Interim Joint Committee on Health and Welfare


Minutes of the<MeetNo1> First Meeting

of the 2012 Interim


<MeetMDY1> June 20, 2012


Call to Order and Roll Call

The<MeetNo2> first meeting of the Interim Joint Committee on Health and Welfare was held on<Day> Wednesday,<MeetMDY2> June 20, 2012, at<MeetTime> 1:00 PM, in<Room> Room 129 of the Capitol Annex. Representative Tom Burch, Co-Chair, called the meeting to order at 1:11 p.m. and the secretary called the roll.


Present were:


Members:<Members> Senator Julie Denton, Co-Chair; Representative Tom Burch, Co-Chair; Senators Tom Buford, Perry B. Clark, David Givens, Denise Harper Angel, Alice Forgy Kerr, Dennis Parrett, Katie Stine, and Jack Westwood; Representatives Julie Raque Adams, Bob M. DeWeese, Brent Housman, Joni L. Jenkins, Tim Moore, Darryl T. Owens, Susan Westrom, and Addia Wuchner.


Guest Legislators: Senator David Williams; and Representatives Jim Gooch, Derrick Graham, and John Will Stacy.


Guests: Audrey Tayse Haynes, Secretary, Cabinet for Health and Family Services; Neville Wise, Acting Commissioner, Department for Medicaid Services, and Dan Jacovitch, Cabinet for Health and Family Services; Michael Murphy, CEO, CoventryCares of Kentucky; Bill Doll and Lindy Lady, Kentucky Medical Association; Nick Hiller, Kentucky Chamber of Commerce; Nathan Goldman, Kentucky Board of Nursing; Russell Palk, Medimmune; Jim Grawe, Sharon Sanders, and Margaret Hazlette, Kentucky Board of Social Work; Jan Gould, Kentucky Retail Federation; Roy Templeton, Kentucky Youth Advocates; Mike Porter, Kentucky Dental Association; Bert May, AHIP; Sarah S. Nicholson and Steve Miller, Kentucky Hospital Association; Jerry Askew, HMA; David Spenard and Matt James, Office of Attorney General; and Anne Hedreas, Kentucky Equal Justice Center.


LRC Staff: DeeAnn Mansfield, Miriam Fordham, Ben Payne, Jonathan Scott, Gina Rigsby, and Cindy Smith.



Representative Graham introduced Audrey Tayse Haynes, the new secretary for the Cabinet for Health and Family Services. Secretary Haynes stated that her immediate goals for the cabinet are to improve transparency, increase coordination and collaboration among various departments to stretch the budget as far as possible, look at service gaps within the systems of care and work with the MCOs and providers to fill the gaps, and ensure Kentuckians receive the highest quality service through provider networks. The Department for Aging and Independent Living oversees senior and disability populations, administers the Adult Guardianship Program, and administers the Traumatic Brain Injury Trust Fund and the Long-Term Care Ombudsman Program. In fiscal year 2011, the department served approximately 600,000 unduplicated clients. Approximately 214,000 Kentuckians suffer from traumatic brain injury.


The Office of Health Policy is planning the state’s health benefit exchange. The Department for Behavioral Health, Developmental and Intellectual Disabilities, oversees mental health and substance abuse services to individuals with intellectual disabilities, works with community mental health centers, and operates state mental health facilities. In fiscal year 2012, approximately 170,000 individuals have been served in community health centers, 14,000 in substance abuse programs, and over 4,000 in the Supports for Community Living (SCL) waiver program. Public health is a vital service in the state. Approximately one million Kentuckians were served in fiscal year 2011. Public health is the state’s largest health system. The Department for Public Health’s budget consists of general fund, federal, Medicaid, Tobacco Settlement, and restricted funds. The Department for Community Based Services’ goals are to improve protocols and services, lower case loads for social workers, improve training for staff, and increase efficiencies. The department employs 4,446 staff.


Child Support Enforcement collected $440 million in child support. The Commission for Children with Special Needs is making efforts to move into the rural parts of the Commonwealth and build more robust provider networks for pediatric providers. There are 823 family resource centers serve approximately 1,180 schools. The Office of Inspector General is getting ready for the July 20, 2012 implementation of the Kentucky All Schedule Prescription Electronic Reporting (KASPER). Kentucky is leading the country with its work in the health information exchange.


CoventryCares: Provider Relations

Secretary Haynes stated that on November 1, 2011, approximately 550,000 Medicaid eligible individuals transitioned to one of the three Medicaid Managed Care Organizations (MCOs). In the first six months, the program saved nearly $190 million. The planning began in March 2011, the Request for Proposal (RFP) was released on April 7, 2011, and all bids were due on Mary 25, 2011. Contracts were finalized the first week of July 2011, and multiple letters to members and assignment to MCOs were all completed by mid-October. Final approval from the Centers for Medicare and Medicaid Services (CMS) came on October 28, 2011, and MCO startup occurred on November 1, 2011.


The assignment process priorities were to provide continuity of care, recognize children and disabled members needs, keep families together with one MCO, prevent MCOs from having too many or too few members, and achieve the lowest price for the Commonwealth. Network adequacy standards were developed by the Department for Medicaid Services (DMS) and stated in the contract. Detailed network adequacy reports were provided to the MCOs weekly throughout October based on their network file submissions. The October 19, 2011 network adequacy report was provided to CMS as part of the readiness review, and CMS approval came October 28, 2011 after review of the contracts and the department’s readiness review. As of June 2012, CoventryCares has 44 percent of the 544,624 statewide Medicaid recipients, Kentucky Spirit 27 percent, and Wellcare 29 percent. Provider groups contract with the MCO not the cabinet.


In response to questions by Representative Housman, Mr. Jacovitch stated that the $190 million is identical to the projected savings with the exception that eligibles are lower than originally estimated and have leveled off since last July. Secretary Haynes stated that the cabinet is on target with the $1 billion savings projected by the Governor. While there were some problems with the implementation of the MCOs, the cabinet and the MCOs have worked together to try to fix the problems.


In response to questions by Senator Denton, Secretary Haynes stated that service gaps include behavioral health, substance abuse, and children’s mental health services. CoventryCares is in the process of renegotiating contracts with several hospitals, and she hopes an agreement on rates can be made with Our Lady of Peace. CoventryCares has an adequate network without the Appalachian Regional Hospital because there are services within 60 minutes or 45 miles of the hospital required by CMS. The risk adjustment follows the population by acuity level. The risk adjustment would be retroactive to April 1, 2012. Commissioner Wise stated that the goal is for the population to become stable before deciding the risk that each MCO would incur. Secretary Haynes stated any reports of supervisors intimidating social workers would be investigated.


In response to questions by Representative Adams, Secretary Haynes stated that the RFPs are due the end of July. The cabinet will take the same consideration for continuity of care with Region 3 if not more than the rest of the state. If a recipient in Region 3 is auto-assigned a MCO that he or she does not like, there will be an opportunity to change MCOs like the rest of the regions.


In response to questions by Senator Givens, Secretary Haynes stated that of the 300 recently added positions, 209 positions are family support, and 91 are protection and permanency because both have high caseloads. Of the 34 new hires that began on June 16, approximately 18 were family support and the rest were protection and permanency. None of the positions were administrative positions. Information on the breakdown of the 4,300 workers reported last year would be provided to the committee. The cabinet will be ready for the July implementation of the Kentucky All Schedule Prescription Electronic Reporting (KASPER). E-mails are being sent to 15,000 providers who can register on-line in the next couple of weeks. The first responsibility of the cabinet is to advocate for the Medicaid recipients to ensure an adequate network with quality services is available for them. Fines can be imposed for any breech of the contract. When a recipient changes to a different MCO, the money follows the recipient.


In response to questions by Representative Owens, Secretary Haynes stated that the Finance Cabinet contracts with the MCOs, which contract with provider networks. The cabinet is not renegotiating contracts with the MCOs, but the MCOs can renegotiate contracts with providers.


In response to questions by Representative Moore, Secretary Haynes stated that each MCO decided if a co-pay would be required for recipients, but it cannot exceed what DMS charged for co-pays under the fee-for-service system. The contract has a process to begin charging co-pays. Commissioner Wise stated that the MCOs had to follow federal guidelines that state the co-pay cannot exceed a percent of a recipient’s income; therefore, the co-pays range from $1 to $3.


In response to a question by Representative Jenkins, Secretary Haynes stated that when the cabinet is notified, it verifies if a MCO provider is really accepting new patients.


In response to questions by Representative Wuchner, Commissioner Wise stated that during open enrollment, recipients receive information that includes a comparison between plans. After a recipient has chosen an MCO, they can change to another MCO with cause that is outlined in the federal regulations. There are provisions and rates to pay out-of-network costs.


In response to a question by Representative Stacy, Secretary Haynes stated that the MCOs have a three-year contract and it would not be renegotiated before the contract expires. There is no contract change necessary to start charging a co-pay.


Mr. Murphy, President and CEO of CoventryCares of Kentucky, stated that some challenges were expected during the implementation phase. CoventryCares remains committed to the Commonwealth and will live up to its contract. The utilization of services in reality versus the information provided in the data book is dramatically different. Administering co-pays is a standard feature among health benefits. Kentucky places a cap on how much money an individual is asked to spend based on his or her quarterly income. Managing that quarter to quarter and using that amount to decide whether to adjust whether to charge a co-pay is the advanced technical issue behind co-pays. CoventryCares’ system was not equipped to charge a co-pay initially. The reason Coventry Cares was not concerned with co-pays was that a risk adjuster would be applied. The programs used to assess risks of individuals are national standards. Each person is assessed based on medical history and receives a score.


Normally, the revenue follows the risk. Kentucky is the only state that, after the scores were run, came in after the fact and placed an artificial limit on how much money could change hands between the MCOs. If CoventryCares had known this, it would not have had a plan without co-pays because the MCO would attract higher risk individuals. In the first quarter of 2012, Coventry lost $50 million. Because CoventryCares is a public company, it cannot absorb such huge losses. The utilization rates are dramatically different than what were given in the data book in order to place bids. CoventryCares does not charge co-pays and has attracted higher risk individuals. Coventry should be receiving $3.4 million additional funds per month for high risk recipients, but has only received $2 million per month since April. The $17 million shortfall is going to Kentucky Spirit, which has lower-risk individuals. Once individuals have been stabilized, a computer program should be run for each month showing the number of individuals with each MCO and adjusting the amount of money based on the number of high risk individuals. With the amount of revenues the company has lost, it is looking for opportunities to put it on a sound financial basis, and one way is to start charging co-pays.


In response to a question by Representative Owens, Mr. Murphy stated that CoventryCares lost $50 million the first quarter of 2012 but does not anticipate continued losses at that level. Since the company is not paid the risk adjustment revenue for caring higher risk individuals, rates must be adjusted to providers. Co-pays would provide some relief to everyone. If the risks among all the MCOs were within a normal range of difference, this would not be an issue. CoventryCares’ risk is substantially higher than the other two MCOs. In the first five months, the prescription drug cost was 41 percent higher than what the original data book stated, and behavioral health costs were 66 percent higher. Rates were bid on the lower utilization rates from the data book.


In response to a question by Representative Jenkins, Mr. Murphy stated that CoventryCares owns a company, Mental Health Net, which administers its own proprietary set of criteria for admitting children that is different from the national criteria. Representative Jenkins requested CoventryCares explain the differences in criteria to providers and then explain them to the committee.


In response to a question by Representative Wuchner, Mr. Murphy stated that cutting services is not an option because the company is required to provide the services in the contract. The question is finding quality providers who are willing to provide services at the price the company can afford to pay. If providers drop out and there is no longer an adequate network, the cabinet could levy sanctions against the MCO. All the MCOs knew the services that were part of the contract and part of the benefits in Kentucky. Kentucky does not have a substance abuse program for adults over the age of 21 years unless the person is an expectant mother or within 90 days post-partum. CoventryCares believes substance abuse costs for adults over the age of 21 years should be a funded mandatory benefit. If a benefit is not in the contract or funded by the cabinet, it costs the MCO millions of dollars to provide the benefit. The cabinet must decide to provide funding for MCOs to provide supplemental benefits, and it should be stated in the contract with the MCOs.


In response to a question by Senator Givens, Mr. Murphy stated that the company anticipated a projected loss the first year of operation. The $17 million risk adjustment loss would be over a twelve-month basis and another $17 million between the lack of adjustment between the start of the program in November 2011 and the end of March 2012. Overutilization is the reason for the largest amount of losses incurred by the MCO. However the data book was constructed, the MCO feels some of the data is missing because there is no way there could be such a dramatic change in utilization of the different services. Each state is unique in how it manages the Medicaid program and what is done to keep it financially stable. If there is inadequate data, other states come up with ways to mitigate the risk before it gets out of control. CoventryCares has not quantified how much it would cost the state to make the changes it has asked to be made but will provide the information to the committee when available. The process is to work within the budget restraints of the cabinet.


In response to a question by Senator Denton, Acting Commissioner Wise stated that it is the cabinet’s intent to provide coverage of school-based services and the administrative regulations and the State Health Plan should provide coverage of these services. The MCOs have to comply with all applicable federal and state mandates. Mr. Murphy stated that if the contract requires coverage of in-school services, CoventryCares would comply with all requirements of its contract. If CoventryCares has not been paying for a provided service, it would retroactively pay the providers the amount owed plus interest. The cabinet sent clarification to hospital providers about coordination of benefits of Medicare and Medicaid dual eligibles, but durable medical equipment providers need the same clarification. Other than hospital providers, physicians have been contacted based on performance and an unwillingness to implement programs the MCO thinks would help better manage care, not because of a cost issue.


After talking to the physicians, some physicians will be sent a termination letter while others will be issued a new contract. There will be due process for providers to address concerns the MCO has with their practices. Information concerning where services would be provided within the network if Our Lady of Peace is terminated will be provided to the committee. Interqual criteria is used for observation and inpatient care in emergency rooms. The claims for individuals who use the emergency room as their primary care are being reviewed and denied primary care payment rates. In Kentucky, a Medicaid recipient can be locked into a specific physician, pharmacy, or hospital based upon misuse of services and overutilization of emergency room visits. If a recipient goes to a different emergency room, the hospital will only be paid $35 for triage evaluation to get the patient redirected to his or her primary care physician for services. Decisions about the local plan are made locally and not on the corporate level. The clinical decisions are made by panels of clinicians around the state and country who then make recommendations to the MCO. Information about the resolution of problems with Hemophilia Preferred Care will be provided to Senator Denton.


Consideration of Referred Administrative Regulations

201 KAR 20:490 – establishes the scope of practice for administering medicine or treatment by a licensed practical nurse as it relates to intravenous therapy; 201 KAR 23:015 – establishes the requirements for the granting of temporary permission to engage in the practice of social work; 921 KAR 2:015 & E – increases the standards of need for all levels of care in the State Supplemental Program for persons who are aged, blind, or have a disability and makes technical corrections; and 921 KAR 3:035 – establishes the certification process used by the cabinet in the administration of the Supplemental Nutrition Assistance Program (SNAP). A motion to accept the administrative regulations was made by Representative Owens, seconded by Senator Harper Angel, and accepted by voice vote.


There being no further business, the meeting was adjourned at 4:00 p.m.