Kansas Gov. Sam Brownback, R. (AP Photo/Jacquelyn Martin)

TOPEKA, Kan. (AP) — Efforts by Kansas Gov. Sam Brownback, R, to overhaul his state’s Medicaid program — including the nursing home benefits component — have hit a rough spot.

Blue Cross and Blue Shield of Kansas, Topeka, has decided not to bid on a contract to help manage the program.

Executives at Kansas Blue, the state’s largest health insurer, said last week that submitting a bid for a state contract would require the company to make dramatic business changes in less than a year.

Brownback’s administration plans to issue three contracts this year for the state’s $2.9 billion program, which provides health coverage to poor families and disabled and elderly Kansans. The contracts would start Jan. 1, 2013.

Kansas has asked the federal government, which helps finance Medicaid, to waive some of its rules so that the contracts can cover the disabled and elderly and include financial incentives for improving services while controlling costs. Critics worry Brownback’s administration is moving too quickly.

Brownback’s efforts to overhaul Medicaid represent the first time the state has attempted to cover the disabled and the elderly, including those in nursing homes, with a managed-care program.

“It’s crystal clear now that it’s going to be for-profit, out-of-state, multinational, probably publicly traded, Wall Street companies,” said Rocky Nichols, executive director of the Disability Rights Center of Kansas, adding that fellow advocates worry about “placing profits” between Medicaid recipients and services.

Brownback spokeswoman Sherriene Jones-Sontag declined to comment about the Kansas blue decision, because the bidding process isn’t complete. Companies had until Tuesday to submit technical details for their proposals but they still have until Feb. 22 to complete their bids, and the administration is not releasing a list of firms still seeking a contract.

Blue Cross was among 15 companies represented at a mandatory conference for potential bidders in December 2011. Others included large, multistate firms such as Coventry Health Care Inc., Bethesda, Md. (NYSE:CVH); UnitedHealth Group Inc., Minnetonka, Minn. (NYSE:UNH) and WellPoint Inc., Indianapolis (NYSE:WLP).

Administration officials have said the overhaul will lead to better coordination of services for high-need Medicaid participants and will eliminate duplication. The plan calls for participants to be able to choose from three statewide contractors.

State medical programs provide services for an average of 380,000 people a month, and the bulk already receive state health coverage through private contractors. By bringing the disabled and elderly into a managed-care system, the state would add Kansans who need relatively expensive long-term care (LTC) services.

Kansas Blue, a policyholder-owned mutual, paid about $2 billion in health claims in 2010. It provides coverage for about 656,000 Kansans and handles claims and services for another 223,000 with coverage from outside the state. Spokeswoman Mary Beth Chambers said the contracts would require Kansas Blue to do things it doesn’t do now as a traditional health insurer, such as helping families decide whether elderly members should go into a nursing home and managing that care.

“We just felt it wasn’t responsible for us to commit to changing our business model that much,” she said. ‘We certainly have no intent — and would be disappointed — if people read our decision as criticizing the governor’s proposals.”

Sen. Dick Kelsey, R-Goddard, Kan., who argues that the GOP administration should delay the contracts, said Kansas Blue’s decision showed that a major player wanted to put together a proposal but, “They concluded it can’t be done.”

“It’s a huge statement, and I don’t know how it can be ignored,” he said.

Senate Public Health and Welfare Committee Chairwoman Vicki Schmidt, R-Topeka, wants to set up a committee to monitor the overhaul.

Rep. Jim Ward, D-Wichita, has introduced a bill to require annual, independent audits of Medicaid. He noted the administration promises the overhaul won’t kick participants out of Medicaid, reduce their benefits or cut payments to health care providers.

“We want an independent third party to look over the shoulder of these insurance companies and make sure they keep those promises,” he said.

-alb