Interim Joint Committee on Health and Welfare


Minutes of the<MeetNo1> 1st Meeting

of the 2005 Session Break


<MeetMDY1> January 19, 2005


The<MeetNo2> 1st meeting of the Interim Joint Committee on Health and Welfare was held on<Day> Wednesday,<MeetMDY2> January 19, 2005, at<MeetTime> 10:00 AM, in<Room> Room 129 of the Capitol Annex. Representative Tom Burch, Co-Chair, called the meeting to order at 10:13 AM, and the secretary called the roll.


Present were:


Members:<Members>  Representative Tom Burch, Co-Chair; Senators Charlie Borders, Denise Harper Angel, Ernesto Scorsone, Dan Seum, Katie Stine, and Johnny Ray Turner; Representatives James R. Comer, Jr., David Floyd, Joni L. Jenkins, Mary Lou Marzian, Stephen R. Nunn, Darryl T. Owens, Ruth Ann Palumbo, Jon David Reinhardt, Ancel Smith, Kathy W. Stein, Susan Westrom, and Addia Wuchner.


Guests:  Ellen Kershaw, Alzheimer's Association; Fawn Conley, Cabinet for Health and Family Services Chafee Program; Nancy S. Horn, Corner Drug, Winchester; Ellen Kelley, Multiple Sclerosis Society; Prentice Harvey, Norton Healthcare; Heidi Schissler and Leslie Jones, Protection and Advocacy; Cathy Allgood Murphy, American Association of Retired Persons; Anne Marie Regan, Office of Kentucky Legal Services Programs; Sean Cutter, McBrayer, McGinnis, Leslie & Kirkland; John Cooper, Capital Link and Kentucky Medical Association; Jan Gould, Kentucky Retail Federation; Brian Bruen and Dave Masten, National Association of Chain Drug Stores; Jeff Arnold, MED Care Pharmacy; Chris Killmeier, Walgreens; Leah Tolliver, Omnicare/Long Term Care Pharmacy Association; Jason Moseley, Cabinet for Health and Family Services; Mike Porter, Kentucky Dental Association; Chris Cecil, Department for Mental Health and Mental Retardation Services, Cabinet for Health and Family Services; Germaine O'Connell, Sharma Klee, and Steve Davis, Department for Public Health, Cabinet for Health and Family Services; Tom Canine, UNISYS; Shirley Eldridge and Carla Combs, Department for Community Based Services, Cabinet for Health and Family Services.


LRC Staff:  Robert Jenkins, CSA, Barbara Baker, Eric Clark, DeeAnn Mansfield, Murray Wood, Pat Patterson, and Gina Rigsby.


Representative Burch welcomed everyone, recognized the new legislators and asked them to briefly introduce themselves.


Next, Representative Larry Clark and Scott Jones, Speaker Pro Tem staff assistant, testified on informal relative caregivers and consent for school-based decisions and medical care.  Representative Clark stated that the proposed house substitute combines the medical consent and education consent affidavits into one affidavit, and refers to caregivers throughout the bill, rather than relative caregivers, to indicate that the program applies to any caregiver.  The proposed committee substitute creates the KinCare Support Program to provide general information, referrals, and follow-up services through a statewide toll-free number to grandparents and other caregivers caring for nonbiological children.  It also requires the Cabinet for Families and Children and the Cabinet for Health Services, in collaboration with the Department of Education, to create an affidavit establishing a caregiver's authority to provide consent for medical treatment of a minor and to make school-related decisions. Parents and legal guardians have the authority to supersede any provision of the affidavit. Persons relying in good faith on the affidavit are exempt from any civil or criminal liability, except for negligence, and anyone who makes a false statement on the affidavit is guilty of a Class A misdemeanor.


Representative Stein asked why the Cabinet for Health Services and the Cabinet for Families and Children were referenced in the bill instead of the Cabinet for Health and Family Services.  Robert Jenkins, Committee Staff Administrator, stated that the executive order issued in 2004 by the Governor had not been approved by the General Assembly, therefore, the Cabinet for Health Services and the Cabinet for Families and Children were still referenced in the statutes.


Representative Nunn asked if the affidavit must be notarized.  Mr. Jones said that the legislation had provisions of criminalization for false statements on an affidavit.  Representative Nunn asked if parents had to relinquish permission every year.  Representative Clark said that, hopefully, it would only be a temporary situation and it is done in conjunction with the school year.  Representative Nunn asked if an affidavit could be executed by fax, and Representative Clark stated that he was unsure but would look into the matter.  Representative Clark said the goal is to create a seamless system.  Representative Nunn stated that grandparents should not be put in a position where they cannot get their grandchildren. Senator Scorsone said that Section 2(8) deals with immunity for providing or refusing contravention of a decision of a parent, and asked if this would be the only set of circumstances to extend the immunity.


Next, Jeanette Stratton, Boys Haven in Louisville and Director of the Mentor Program, testified on youth who age out of foster care.  He stated that there are 6,400 youth in foster care, and 650 will turn 18 years of age in 2005.  Approximately 150 foster youth recommitted their custody to the state in 2004. Ms. Stratton stated the John Chafee Independence Program is a federally-funded program designed to teach children and youth in out-of-home care and youth formally in care the skills that will enable them to be self-sufficient after being released from care.  The program mandates that all children 12 years of age and over in care receive independent living services, regardless of permanency goal. Kentucky has 80 Chafee apartment slots available.  Sixty-five percent of youth will not receive any services as they make their transition into independent living. Approximately 52 percent of 18-24 year olds in the homeless population have experienced foster care according to a October 2003 survey conducted by the Coalition for the Homeless.


Anthony Wade, participant in the Bellwood Chaffe program, said that he came from an abusive home and went to the YMCA Shelter House before, at the age of 17, he was committed to the state and entered the Bellwood Transitional Living Program.  He said that at age of 18, he recommitted to the state and was placed into one of the Chaffe program slots.  Mr. Wade stated that, coming from an abusive home, without this program he would not have the knowledge or skills to transition from foster care into society.  He said the program gave him an opportunity to get his life together and be a better person.


 Judith Bloor, Vice President of the Child Kind Center at the Home of the Innocents, said that the Home of the Innocents started aftercare and prevention services that serve young people in 1991. She said that the resources currently available will only help approximately 30 percent of the youth who will age out of the foster care program. The young people aging out of foster care, without help from all of us, will be part of the prison population, potentially part of the mentally ill population, and may end up in the homeless adult shelter system. Ms. Bloor said that solutions on the state level would be an extension of the amount of time a youth has to consider a recommitment to the cabinet for aftercare assistance and education, and a funds allocation for HB 376 that passed in the 2004 regular session.


Representative Marzian asked about the status of the Kentucky Commission on Services and Supports for Individuals with Mental Retardation and Other Developmental Disorders and the Kentucky Commission on Services and Supports to Individuals with Mental Illness, Alcohol and Other Drug Disorders, and Dual Diagnoses joint ad hoc committee on transitioning from children's services systems to adult services systems for children who continue to need services or supports after reaching age twenty-one. Mr. Baldwin stated that he did not know but would check on the status of the ad hoc committee.  Representative Marzian suggested a letter be send to the cabinet asking for follow-up on the status of the ad hoc committee.


Representative Owens asked how many slots were available in the Chaffe program and the timeframe on the grant.  Ms. Stratton stated that there are 80 slots, and Mr. Baldwin stated that this is a discretionary spending on an annual basis that must be approved by Congress. Ms. Stratton said that 30 percent of the funds can be used for housing costs and 70 percent on other programs.


Representative Westrom asked if a child who had left foster care would be able to return to the Chaffe Program. Mr. Baldwin said currently someone has six months to make a decision to recommit, but he believes this should be longer.  Representative Westrom asked how many more slots were needed.  Mr. Baldwin stated that approximately 200 to 250 more slots are needed.  Representative Westrom asked how many youth joined the military, and Ms. Bloor stated very few.


Representative Burch stated that the older a child gets, the harder it is to be adopted.  He said that the state could not afford to lose any of its children, and we have an obligation to take care of their needs.  If there are no jobs available for these children, they tend to get into trouble.


Next, Dr. Steve Davis and Germaine O'Connell from the Department for Public Health within the Cabinet for Health and Family Services, and Heidi Schissler, Protection and Advocacy, were present to answer questions about 911 KAR 2:110 & E.  A motion to adopt an amendment that would let parents know that their IFSP team may request payment for services for a child beyond those permitted by administrative regulation was made by Senator Borders, seconded by Representative Marzian, and approved by voice vote.  A motion to adopt 911 KAR 2:110 & E as amended was made by Representative Marzian, seconded by Senator Borders, and approved by voice vote. Representative Burch stated that 921 KAR 2:016 would be discussed at the next committee meeting.


Next, Brian K. Bruen, Director, Policy Studies and Research, National Association of Chain Drug Stores (NACDS), Nancy S. Horn, pharmacist, and Leah Tolliver and Jeff Arnold of the Long Term Care Pharmacy Alliance, testified on the proposed changes to the Medicaid Outpatient Pharmacy Program. Mr. Bruen stated that the proposed reimbursement severely impacts community pharmacies.  The reduction from AWP - 12 percent to AWP - 16 percent would save the Medicaid program $32 million in state and federal funds and would reduce pharmacies' gross revenues by 22 percent.  The additional reduction proposed in January 2006 of AWP - 16 percent to AWP - 17 percent would save the Medicaid program an additional $8.5 million in state and federal funds and reduce pharmacies' gross revenues by another seven percent.


Mr. Bruen stated the Medicaid dispensing fee was reduced in 2001 to $4.51. He said NACDS estimates the average cost of dispensing a retail prescription in Kentucky is $7.11.  Factors driving Medicaid drug spending are increased use of prescription drugs, increase prices of existing drugs, and substitution of new drugs for existing drugs.  He said that Kentucky has a good generic dispensing rate, but most expenditures are attributable to brand name products. Cutting pharmacy reimbursement prices does nothing to control purchasing and overhead costs.  Pharmacies cannot force manufacturers and suppliers to lower prices.  Pharmacies have fixed costs for drugs that must be recovered regardless of ingredient cost.  Manufacturer discounts passed through to pharmacies do not reduce a pharmacy's cost of goods.  Pharmacies' limited margins of profit make it impossible to pass along significant discounts. None of the proposed reductions to AWP affects acquisition costs; therefore, pharmacies would lose money and a great share of Kentucky's drug payments would go to manufacturers and wholesalers.  Three broad characteristics determine the level of spending for prescribed drugs in any public or private program: 1) the quantity of drugs consumed; 2) the mix of drugs consumed; and 3) the price per unit of these drugs.


Mr. Bruen stated that Kentucky has a 55 percent generic drug utilization rate, however, Kentucky still spends approximately 78 percent of the Medicaid drug dollars on brand prescriptions. Manufacturers' prices are not affected by reimbursement cuts, and a six percent increase in manufacturers' prices would erase the savings gained from the cut to pharmacy reimbursement. Pharmacies asked that Kentucky provide adequate reimbursement to continue to provide a valuable and needed service to Medicaid patients with expectation for reasonable profits for providing these services. He said that if the Department for Medicaid Services wants to reduce the estimated acquisition costs, it should increase the inadequate dispensing fees.


Mr. Bruen said that the goal should be to provide a sufficient total payment to pharmacies to obtain and manage drug inventory, dispense drug, assure appropriate use by patient, and provide a reasonable profit to pharmacies.  Federal regulation requires states to reimburse estimated acquisition cost, not actual acquisition cost.  He said the higher costs of participating in the Medicaid program are coordination of benefits issues, bad debt, uncollected co-pays, costly prior authorization requirements that have to be performed by pharmacies, manual claims rejection issues, changing population eligibility, and changing rules.  Medicaid gross margins are not better than other third party payers.


Ms. Horn stated that the issues Medicaid needs to address are overutilization and rising drug manufacturer's prices.  She said that the December 3, 2004 emergency regulations being considered by the Department for Medicaid Services will have a significant impact on her ability to serve her patients, and further reductions would force her and her colleagues to make tough decisions regarding serving the Medicaid population.  She said that her biggest fear is that independent pharmacies around the state will cease to be economically viable, and the state will lose an important health care resource.


Senator Stine asked what recommendations were needed to address the overutilization issues.  Ms. Horn stated that reports need to be run showing what medications are prescribed most to see if there are duplication of medications for a patient.  Senator Stine asked about co-pays and the impact of overutilization.  Mr. Bruen stated that a federal regulation states that Medicaid patients cannot be forced to pay co-pays at the time of getting medications.  Mr. Bruen stated that the state of Florida contracted with Gold Standard Multimedia Company to distribute handheld PDA computers to the top 1,000 prescribing physicians to provide information about the state's preferred drug list along with comparative information about drugs and to provide immediate access to other prescribed drugs for the physician's patients. He said that it is estimated that Florida saved approximately $700 per prescriber per month.


Senator Turner asked if any drug utilization studies had been conducted on small pharmacies in rural areas.  Ms. Horn stated that there is limited data but she would provide what information she had to committee members.  Senator Seum asked what percentage of Ms. Horn's pharmacy business were Medicaid patients.  Ms. Horn stated approximately 30 percent.


Representative Nunn stated that the University of Kentucky College of Pharmacy developed a program to help the cabinet identify the top prescribers in the state and to train these physicians about better prescribing habits. Another area that needs to be improved is the KASPER program.  He asked about the impact of reimbursement issues and the affect on long-term care facilities.  Mr. Bruen stated that direct-to-consumer advertising hurts because the patient only wants the brand name drug even if there is a generic drug available.  Representative Burch stated that the cabinet is contacting doctors about the costs of name brand drugs.


Representative Stein asked if there had been a difference in overutilization since the Pharmacy Benefit Manager Program was implemented. She asked how other states  have handled the problem other than slashing the dispensing fee and AWP.  Mr. Bruen said that Kentucky has a preferred drug list and dispenses more generic drugs. Representative Stein asked where Kentucky ranked in comparison to other states in eliminating benefits to pharmacists, and Mr. Bruen stated close to the bottom.


Senator Stine asked if the dispensing fees were lower in surrounding states. Mr. Bruen said that the dispensing fees were comparable prior to the emergency regulation but Kentucky now ranks toward the bottom.


Senator Seum asked if a person owned a pharmacy and bought drugs at the wholesale price to sell at retail if there would be a markup on the drug and the dispensing fee.  Mr. Bruen said that reimbursement in Medicaid is determined solely based on prices that are reported by manufacturers, and Medicaid then estimates how much would be paid. Senator Seum asked if there were a markup for non-Medicaid patients, and Mr. Bruen said that this would depend on the reimbursement plan, but in general, it would not be the case.


Ms. Tolliver stated that: 1) reduction in ingredient reimbursement to AWP - 16 percent would place Kentucky near the bottom of all states; 2) reduction and/or elimination of the unit-dose fee unfairly targets long-term care pharmacies, since all prescriptions are packaged in unit-dose in order to facilitate safe administration; 3) the three-brand prescription limit places undue strain on long-term care pharmacies by requiring prior authorization for any other prescription; 4) sending larger supplies of controlled substances create a potential for diversion and waste; and 5) a 90-day supply requirement for a nursing home resident is required in only one small state Medicaid program in the United States. Current medication management systems in nursing homes will not accommodate such a large supply. Mr. Arnold stated the Long Term Care Pharmacy Alliance would recommend the cabinet immediately place a moratorium on any further changes in the Medicaid pharmacy program and work with the long-term care pharmacy provider community to resolve the current claims backlog and direct First Health to communicate is MAC reimbursement formula.


A motion to approve 201 KAR 22:091, 911 KAR 2:120 & E, 911 KAR 1:130 & E, and 911 KAR 2:150 & E was made by Senator Borders, seconded by Representative Nunn, and approved by voice vote.


Commissioner Shannon Turner, Department for Medicaid Services, stated that she could not comment on the changes in the December 3, 2004 emergency regulation because of a lawsuit filed by the Long Term Care Pharmacy Alliance and the Kentucky Pharmacists Association against the cabinet. She stated there is a $526 million deficit in the Medicaid program and difficult choices must be made.  The cabinet will look at all aspects before there are cuts in services or changes in eligibility.  She said that the cabinet has estimated it will spend $820 million on pharmacy, which will be more than the amount spent on hospitals and nursing homes. The AWP is not tied to acquisition costs, and AWP pricing is being reviewed at the federal and state levels and is the  subject of a lawsuit that the Attorney General of Kentucky is bringing forth against several drug manufacturers on behalf of the Medicaid Program. Commissioner Turner stated that the assertion that pharmacies cannot negotiate reimbursement strategies with manufacturers has not been proven to be correct.


Commissioner Turner said that Kentucky is looking at a limitation on AWP reimbursement that would bring Kentucky more in line with states on a national level. The AWP is just one component of how pharmacies are reimbursed. The others are co-pays, dispensing fee, and volume. Kentucky's pharmaceutical volume is nearly twice the national Medicaid average and volume drives a discount. Kentucky has chosen to cover many optional groups. Any decision that financially impacts the department is made under the premise that the department wants to continue to serve the population currently being served, so the department has to rearrange where the dollars are allocated. She said that other states are putting strict prescription limits in place.  Kentucky is proposing a three brand name allowance and unlimited generics with a process for this to be overridden if the person's physician determines that more than three brand name drugs are medically necessary. She said that this would allow the department to shift the focus to generic utilization.


Commissioner Turner said that the cabinet is looking at limiting repackaging fees in long-term care pharmacies.  Kentucky previously allowed two cents for items already pre-packaged and four cents for items to be re-packaged. She said that for items that are already pre-packaged, the  cost for the packaging is figured in to the ingredient cost for the drug. The cabinet plans to eliminate a re-packaging allowance for items that are already pre-packaged, and continue to give a unit-dose add-on of two cents for items that are not pre-packaged. Ninety-day supplies of maintenance drugs are being reviewed.


Senator Stine asked if the cabinet paid $44 for a bottle of generic Tylenol, and Commissioner Turner said that happens in the long-term care setting. Commissioner Turner stated that limiting brand name drugs to three would cause more generic utilization.  First Health, the cabinet's pharmacy benefit administrator, has identified and averted 3,600 severity level one drug-drug interactions in patients.  Senator Stine asked about restrictions.  Commissioner Turner said that there are no administrative regulations that require unit dosing neither on the state or federal level.


Representative Nunn asked if the cabinet had contacted Representative Lee about the emergency administrative regulations.  Mr. Payton stated the cabinet had sought his guidance.  Representative Nunn asked if pharmacists ranked at the bottom of reimbursement in surrounding states.  Commissioner Turner stated that all aspects had to be considered.  Representative Nunn asked about the $526 million shortfall, and Commissioner Turner stated that the cabinet had received money in the governor's spending plan.  Representative Nunn asked how much was needed to close out the fiscal year.  Commissioner Turner stated that the cabinet needs an additional allocation of approximately $35 million in state funds.


Senator Seum asked about a retail markup, and Commissioner Turner said it is not characterized as a rebate.


Representative Owens asked why discussions were not conducted before issuing the emergency administrative regulation.  Commissioner Turner stated that the emergency regulation had not been issued to date.


Representative Burch asked if the cabinet had a plan to take care of patients if they no longer had access to a pharmacy.  Commissioner Turner stated the cabinet would review on a case by case basis.  Representative Burch asked if Medicaid had looked at mail order for patients, and Commissioner Turner stated the cabinet was reviewing this option.


Next, Dr. Steve Davis and Janet Luttrell from the Department for Public Health within the Cabinet for Health and Family Services testified on the 2005 Preventive Health and Health Services Block Grant.  Dr. Davis stated the amount of the block grant is expected to be approximately $1.9 million.  Of this total, approximately $99,000 would be granted to the Kentucky Department for Mental Health and Mental Retardation Services to provide funding for five of Kentucky's 13 Rape Crisis Centers and their statewide coalition to provide services to victims of rape and other sex offenses.  He stated that $75,000 would be contracted with the University of Louisville School of Public Health to search and apply for funding opportunities to increase the revenue flow of the Kentucky Physician Care Program as well as recruit new physicians, dentists, and pharmaceutical companies for the program.


Dr. Davis said that the remainder of the block grant, $1.7 million, would be granted to the Department for Public Health to provide funding to local health departments for community-based activities addressing physical activity, which will impact all the major chronic diseases.  A small portion of the funding is retained by the Department for Public Health to support two staff positions to oversee community physical activity initiatives statewide.  The grant application was prepared under federal guidelines that require the states to use funds for activities directed toward the achievement of the National Health Promotion and Disease Prevention Objectives in Healthy People 2010.  The block grant is due to the Centers for Disease Control and Prevention (CDC) between October 1, 2004 and September 30, 2005.  There is no increase in staff or operating expenses for the Department for Public Health or the Department for Mental Health and Mental Retardation Services.  Participation in a mandatory training hosted by the CDC is required for this grant.  No state general funds will be used for this training and no overtime will be earned as a result of participation in this training.  A motion to accept the 2005 Preventive Health and Health Services Block Grant was made by Representative Nunn, seconded by Representative Stein, and accepted by voice vote.


There being no further business, a motion to adjourn at 3:55 p.m. was made by Representative Nunn, seconded by Representative Stein, and approved by voice vote.