Medicaid Managed Care Oversight Advisory Committee


Minutes of the<MeetNo1> 11th Meeting

of the 2001 Interim


<MeetMDY1> May 31, 2001


The<MeetNo2> 11th meeting of the Medicaid Managed Care Oversight Advisory Committee was held on<Day> Thursday,<MeetMDY2> May 31, 2001, at<MeetTime> 2:00 PM, in<Room> Room 131 of the Capitol Annex. Senator Daniel Mongiardo, Co-Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Daniel Mongiardo, Co-Chair; Representative Paul Bather, Co-Chair; Senators Vernie McGaha, Dan Seum, and Johnny Turner; Representatives James Bruce, Jack Coleman, Stephen Nunn, and Dottie Sims.


Guests:† Mike Porter for the Kentucky Dental Association; Marty White and Patrick Padgett for the Kentucky Medical Association; Gretchen Brown for the KAHPC; Peter Hasselbacker for U of L; Marsha Johnson, Shannon Fields, and Linda Thomas for KDC; Cathy Allgood Murphy for the Center for Accessible Living; Ronny Pryor for LifePoint Hospital; Jeff Talbert for UK; Jan Gould for the Kentucky Retail Federation; Alice Delambre for the Office of Aging Services; Jim McWilliams for the Governorís Office of Policy and Management; Amy Watts for the Kentucky Long-Term Policy Research Center; Lynn Chapple for Department for Medicaid Services; Helane Miller for Abbott; Beckie Stephens for the Kentucky Childrenís Alliance; James Kimbrough for Olmstead State Plan Project; James Jitter Allen, consultant; Sarah Nicholason, Mike Rust, and Nancy Galvagni for the Kentucky Hospital Association; Prentice Harvey for Norton; Bill Bowers for Astra Zewneca; and Angie Dorten for Office of Inspector General.†


LRC Staff:† Barbara Baker, Robert Jenkins, Perry Nutt, DeeAnn Mansfield, Murray Wood, Eric Clark, Kelly Smith,† and Cindy Smith.


The minutes of the November 13, 2000, and December 1, 2000, meetings were approved without objection.


First, Senator Mongiardo made opening comments to the Committee regarding the proposed workplan and the upcoming regional meetings.


Next, there was a Medicaid overview by Cathy Kustra, Chair of the Executive Steering Committee, and Marcia Morgan, Interim Secretary of the Cabinet for Health Services.† Ms. Kustra presented an overview of the plans of the Executive Steering Committee on Medicaid to deal with the spending imbalance in the Medicaid program.† She said the first step of the Executive Steering Committee on Medicaid was to meet with providers and advocates to assure them of input to the process.† She said resolving the Medicaid crisis is not as simple as making cuts across the board.† An analytical approach is in order since there are services that should not be cut.† Some of the cuts or caps proposed in the February presentation that former Secretary Helton and Jim Ramsey presented have been delayed to give the Committee time to step back, look at the bigger picture, and make strategic decisions.† She said that Medicaid spending is a function of caseload, provider rates, and utilization.† Of the three, utilization is everyoneís favorite candidate for reduction, but it is the most challenging of the triad for government to control.† Nevertheless, that is where the Executive Steering Committee on Medicaid will be focusing their efforts.† Next, Ms. Kustra presented information in relation to the growth in eligibles from June of FY 1999 through February FY 2001.† This data concluded that there was a growth of† 80,329 eligible over that time period.† She pointed out that the most common targets for utilization control are the number of prescriptions per person, number of brand name prescriptions, inpatient hospital days and length of stay, emergency room utilization, excessive and costly diagnostic and ancillary services, and transportation.† She reported that options for Medicaid Managed Care include (1) a capitated, HMO-like system like Passport; (2) primary care case management (3) prospective payments or case-based payments; and (4) the use of administrative service organizations.† The goal is to bring Medicaid spending into balance with the budget and to implement managed care for Medicaid statewide.† The Steering Committee has short-term strategies, intermediate-strategies and long-term strategies.† The short-term strategies included the following: (1) completing year end analysis of eligibles and expenditures for FY 2001; (2) focusing on FY 2002 projections of expenditures; (3) continuing to refine IGT projections for FY 2002; (4) determining remaining actions necessary to bring FY 2002 into balance; (5) issuing an Executive Order by Governor Patton for a limited CON moratorium; (6) talking with potential industry vendors with expertise in managing utilization; (7) pursuing development of intergovernmental transfers; and (8) assuring program integrity for KCHIP and Medicaid programs.† Potential intermediate steps include the following: (1) analyzing whether to postpone or eliminate annual rate adjustments; (2) capping enrollment of some waiver programs; (3) developing an improved prior authorization process for pharmacy using consulting pharmacists within existing statutes; (4) exploring direct contracting for certain disposable durable medical equipment items; (5) eliminating incentive payments for Federally Qualified Health Centers; (6) reorganizing the Department of Medicaid Services; (7) stepping up post-payments financial recovery programs; (8) stepping up peer review programs; and† (9) instituting presumptive Medicaid Eligibility for pregnant women and children to improve access to care.† Potential long-term strategies include the following: (1) refining the Enhanced KenPAC program; (2) restructuring remaining rate methodologies as needed; (3) developing a pharmacy benefits management program; (4) replacing Drug Management Review Advisory Board with a Pharmacy and Therapeutic Committee; (5) using a magnetic swipe card to create a paperless system for Medicaid; and† (6) requiring premiums and/or co-pays for the KCHIP population.


Senator Mongiardo asked if there is any data to support that case management provided in clinics actually reduces the cost of a case, as compared to physician offices that do not have case management.† Ms. Kustra said they would get that information and present it to the Committee.


Marcia Morgan, Interim Secretary of the Cabinet for Health Services, reported that the Cabinet thinks the Medicaid budget is in balance for FY 2001.† They are in the process of updating the forecast using the most recent claims data through March.† They were able to balance the Medicaid budget because there was an additional $5 million carried into fiscal year 2001 that was not anticipated.† When matched with the federal fund participation, that equals $18.3 million.† In addition, as expenditures go up, the provider tax revenue goes up.† An additional $11.8 million more than projected has been collected in provider taxes.† With the federal fund participation, that amount equals $39.7 million.† On January 12, an emergency regulation was filed that reduced the pharmacy dispensing fee in both long-term care and retail pharmacy.† They are on track to save $3.1 million as a result of that action.† In terms of intergovernmental transfers, the Governor gave them the charge to look for discretionary administrative costs in the Cabinet for Health Services to look for ways to supplement the Department for Medicaid Servicesí budget.†† They also filed a regulation in March relating to hospital rates that will raise $29.5 million.† In FY 2002, another $70 million will be collected.† This source of revenue is nonrecurring in nature.† A total of $105.6 of revenues was raised or costs were avoided.† Based on December claims data, there was a shortfall of $77.5 million, plus an add on for adjustments for supports for community living, KCHIP for public employees, and an increase on the Passport contract equals $86 million.†† If the forecast is correct on both the revenue and the expenditure side, the year could be ended with a $19.6 million balance.


Senator Mongiardo asked how the $30 million from the hospital administrative regulation has affected the hospitals.† Ms. Morgan said the Cabinet met with the Kentucky Hospital Association when they were contemplating this action.† In talking with them, they were not happy with this but thought it was a rational response to the current Medicaid situation.


Ms. Morgan continued by saying they have also focused on 2002 projections of expenditures and eligibles.† They canít conclude these projections until the forecast is completed.† At this point, based on December claims data, the Medicaid program is projecting a $280 million shortfall in FY 2002.


Representative Bather asked the Cabinet to describe the assumptions they are using for the forecast.† Ms. Morgan explained that they do the forecast by multiplying the eligibles by the cost.† The process they go through is very complex.† In regard to the forecasting model, they look at claims data on a historic basis and the number of eligibles actually utilizing services for each region of the state.† This information is used to determine regional costs per eligible.


Representative Bather said he assumed that with all the new eligibles who came in last year, there would be a moderation in terms of utilization of services that would probably take place in the second or third quarters.† Ms. Morgan said that this could not be determined at this point, but that is something they will have looked at in terms of their service lines.

Representative Coleman asked where SURS and Unisys have been all these years.† Ms. Kustra said she canít speak as to problems before she was here, but she is sure it has been very frustrating.† She is sure there are techniques with post payment audits that could be used.† There is money on the table that they are going to try to get back.


Representative Coleman asked what Unisys is doing.† Ms. Kustra said Unisys is paying claims; it is an MMIS system.† All states have an MMIS system for Medicaid.† Ms. Morgan said the Cabinet would like the opportunity to go back and compare the capabilities the Cabinet had under the EDS contract versus the Unisys contract.† She indicated that she would like to look at what has been done with the third party collection since contracts have been changed.

Next, there was a presentation by Donna Folkemer, Program Manager, National Conference of State Legislatures on alternative approaches to Medicaid and other statesí experiences.† She said that health care costs are up in both the private sector and public sector.† In the private sector, health care costs are expected to increase just over 8 percent a year for the ten years.† The CBO predicts an average annual growth of 7.4 percent for Medicare and average annual growth of 8.7 percent for Medicaid between 2000-2011.† She reported, based on HCFA data, that Kentucky had 698,000 enrollees in 1995 and 654,000 in 1998, an annual decrease of 2.2 percent. The national annual decrease was 1.0 percent.† Kentucky had Medicaid expenditures of $2.2 billion in 1995 and $2.7 billion in 1998, a growth rate of 6.8 percent annually.† The national annual growth rate was 3.9 percent.† She said that Medicaid may be returning to levels of growth comparable to those seen in the early 1990s, at least on a per enrollee basis, as reported by John Holohan of the Urban Institute.† She reported that the cost drivers were the increasing costs of pharmaceuticals and the changing composition of enrollees to higher cost disabled enrollees.† Other factors driving costs were (1) savings from managed care already achieved or not occurring as expected; (2) rising health care costs hit Medicaid as a big payer; and (3) increasing enrollment.† Managed care fits in the picture because states have significantly expanded enrollment in Medicaid managed care.† In 1991, fewer than 10 percent of all enrollees were in managed care, but by 1998, nearly 54 percent were in managed care.† She said that in regard to Medicaid states are† (1) trying to get balance among activities that affect providers, services, and beneficiaries; (2) focusing on new management and/or purchasing approaches across an array of service and eligibility categories; and (3) maintaining capacity of program to provide promised coverage.† Ms. Folkemer said more options for Medicaid are (1) changing the dispensing fee; (2) setting a maximum day supply; and (3) limiting the number of prescriptions per month.† Other things being tried include (1) multi-state purchasing initiatives; (2) Pharmacy Benefits Manager for public programs; (3) Drug Utilization Review (better software); and (4) prescriber education.† Ms. Folkemer discussed a new law in Florida that created a preferred drug formulary.† She explained that the drug company could present evidence to support a drug being included on the list if the company provided a greater rebate for the drug than the amount required under federal law.† Ms. Folkemer also provided an overview of disease management programs, focusing on† the Florida program.† She concluded by listing the following factors that will affect Medicaid: (1) cost increases; (2) revenue constraints; (3) number of uninsured; (4) Olmstead court case; (5) data and information needs; (6) vulnerable population being served; and (7) changes at the federal level.

Senator Mongiardo asked how the $1,800 and $1,200 for non-disabled adult and child compare to the cost per person in an insurance-type program.† Ms. Folkemer said she doesnít have that information but can get it.† She said the Medicaid cost would be somewhat higher.† But, much of that would have to do with the benefit package.


Representative Coleman asked how many states currently provide pharmacy.† Ms. Folkemer said every state provides pharmacy service, but it is optional.


Senator Westwood asked why Kentuckyís increase in Medicaid expenditures was almost twice the national average.† Ms. Folkemer said she doesnít know for sure, but what you are going to see depends on whether the state moved toward some type of capitated managed care during that time.† She indicated that this may be due to other states moving to managed care during that time frame.


Senator Mongiardo asked if there are any states that use a co-pay system or went to a co-pay system after not having that type of system; and if so, how did that reduce their costs.† Ms. Folkemer said she would have to get analysis of that for the Committee.† She said the co-pay structures have changed over time.† She said she would find information on that.


Senator Mongiardo said physicians are not business people and they have not been trained to look so much at the cost side; yet managed care seems to have failed because the management of that care is at some distant site, some impersonal decision maker.† He asked if any state has tried to merge the two, and take the case manager from some distant site and put it in the doctorís office where there is a person to use care management instead of managed care.† Ms. Folkemer said there are as many different managed care models as there are states.† The primary care case management model relies on a physician being the case manager.† So, the states that are using that as their basic model are basically saying the case management should be at the physician level.


Representative Bather asked what states are doing in terms of prevention, education, community-based models, and bottom-up approaches toward dealing with health in terms of reducing costs in the long term and educating and reforming the system.† Ms. Folkemer said states are looking at particular diseases where there seem to be protocols, or a way to manage that condition better.† Much of that has to do with patient compliance.


Senator Mongiardo said one of the problems he sees within the system is that Medicaid provides health services mainly to mothers and children, and these parents lose their health insurance if they get jobs.† So, they are almost forced to stay within the welfare system to provide health care to their children.† He asked if there are states that allow a buy-in program or allow extended Medicaid services while the mother or father goes to work in a job that doesnít have health care.† If so, what states do this and how does it work?† Ms. Folkemer said when federal welfare laws were passed, Medicaid was de-linked from welfare.† States still have to provide Medicaid coverage to people who would have been on welfare.† In general, eligibility depends upon income levels that have been set by states.† Eligibility is tied to family income level and that is true in every state. The only buy-in law in effect now is the option that states have to allow disabled people who are working to buy into Medicaid.


Next, Jeff Talbert, Assistant Professor at the James W. Martin School of Public Policy and Administration at the University of Kentucky, gave a presentation on the results of consumer and provider satisfaction surveys. He said the components of the project were (1) patient/consumer survey from 1998, 1999, 2000, and 2001; (2) provider survey from 1999, 2000, and 2001; (3) HEDIS Quality/Utilization analysis from 1997, 1998, 1999.† The patient/consumer survey was based on HEDIS/CAHPS 2.0H Survey.† He stated that the survey included a random sample of 5,000 adults and 5,000 children stratified by type and region.† He reported a response rate average of 35 percent.† The patient/consumer survey included questions related to health status and utilization, access to providers and specialists, satisfaction with providers and plan, and demographic information.† The provider survey was based on a study of provider satisfaction and attitudes on managed care using a statewide stratified random sample of 200 in-state providers identified by type and region.† The provider survey included questions regarding the type of practice/physician, satisfaction with practice, willingness to accept Medicaid patients, attitudes toward managed care, fee for services and Medicaid, administrative workload, and demographics.† He said the HEDIS quality/utilization analysis used for the consumer survey was based on administrative claims data.† The survey measured the effectiveness of care, access and availability of care, and utilization of services. He reported that the statewide general findings were compared to private health plans surveyed by the NCQA.† He reported that Medicaid recipients in Kentucky were more satisfied with their health plan, equally satisfied with the number of doctors to choose from, encounter fewer delays in the approval process, and have less difficulty in seeing a specialist as compared to private health plans.† A report of the findings of the survey followed.† He reported that (1) providers perceive that Medicaid patients are different from other privately insured patients; (2) providers appear to be satisfied with their current medical practices; (3) providers are concerned with payment levels, particularly those for Medicaid patients; (4) providers appear concerned about the time they spend on administrative procedures; (5) providers reported more dissatisfaction with Medicaid than with fee-for-service or private managed care; (6) providers report accepting all new patients, with the rates varying from a low 50† percent to 70† percent; and (7) providers in the† managed care partnership regions were concerned with access to information on utilization review and with getting information on their spending patterns.† However, he reported that this had improved from 1999 to 2000.


Senator Mongiardo asked if data had been collected on the number of emergency room visits that resulted in hospitalization.† Mr. Talbert said they asked if they had been hospitalized and they asked how many ER visits they had, but the question didnít say whether they went to the ER or were hospitalized.


Senator Mongiardo asked if the satisfaction was the same whether it was in a rural hospital or in a large metropolitan hospital.† Mr. Talbert said the survey didnít make a distinction between rural and urban hospitals in relation to satisfaction.


The next meeting of the Medicaid Managed Care Oversight Advisory Committee is scheduled for Friday, June 29, 2001, at 12:00 PM in Frankfort.


The meeting was adjourned at 5:20 PM.