilities and to paper suppliers that made use of recycled materials.

“The Kansas Legislature broadly has the power under the state constitution to establish and alter procurement and appropriations processes for governmental entities. The procedure by which the Legislature does so is enactment of law,” Schmidt said.

“The Legislature may lawfully alter the procurement process for a state agency through new legislation. This includes modifying, delaying or eliminating the competitive bid process and directing the Secretary in its management of the KanCare system.”

The attorney general said there was potential the federal government or other litigants could challenge the one-year delay.