COUNCIL OF THE DISTRICT OF COLUMBIA

THE JOHN A. WILSON BUILDING

1350 PENNSYLVANIA AVENUE, NW
WASHINGTON, D.C. 20004

VINCENT C. GRAY Committee Member:

Ward 7 Councilmember Business and Economic Development
Chair, Committee on Health Judiciary and Public Safety
Co-Chair, Special Committee on COVID-19 Pandemic Recovery

May 28, 2021

The Honorable Anita Bonds, Councilmember, At-Large

The Honorable Elissa Silverman, Councilmember, At-Large
The Honorable Christina Henderson, Councilmember, At-Large
The Honorable Brianne K. Nadeau, Councilmember, Ward 1
The Honorable Brooke Pinto, Councilmember, Ward 2
The Honorable Mary M. Cheh, Councilmember, Ward 3
The Honorable Janeese Lewis George, Councilmember, Ward 4
The Honorable Charles Allen, Councilmember, Ward 6
The Honorable Trayon White, Sr., Councilmember, Ward 8

Dear Council Colleagues:

I am writing to urge you to join me in voting to oppose the “Fidelity in Compliance of Contracting
and Procurement Declaration Resolution of 2021”.

Procedural Concerns

Simply put, this bill attempts to direct a Medicaid Management Care Organization (MCO) contract
to one company, Amerigroup DC (Amerigroup), by dictating the number of managed care plans that
the Department of Health Care Finance (DHCF) must include in its Medicaid managed care program,
and through short circuiting the procurement process for Medicaid MCOs by directing the Office of
Contracting and Procurement (OCP) to terminate the contract of another health plan, MedStar Family
Practice (MedStar), prior to the date that the Contract Appeals Board (CAB) has established for this
potential outcome.

More harmful, if DHCF refuses to add a third plan to the program following the elimination of one
of the current three MCOs, the bill establishes crippling funding limitations for the District’s Medicaid
and DC Healthcare Alliance programs, which provide health care to our most vulnerable
residents. These are the same residents who have disproportionately been affected the most by
COVID-19 cases and deaths. Further, there was absolutely no consultation with the Committee on
Health regarding this emergency legislation.

Permanent legislation related to this issue has been introduced at the request of the Mayor but takes
the opposite position. This legislation, Bill 24-0115, the “Department of Health Care Finance Support
Act of 2021” was referred sequentially, first to the Committee on Health, and then to the Committee
on Business and Economic Development. Moving this emergency legislation effectively amounts to
a discharge of the issue from the Committee on Health.
The Committee on Health held a public hearing on Bill 24-0115 on April 21, 2021. I entered the
hearing undecided on the legislation, but following very thorough testimony from Deputy Mayor
Wayne Turnage, I was persuaded to support the legislation. I have attached a copy of Deputy Mayor
Turnage’s PowerPoint presentation to my e-mail circulating this letter. I encourage you to read the
PowerPoint and to watch the public hearing, which is available on the Council’s website
at: https://dc.granicus.com/MediaPlayer.php?view_id=2&clip_id=6333.

A version of this legislation has also been included in the Mayor’s “Fiscal Year 2022 Budget Support
Act of 2021”, because the legislation has fiscal implications related to the Fiscal Year 2022
budget. Thus, the Council already has two traditional legislative paths that will allow it to legislate
on the contracting issues associated with the MCO contracts. Due to the budget nexus, it appears that
approving the “Fidelity in Compliance of Contracting and Procurement Emergency Amendment Act
of 2021” would create a budgetary shortfall of $5.4 million as outlined in the BSA.

Recent History of the Medicaid MCO Contract

In 2020, the District was required to rebid the MCO contracts because there was imbalance in the
membership of high-cost Medicaid patients, which caused AmeriHealth to take significant financial
losses, allowing Amerigroup and the other health plan in the program at that time to earn significant
profits. After a competitive bidding process, in June 2020, the Executive Branch awarded contracts
to two of three incumbent plans: AmeriHealth and CareFirst. This time, Medstar Family Choice --
which lost the MCO contract to Amerigroup during the prior MCO solicitation -- was selected as the
third MCO plan.

However, on August 20, 2020, the Contract Appeals Board (CAB) found that OCP’s long-standing
practice of allowing vendors to submit a final subcontracting plan at the best and final offer stage of
procurements was contrary to CAB’s interpretation of D.C. Code. Accordingly, the CAB declared
that the winner in a separate Department of Health Care Finance procurement for the Medicaid
Management Information System (MMIS), was to be considered non-responsive for failing to submit
a final subcontracting plan with the initial bid. This ruling also impacted the District’s MCO and
District of Columbia Access System (DCAS) procurements.

In addition to procedural issues, there are also substantive appeals before the CAB on the scoring of
Medstar’s MCO proposal. However, those substantive appeals are not ripe, because CAB will
consider Medstar’s proposal as non-responsive for submitting a final subcontracting plan at the best
and final offer stage of the procurement. To address this procedural issue at CAB, the Executive
Branch submitted Bill 24-0115, the “Department of Health Care Finance Support Act of 2021”, which
deems legally sufficient, the sub-contracting plans for the three DHCF procurements initiated prior
to August 20, 2020. This bill does NOT intervene in the substantive appeal of the scoring of
MedStar’s proposal; rather, it merely allows the procurement process to be completed. If MedStar
does not prevail in the appeal, its contract will terminate on September 30, 2021. No other past or
future contracts are impacted by B24-0115.

Essentially, B24-0115, ratifies what was the OCP citywide practice on subcontracting plans, which
was widely understood to be the law by all of companies bidding on the Medicaid contract. Why do
I know that Amerigroup DC understood this to be the law? Because after Amerigroup was awarded
the MCO contract in the prior solicitation, a CBE vendor who was included in Amerigroup’s initial

2
subcontracting plan without the vendor’s knowledge or consent and was later excluded altogether.
This vendor complained to the staff of several Council committees, including the Committee on
Health. Amerigroup’s representatives explained that the final subcontracting plan was not required
until the best and final offer stage of procurement.

Institutional Concern: Council Contract Steering

This legislation is a dramatic departure from the Council’s traditional role in evaluating
contracts. Contract and grant selection are appropriately within the sole purview of the Executive
Branch. In 2014, as Chairman of the Council, I eliminated legislative earmarks, because I was
concerned about the corrosive impact that they were having on the District’s competitive process for
awarding funds. The Council has an important oversight role with contracts. The Council can choose
to disapprove contracts over one million dollars and it can decline to approve multi-year contracts,
which require active Council approval. However, Council does not, and should not, award contracts.

On July 29, 2020, the Committee on Health held a public oversight roundtable to examine the
selection of the Medicaid managed care contracts. There was not a single credible fact that was put
on the record that established anyone at the Department of Health Care Finance or the Office of
Contracting and Procurement had acted with impropriety. The Council had the ability to disapprove
these contracts, and it wisely declined to do so. In fact, the previous time the MCO contracts were
awarded, and the roles for MedStar and Amerigroup were reversed, and I similarly declined to
intervene, because there was no evidence that the contracting process was not fair.

The “Fidelity in Compliance of Contracting and Procurement Emergency Amendment Act of 2021”
takes truly extraordinary action to intervene in the contracting process, and it makes me
uncomfortable that we are exceeding the appropriate authority of the Council and treading on ground
that places the Council in an ethically precarious posture. Section 3 of this legislation unambiguously
intends to steer a third MCO contract to Amerigroup. I do not think that this is an appropriate role of
a legislative body.

Cutting Quality Health Care Access for Vulnerable Residents with Medicaid Insurance

The 2020 Medicaid contracts guaranteed that for the first time in the history of the District that all
residents who were insured through Medicaid or the D.C. Healthcare Alliance could receive care at
all District hospitals and Federally Qualified Health Centers. Approximately 64% of the residents of
Ward 7 and 74% of the residents of Ward 8 are insured through Medicaid. By peremptorily ending
Medstar’s bid for a MCO contract and forcing Amerigroup into the program, the “Fidelity in
Compliance of Contracting and Procurement Emergency Amendment Act of 2021” will undo the
hard-fought efforts to secure universal Medicaid access, putting the enrollees in the DC Medicaid
program in jeopardy of losing access to the largest health care system in the city.

Unfortunately, this legislation also creates the possibility for an even more disturbing scenario that
could threaten the financial viability of the entire District Medicaid program. If the Council’s contract
steering in Section 3 is found to be legally insufficient and does not proceed forward, and the District
decides to utilize two MCO plans, Section 4 locks the MCO rates into the lowest actuarially sound
rates for the Medicaid and Alliance programs for four years - from Fiscal Years 2022 to
2025. Holding rates at the lowest amount possible for four consecutive years would have a damaging
impact on the ability of the two remaining MCOs to remain financially viable. No health plan can
3
survive with four straight years of lower bound rates. This bizarre and punitive approach appears to
be designed to punish two high-quality, nationally recognized health plans, AmeriHealth and
CareFirst, and push them out of the District insurance market. Indeed, this legislation could force
one or both MCO plans to leave the District of Columbia, throwing our health care insurance system
for our most vulnerable residents into chaos. More damaging to the District, there is no guarantee
that the Centers for Medicare and Medicaid will certify rates that have been predestined, regardless
of the trend in health care cost for Medicaid recipients. Should they refuse to certify a District practice
of consistently paying lower bound rates, the Council will be required to allocate nearly $800 million
to cover the loss of federal funds.

My Preferred Approach

The Executive Branch has included a subtitle in the “Fiscal Year 2022 Budget Support Act of 2021”
that is similar to Bill 24-0115. This subtitle will likely be referred to both the Committees on Health
and Business and Economic Development. As discussed earlier, this legislation ratifies that the
timing of the submission of the subcontracting plans be deemed valid for these three impacted DHCF
procurement only. Absent new information, I intend to recommend to my Committee members that
the Committee on Health support this subtitle, because I do not want to force residents with Medicaid
insurance through Medstar to have to switch their health insurance for the second time in one year
during a once-in-century global pandemic. I anticipate that my Ward 5 colleague who chairs the
Committee on Business and Economic Development will likely recommend the opposite approach in
his draft Committee comments.

Ultimately, deciding this issue as part of the Fiscal Year 2022 budget seems to be the most appropriate
course forward, because the MCO contracting issue has fiscal ramifications that are germane to the
budget. If the Council determines that it does not support grandfathering in these three DHCF
contracts, then it will have to find additional funds to cover the cost of restarting the procurements. In
this scenario where the Council declines to move the Mayor’s legislation, it makes sense for the
District to proceed with the two high-quality, stable MCO plans – both of whom share the same
network of hospitals and clinics. While this will not eliminate the disruption of moving beneficiaries
for a second time in a year, it should ensure that they can retain their physicians. What does not make
sense is for the Council to statutorily force DHCF to select Amerigroup when doing so will undo the
progress that has been made to Medicaid insurance access in the District for our most vulnerable
residents who are still grappling with COVID-19.

Sincerely,

Vincent C. Gray

cc: The Honorable Phil Mendelson, Chairman, Council of the District of Columbia
The Honorable Kenyan R. McDuffie, Chair Pro Tempore, Councilmember, Ward 5
The Honorable Robert C. White, Jr., Councilmember, At-Large
The Honorable Muriel Bowser, Mayor of the District of Columbia
Kevin Donahue, City Administrator
Wayne Turnage, Deputy Mayor for Health and Human Services
Fitzroy Lee, Interim Chief Financial Officer
4