RELATING TO MEDICAID.

HB2144

HOUSE OF REPRESENTATIVES

H.B. NO.

2144

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

relating
to medicaid
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

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SECTION 1.
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The
legislature finds that the administration of medicaid through managed care
organizations has contributed to excessive administrative costs, reduced
transparency in financial and clinical decision-making, and barriers to timely
access to medically necessary care.
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These outcomes have disproportionately impacted Native Hawaiian
communities, rural residents, individuals with complex health needs, and those
navigating behavioral health and disability services.

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The legislature further finds that a
managed fee‑for‑service model, under which providers are paid
directly by the State and care coordination is funded separately, will promote
transparency, accountability, and equity.
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This model will reduce administrative
overhead, restore public ownership of medicaid data, and ensure that care
decisions are made in the best interest of patients, rather than corporate
shareholders.

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Accordingly, the purpose of this Act is to:

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(1)
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Prohibit
a financial risk-bearing entity from administering medicaid services;

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(2)
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Require
the department of human services to contract with one or more administrative
services organizations to perform non-risk administrative functions for the
operation of the State's medicaid program;

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(3)
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Require
the department of human services to establish a medicaid care coordination program
to contract with community-based programs to provide care coordination
services;

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(4)
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Require
physicians, other independent practitioners, hospitals, and other institutional
health care providers to be paid or reimbursed directly by the State's medicaid
agency;

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(5)
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Require
the department of human services to establish regional health hubs in each
county to serve as localized oversight bodies; and

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(6)
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Require
the department of human services to convene a medicaid stakeholder advisory
group to support continuous improvement throughout the transition period.

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(7)
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Appropriate
funds.

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SECTION 2.
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Prohibition of risk-based medicare contracts.
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(a)
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Beginning July 1, 2026, the department of human services shall not
initiate, renew, or extend any contract with a financial risk-bearing entity
for the administration of medicaid services.
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This prohibition shall apply to all programs administered under the
State's medicaid agency, including med‑QUEST and any successor programs.

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(b)
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All existing contracts with managed care organizations shall terminate
no later than December 31, 2026.
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The
department shall support the smooth and orderly transition for enrollees,
providers, and administrative systems.

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(c)
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A fiscal intermediary entity shall not receive capitated payments or
assume financial risk for medicaid enrollees under any program administered by
the State.
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Medicaid payments for health
care services shall be made directly from the State to providers of care on a
fee-for-service basis, with care coordination funded separately.
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Providers of direct care shall not be paid
with capitation except for a fixed, predetermined monthly care coordination fee
paid to practices designated by a beneficiary as the coordinator of their care.

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SECTION 3.
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Performance of non-risk administrative
functions by an administrative services organization.
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(a)
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The
department shall contract with one or more administrative services
organizations to perform non-risk administrative functions necessary for the
operation of the medicaid program
.
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These functions shall include but are not
limited to:

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(1)
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Prior
authorization review to ensure that medically necessary services are approved
in a timely and equitable manner.
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Prior
authorization shall be used as judiciously as possible and only for services with
a demonstrated risk of non-medically necessary use.
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As a non-risk contractor, the administrative
services organization shall have no financial stake in medical necessity
determinations;

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(2)
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Administration
of provider credentialing and recruitment to support a robust, culturally
competent, and geographically distributed provider network; provided that the
state medicaid agency shall retain authority over participation status of
individual practitioners with a goal of maintaining as broad a network as
possible, excluding only practitioners found to have engaged in material
professional misconduct, including fraud, felony, gross or hazardous
negligence, incompetence, or multiple instances of negligence;

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(3)
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Customer
service and grievance resolution to assist enrollees in navigating benefits,
resolving disputes, and accessing care;

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(4)
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Data
analytics and utilization monitoring to evaluate service patterns, identify
gaps in care, and support continuous quality improvement;

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(5)
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Claims
processing to ensure accurate and timely reimbursement for covered services;
and

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(6)
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Administrative
support for care coordination programs, including scheduling assistance,
documentation infrastructure, and technical support for interdisciplinary teams
engaged in patient-centered care and community-based specialist consultations
to primary care.

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(b)
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The
department shall retain primary responsibility for medicaid administration,
provider payment, and oversight of administrative services organizations.
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The department of health shall retain
authority over public health functions pursuant to section 8 of this Act.

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(c)
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An
administrative services organization shall not establish or maintain separate
provider networks.
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Each medicaid
enrollee shall access care through a unified statewide provider network that is
publicly managed and inclusive of safety-net providers, culturally competent
practitioners, and geographically distributed services.

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(d)
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An
administrative services organization shall comply with all transparency and
data-sharing requirements established by the department, including public
reporting of performance metrics, audit results, and stakeholder feedback.

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SECTION 4.
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Medicaid care coordination program.
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(a)
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The department shall
establish a medicaid care coordination program to contract with community-based
programs with interdisciplinary teams to provide care coordination services
that can improve health outcomes, reduce unnecessary utilization, and promote
culturally responsive care.
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These
services shall include, but are not limited to, patient navigation,
transportation services for health care, interdisciplinary care planning,
chronic disease management, specialist consultations to primary care, programs
for patients with specialized care needs including for those with serious
mental illness and substance abuse disorders, specialized programs for
geriatric care needs, behavioral health integration, and culturally competent
outreach.

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(b)
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The department shall provide fixed, predetermined care coordination
payments to any primary care practice formally designated by a medicaid
enrollee as their source of coordinated care.
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The department shall prioritize models that
allow lean primary care practices to collaborate with community-based care
coordination teams, ensuring flexibility, cost-effectiveness, and
responsiveness to patient needs.
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Community-based
care coordination services shall be funded with budgets from the care
coordination program based on cost of operations and community need, and not
with capitation based on defined members that would shift insurance risk onto
care providers, require risk adjustment, or impose undue administrative burden.

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(c)
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The department shall develop and publish performance metrics to evaluate
the effectiveness of care coordination services.
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These metrics shall include, but shall not be
limited to, patient satisfaction, reduction in avoidable hospitalizations,
improved chronic disease management, and culturally appropriate service
delivery.
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SECTION 5.
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Provider compensation.
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(a)
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Physicians and other independent
practitioners shall be paid directly by the state medicaid agency for clinical
services provided to medicaid enrollees.
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Payments shall be made on a fee-for-service
basis and shall be equal to at least one hundred per cent of the applicable medicare
rates for the same services, adjusted for geographic and practice-specific
factors as determined by the department.

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(b)
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In addition to standard fee-for-service payments, the department shall
provide a fixed, predetermined care coordination fee to eligible providers for
each medicaid enrollee who formally designates that provider or practice as
their primary source of coordinated care.
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This fixed, predetermined care coordination
fee shall be drawn from the medicaid care coordination program established
under section 4 of this Act.

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(c)
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Hospitals and other institutional providers shall be reimbursed directly
by the state medicaid agency through fee‑for-service payments. Payment
methodologies shall be designed to promote financial stability, access to
essential services, and alignment with the goals of this Act.

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(d)
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All care coordination services, whether provided by independent
practitioners, institutional providers, or community-based entities, shall be
funded through budgets drawn from the care coordination program.
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The department shall establish clear
guidelines for performance evaluation to ensure that care coordination payments
support high-quality, patient‑centered, and culturally competent care.

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SECTION 6.
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Regional health hubs.
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(a)
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The department of human services shall
establish regional health hubs in each county to serve as localized oversight
bodies that monitor community health needs, assess disparities in access and
outcomes, and facilitate continuous feedback between providers, patients, and
the department.
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Each hub shall be tasked
with identifying gaps in service delivery, recommending culturally responsive
best practices, and supporting the implementation of care coordination
strategies aligned with the goals of this Act.

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(b)
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Each regional health hub shall convene not
less than once per calendar quarter and shall include representation from
primary care providers, community health workers, behavioral health
specialists, patient advocates, and local public health officials.
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The department shall ensure that hub
membership reflects the geographic, cultural, and linguistic diversity of the
region served.

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(c)
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The
department shall provide operational funding, technical assistance, and
administrative support to each regional health hub.
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Each hub shall submit an annual report to the
department and the legislature summarizing its findings, recommendations, and
stakeholder engagement activities.

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SECTION 7.
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Transparency and ownership of data.
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(a)
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All contracts entered into by
the department with administrative services organizations shall include
provisions requiring full compliance with chapter 92F, Hawaii Revised Statutes,
the State's Uniform Information Practices Act, and any other applicable laws
governing public access to government records and data.

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(b)
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The
State shall retain full and exclusive ownership of all medicaid-related data,
including but not limited to utilization records, cost reports, provider
directories, and enrollee demographics.
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A
private entity shall not assert proprietary rights over data generated through
publicly funded programs.

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(c)
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The
department shall develop and maintain a publicly accessible data dashboard that
includes de-identified medicaid data for research, oversight, and community
engagement.
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The dashboard shall be
updated quarterly and shall include metrics related to access, quality, equity,
and cost.
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The department shall also
publish an annual data report summarizing trends, disparities, and
recommendations for improvement.

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SECTION 8.
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Department of health public health functions.
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(a)
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Public health functions, including vaccination programs, disease
surveillance, emergency response coordination, and health education
initiatives, shall remain under the direct administration of the department of
health.
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These functions shall not be
delegated to any administrative services organization, contractor, or
third-party entity.

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(b)
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The department of health shall ensure that public health operations are
integrated with medicaid services where appropriate, and that coordination
between agencies supports continuity of care, emergency preparedness, and
population health management.
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The
department of health shall maintain staffing, infrastructure, and funding
necessary to fulfill its public health responsibilities without reliance on
privatized intermediaries.

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SECTION 9.
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The department shall convene a medicaid stakeholder advisory
group composed of providers, patient advocates, public health officials, and
community leaders to monitor implementation, provide feedback, and support
continuous improvement throughout the transition period.

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SECTION 10.
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Annual Reports; budget.
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(a)
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The department shall submit a report to the legislature
no later than forty days prior to the convening of each regular session beginning
with the regular session of 2027.
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The
report shall include detailed information regarding:

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(1)
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Income
and expenditures related to medicaid program administration and service
delivery, including disbursements from appropriations made to the department
for the medicaid care coordination program, including general funds and federal
fund, as applicable;

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(2)
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Provider
participation and the quality of care provided to medicaid program beneficiaries,
including performance metrics and patient outcomes;

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(3)
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Challenges
encountered by providers, including physicians, hospitals, and community-based
organizations; and

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(4)
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Recommendations
for medicaid program improvement, policy adjustments, and legislative support;

provided
that the department shall consult with regional health hubs, provider networks,
and patient advocacy groups in preparing the report.
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The report shall be made publicly available
and shall serve as a primary tool for legislative oversight and continuous
improvement of the medicaid program.

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(b)
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The
department shall submit a detailed budget and implementation timeline to the legislature
no later than December 1, .
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The budget shall include projected costs,
staffing requirements, technology upgrades, stakeholder engagement plans, and
contingency strategies to ensure uninterrupted service delivery during the
transition period.

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SECTION 11.
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The department of human services shall apply to the United States
Department of Health and Human Services for any amendment to the state medicaid
plan or for any medicaid waiver necessary to implement sections 2 through 7 of
this Act.

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SECTION 12.
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As used in this Act:

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"Administrative services
organization" means an entity contracted by the State to perform
administrative functions related to medicaid, including but not limited to
claims processing, prior authorization review, provider credentialing and recruitment,
customer service and grievance resolution, and data analytics and utilization
monitoring, and does not assume financial risk for the cost of medicaid
services.

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"Care coordination" means a set
of services provided by a physician, nurse, community health worker, behavioral
health professional, or other licensed provider to ensure that patients receive
appropriate, timely, and culturally responsive care across the continuum of
health services.

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"Department" means the department
of human services.

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"Financial risk-bearing entity"
means any organization that receives capitated payments or assumes financial
liability for the costs of medicaid services, including managed care
organizations, health maintenance organizations, and other entities operating
under risk-based contracts.

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"Managed fee-for-service" means a
medicaid delivery model in which providers are paid directly by the State
through fee‑for‑service for clinical services, and care
coordination is funded through a separate mechanism that does not involve
capitation of a risk-bearing fiscal intermediary.

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"Medicaid" or "medicaid
program" means the joint federal‑state program enacted under Title
XIX of the Social Security Act of 1935, as amended, that provides medical
assistance for adults and children with limited income and resources.

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"Regional health hub" means a
geographically designated body convened by the department of human services to
monitor community health needs, assess equity outcomes, facilitate provider and
patient feedback, and recommend best practices for care delivery and access.

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"State medicaid agency" means the
department of human services, designated as the single state agency responsible
for administration of the medicaid program pursuant to Title XIX of the Social
Security Act of 1935, as amended, acting directly or through its med-QUEST
division.

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SECTION 13.
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There is appropriated out of the general revenues of the State of Hawaii
the sum of $ or so
much thereof as may be necessary for fiscal year 2026-2027 for:

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(1)
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Transitioning
infrastructure and administrative systems from risk-bearing managed care
organizations to non-risk administrative services organizations;

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(2)
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Establishing
and maintaining the care coordination fund, including provider outreach,
enrollment, and performance monitoring;

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(3)
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Developing
and supporting regional health hubs, including staffing, meeting facilitation,
and reporting functions; and

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(4)
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Expanding
provider recruitment, training, and retention programs, with emphasis on
culturally competent care and service to underserved populations.

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The sum appropriated shall be expended by
the department of human services for the purposes of this Act.

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SECTION 14.
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If any provision of this Act, or the application thereof to any person
or circumstance, is held invalid, the invalidity does not affect other
provisions or applications of the Act that can be given effect without the
invalid provision or application, and to this end the provisions of this Act
are severable.

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SECTION 15.
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This Act shall take effect on July 1, 2026; provided that sections 2
through 7 of this Act shall take effect upon approval of the Hawaii medicaid
state plan by the Centers for Medicare and Medicaid Services.

INTRODUCED BY:

_____________________________

Report Title:

DHS;
Med-QUEST Division; Medicaid; Financial Risk-Bearing Entity; Prohibition;
Administrative Services Organization; Medicaid; Care Coordination Program;
Regional Health Hub; Medicaid Stakeholder Advisory Group; Reports; Appropriation

Description:

Prohibits
a financial risk-bearing entity from administering Medicaid services.
�
Requires the Department of Human Services to
contract with one or more administrative services organizations to perform
non-risk administrative functions for the operation of the State's Medicaid
program.
�
Requires the Department to
establish a Medicaid Care Coordination Program to contract with community-based
programs to provide care coordination services.
�

Requires physicians, other independent practitioners, hospitals, and
other institutional providers to be paid or reimbursed directly by the State's
medicaid agency.
�
Requires the Department
to establish regional health hubs in each county to serve as localized
oversight bodies.

�
Requires the Department to convene a
Medicaid Stakeholder Advisory Group to support continuous improvement
throughout the transition period.
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Requires reports to the Legislature.
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Appropriate funds.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.