Call to Order and Roll Call
The 7th meeting of the Task Force on Medicaid Cost Containment was held on Monday, October 18, 2010, at 1:00 PM, in Room 131 of the Capitol Annex. Senator Katie Kratz Stine, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Katie Kratz Stine, Co-Chair; Representative Jimmie Lee, Co-Chair; Senators Tom Buford, Julie Denton, Denise Harper Angel, Bob Leeper, and David L. Williams; Representatives Tom Burch, and Rick Rand.
Guests: Patty Dempsey for the ARC of Kentucky; Jim McWilliams for the Governor’s Office of Policy and Management; Eric Clark for the Kentucky Association of Health Care Facilities; Tony Sholar for Norton’s; Mary Begley for the Cabinet for Health and Family Services, Office of Inspector General; Bill Doll and Marty White for the Kentucky Medical Association; Toni Miles for the University of Louisville; Charles George for the Kentucky Chamber; and Sarah Nicholson for the Kentucky Hospital Association.
LRC Staff: Miriam Fordham, Pam Thomas, Cindy Murray, Mike Clark, DeeAnn Mansfield, Frank Willey, and Cindy Smith.
Approval of Minutes
The minutes from the September 21, 2010, meeting were approved without objection.
Discussion of Medicaid Fraud and Abuse Detection
Mitchel Denham, Executive Director, Office of Medicaid Fraud and Abuse Control, Office of the Attorney General, and David Johnstone, Assistant Attorney General, Office of the Attorney General discussed the Office of Medicaid Fraud and Abuse Control. Mr. Denham said all states are required to have a Medicaid fraud control unit that must be separate from their Medicaid agency. It is funded in part by a federal grant, in part by the state, and must have a certain professional staff of attorneys, investigators, and auditors. The jurisdiction of the Medicaid fraud control unit is provider fraud and abuse, neglect, and exploitation of patients in Medicaid funded facilities.
Mr. Johnstone discussed the fraud cases involving average wholesale price (AWP) for prescription drugs. There have been lawsuits filed against 47 pharmaceutical companies from 2003 to 2004. There were allegations that they were reporting inflated prices to Medicaid so providers would receive greater reimbursement. Drug companies would in turn get more profits and a larger market share. There were three successful jury trials in 2009. Total AWP Medicaid recoveries, including jury verdicts, fines and settlements to date were $75,564,226.50.
Mr. Denham spoke about global recoveries. Teams from the National Association of Medicaid Fraud Units negotiate on behalf of the states. They review the agreement and have the opportunity to sign on. Two Kentucky members are on the current global teams. Cases include kickback, off-label marketing, rebate, and nominal price schemes. In regard to pending civil suits, it was reported that there is a pending suit against the Wyeth company for allegedly engaging in a nominal pricing scheme surrounding its proton pump inhibitor drugs. There is also a suit against Johnson and Johnson for allegedly engaging in a kickback scheme with Omnicare to increase the market share of an atypical antipsychotic drug.
Sources of criminal complaints include utilization reviews from the Department for Medicaid Services; the Office of Inspector General; the Medicaid fraud control unit hotline; the website of the Attorney General; internal findings; federal government; professional boards; and providers. In preliminary cases, there is a fraud investigative support team that provides data analysis, on site record and chart reviews, policy reviews, and meetings with Cabinet personnel. In a full investigation and prosecution, an investigator conducts a thorough investigation into allegations. An attorney provides legal advice and determines whether or not the case is a viable prosecution. If it is viable, the case is presented to the Grand Jury. From 2008 through 2010, there have been 18 new indictments, resulting in 16 convictions and restitution of $2,059,039.58 was ordered.
In response to a question from Representative Lee, Mr. Johnstone said there have been no settlements appealed, one jury verdict was appealed, and one case was settled.
In response to a question by Senator Denton, Mr. Johnstone said that there have been no AWP lawsuits filed since 2005.
In response to a question by Senator Denton, Mr. Johnstone said Kentucky could negotiate through a buying consortium.
In response to a question by President Williams, Mr. Johnstone said that there have been no additional lawsuits filed because there were three lawsuits filed with 47 defendants, and there have been two amended complaints to correct party situations.
In response to a question by President Williams, Mr. Johnstone said there has been $75 million recovered, all by private counsel, which was selected through a request for proposal (RFP).
In response to a question by President Williams, Mr. Denham said that the $75 million came from jury verdicts, fines, and settlements.
In response to a question by President Williams, Mr. Johnstone said that the lawsuits were filed when Speaker Stumbo was Attorney General and settled during Attorney General Conway’s term.
In response to a question by Representative Burch, Mr. Johnstone said that most providers knew that pharmacy companies were inflating costs for more reimbursement to benefit them.
In response to a question by Senator Buford, Mr. Johnstone said that since Wyatt was purchased by Pfizer, Pfizer will be the responsible party in the lawsuit.
In response to a question by Representative Lee, Mr. Denham said his office can run the numbers on the number of cases that are not related to pharmacy.
In response to a question by Representative Lee, Mr. Denham said in order to change what is being done, there needs to be a comprehensive look at Medicaid fraud, and a historical criminal case should be done after it has occurred. These are the most difficult types of cases to prove and prosecute.
Mary Begley, Inspector General, Cabinet for Health and Family Services, discussed the Office of Inspector General Audits and Investigations. Stephanie Hold and Lee Guice were present from the Office of Inspector General to answer questions. Inspector General Begley said there are two investigations against providers and also investigations against recipients. The majority of both provider and recipient complaints are received through the Office of Inspector General Medicaid welfare fraud hotline. There have been 18,074 hotline calls in SFY 2010. Hotline callers include recipients, other providers, patients, border state program integrity units, and the general public. Other source referrals include the Department for Medicaid Services; the Office of the Attorney General; the Medicaid Fraud Control Unit; other state agencies such as the Department of Revenue; the Office of Inspector General; Cabinet contractors; and licensure boards. Fraud detected by KASPER can reveal a provider who is overprescribing for a Medicaid recipients and can reveal a Medicaid recipient who is doctor shopping and/or diverting prescription drugs. Common provider fraud allegations include up-coding, excessive billing, duplicate billing, unbundling, and billing for services not rendered.
In a preliminary investigation, there is a review of claims data, a policy review, a patient record review, patient interviews, provider employee interviews, provider interviews, and identifying any resulting overpayment. When a provider investigation is unsubstantiated, there is an investigative report sent to Medicaid. Medicaid Services may refer the case to other investigative agencies such as the Revenue Cabinet or licensure boards. Common recipient allegations include unreported household members, unreported income, unreported resources, reported household members not in the home, client not working as required, and receiving benefits in two states. The Office of Inspector General investigative process includes reviewing all pertinent benefits case records; interviewing neighbors, landlords, employers and recipients; obtaining written statements; securing documents such as bank records, court records, school records and wage records, and working with the Department of Community Based Services, Medicaid, and Child Care, to determine loss. Common non-eligibility allegations include Medicaid cared sharing and overutilization of benefits.
In response to a question by Senator Stine, Ms. Hold said that for the emergency room personnel to get a report from the KASPER personnel, they need to go through the system and the data base, and can get the report back in 15 seconds.
In response to a question by President Williams, Ms. Hold said tracking non-scheduled drugs can be done through the MMIS system.
In response to a question by President Williams, Ms. Hold said that triggers for investigation include calls of complaints and concerns from the public, and also referrals of cases from DCBS.
In response to a question by Representative Burch, Ms. Hold said they cannot data mine for certain doctors through the KASPER system. It has to be done due to a complaint against a doctor.
In response to a question by Senator Harper Angel, Ms. Guice said that in the Division of Audits and Investigations there are 62 full time positions, but resources are tight and they could use more staff.
In response to a question by President Williams, Ms. Guice said they do not have the numbers available on what the returns would be if additional employees were on staff.
In response to a question by Representative Lee, Inspector General Begley said she is not sure if the Kentucky Choices card offers cash back, but she would check into that and report back to the committee.
Van Knowles, Analyst, Program Review and Investigations Committee, Legislative Research Commission, discussed fraud and abuse among providers. He said there was massive fraud against private insurers in 2005. In preventing or recovering fraud and abuse, post payment review is essential. Fraud can be hard to detect because perpetrators try to hide their actions, and thus unintentional abuse may be easier to detect. Information systems assist in fraud and abuse prevention and recovery and must be adaptable. Individuals are essential for the review of suspended claims before payment and for post payment review. Sophisticated fraud is hard to detect and may involve large sums over time. People involved with fraudulent providers know what is going on. Insider information is essential, and therefore hotlines exist, but offer no incentive, but false claims acts can provide an incentive. He recommended that the General Assembly consider a Kentucky False Claims Act. Saving money can be expensive as reviewers and investigators are costly. Medicaid should focus on the greatest return on investment in its fraud and abuse efforts. The program has to spend money to save money. Limited resources must be targeted for the greatest impact. Measuring outcomes is essential, and thus he recommended that cost effectiveness be measured for all initiatives. The Medicaid program needs comprehensive planning as the program is large and complex with many vendors and agencies contracted help. Mr. Knowles recommended that Medicaid has a program integrity plan covering all vendors and agencies involved in fraud and abuse and that there is a staffing plan for Medicaid, DCBS, and other vendors and agencies. Cost recovery opportunities have been lost. For instance, supporting records may be destroyed after five years and some providers move, retire, or close. The result is that when Medicaid cannot keep up with the claims records, older overpayment become uncollectable because of age and provider changes.
When faced with restrictions, providers may threaten to end their participation in the Medicaid program which jeopardizes Medicaid’s mandate for access to care. In order to prevent that situation, Medicaid’s fraud and abuse efforts should be balanced and fair. Mr. Knowles recommended using an aggressive a fraud and abuse program as possible, balanced with quality of care and the concerns of providers.
In response to a question by President Williams, Mr. Knowles said that it is up to the people making up the standards for electronic health records to set the standards. There is potential for abuse of electronic health records to commit fraud.
Brandon Clark, Principal, FrogueClark, LLC, discussed the impact of health care reform and options to reduce waste, fraud, and abuse. In 2014 when states are required to expand coverage to individuals under 133 percent of poverty, a Heritage Foundation study showed that there will be an additional 294,373 Medicaid enrollees which will be a $508 million increase in Kentucky Medicaid spending. The Kaiser Foundation Study showed there will be an additional 329,000 additional Medicaid enrollees in 2019, and will be an additional $515 million increase in Kentucky Medicaid spending. Kentucky’s median household income is $49,801. With the five percent income disregard the effective eligibility would be 138 percent of poverty, which Mr. Clark said was more than the federal poverty level income of $53,000 for a family of four. In Kentucky, 28.1 percent of Kentuckians are below 133 percent of the federal poverty level. Mandated Medicaid expansion will add more than $500 million to Kentucky’s already difficult budget. The maintenance of eligibility requirement limits options to balance the Medicaid budget. Options for reducing fraud include: modeling the credit card industry by validating claims prior to paying for Medicaid services; facilitating better data sharing across departmental jurisdictions and with local government agencies; avoiding the failed pay and chase model; contracting with private firms to audit data to identify potential cases of fraud for further reviews; asking Health and Human Services and Congress for a waiver of the 60 day rule; posting all claims online for public access in order to better identify outlier or fraudulent billing. Other cost containment options include expanding managed care plans; expanding use of the benchmark coverage plans; offering premium assistance; improving enforcement of payer of last resort; and offering disease management incentives. He recommended allowing beneficiaries choice of competing health plans based on publicly available quality ratings, performance ratings, benefits, programs, cost, and providers and offering financial incentives to Medicaid beneficiaries who follow prescribed treatment plans.
In response to a question by President Williams, Mr. Clark said that DSH policy needs to be changed before it is implemented and there is still a need for DSH payments to hospitals.
In response to a question by President Williams, Mr. Clark said that crowd out is based on past experience and based on CHIP numbers.
In response to a question by President Williams, Mr. Clark said there is unlikely to be a repeal of the legislation before 2013, but some changes will probably be made.
The meeting was adjourned at 3:50 p.m.