A dispute over a $1.5 billion contract to provide healthcare for more than 37,000 aged, blind and disabled patients on Medicaid in Hawai'i will spill into federal court this morning.

The outcome could affect whether the state can go ahead with its plans to change its Medicaid system from a fee-for-service program to managed care by the end of the year.

AlohaCare filed suit in May against the state Department of Human Services and its director, Lilllian Koller. The Medicaid contract, previously held by AlohaCare, was awarded this time to two Mainland for-profit companies.

AlohaCare was supported yesterday at a news conference by the Hawaii Coalition for Health, a group of doctors and healthcare providers.

That group filed suit on June 10 over concerns about, among other things, possible lapses in coverage, delays in response from the Mainland, and the possibility that a patient's needs could be overridden by the companies' desire for profits.

The coalition asked U.S. District Judge Susan Mollway to combine the two suits against the state for today's hearing. The coalition's suit was supposed to be heard on July 21.

"I have more than 20 patients with stories that will break your heart, who need care every day and are at risk of losing their team of doctors if this switch from a fee-for-service program to a managed-care system with these Mainland companies overseeing it goes through," said Dr. Alreen Jouxson-Meyers, a pediatrician in Wahiawa and the president of the coalition.

"It breaks my heart, but I told my patients that if this goes through, I can't go through the bureaucracy that this new system will bring. They'll have to find another care provider. I think a lot of doctors feel that way."

However, Koller, speaking at an impromptu news conference on the DHS steps yesterday, defended both companies.

"There has been a lot of misinformation put out there, raising concerns," Koller said.

"Patients will continue with their current services until the new coverage is in place, and it will be seamless," she said. "Doctors will not make a penny less than they do now on these cases. That's in the contract. In most cases, they'll make more, but the switch is not about money. It's about a better care system."

Koller said it's been the state's goal since 1994 to move Medicaid coverage for the blind, aged and disabled clients into managed care.

"AlohaCare's protest of the QExA competitive bidding process was soundly rejected by the independent state Procurement Office, and we believe the lawsuits filed by AlohaCare will now be rejected in federal court," Koller said. "There were five bidders, and the two that were selected are clearly the superior proposals."

Rafael del Castillo, attorney for the coalition and the Hawaii Congress of Physicians, urged reporters to Google-search the background of WellCare Inc. of Tampa Fla., and UnitedHealth Group of Minneapolis, the companies that got the contract.

"We're concerned that individual rights are being violated," he said. "We understand the state is taking a large-picture view with this coverage, but we're concerned on a patient-by-patient basis."

WellCare was investigated this year by the FBI and Florida officials for possible government overpayments. In January, three of WellCare's top executives resigned, including its chief executive officer, Todd Farha.

UnitedHealth units were accused by state authorities of claims-processing failures in California and fraudulent rate-setting in New York this year.

Earlier this year, AlohaCare said UnitedHealth and WellCare were two of seven national health plans that agreed to suspend Medicare marketing last summer after being cited for failure to comply with marketing guidelines.

Sheila and Jarrod Fujinaga brought their 3-year-old daughter, Chenoa, to the coalition's news conference. They said Chenoa has had 12 specialists helping her since she was diagnosed with a rare muscle disease when she was 6 months old. She must be fed through a tube and has developed seizures and other problems.

"I'm worried about the switch and if there would be a lapse in coverage," Sheila Fujinaga said. "If there was, how would Chenoa survive?"