The 14th meeting of the Medicaid Managed Care Oversight Advisory Committee was held on Friday, August 24, 2001, at 12:00 PM (central time) at the Jennie Stuart Medical Center, Cotthoff Learning Center, Doctor’s Pavilion. Senator Daniel Mongiardo, Co-Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Daniel Mongiardo, Co-Chair; Senators Dan Seum, and Johnny Turner; Representatives James Bruce, Stephen Nunn, and Dottie Sims.
Guests: Louise Brown, citizen; Wayne Thompson, Office of Inspector General; Ralph Bouvette, American Pharmaceutical Service Corporation; Jewel Burgher, Elizabeth Tonain, Marie Perkins, Sherry Legrand, Department of Medicaid; Ray Reynolds, Heartland CARES; Fred Nesler, State Representative; Carol Muldoon, Passport Health Plan; Joe T. Myers, DSC; Bill Clouse, DSC; Duane Dringenburg, Department of Medicaid Services; Tria Bridgeman, Center for Accessible Living; Annie Hampton, citizen; David Gindner, Pennyroyal Center; Julios M. Pulei, Office of Dr. Ratilal Gazera; Pam Ison, HSK, Inc.; Sam Brown, Jennie Stuart Medical Center; Jewell Long, AARP; Juanita Martin, AARP; Carolyn Thorpe, PLANS; Carol Aiken, Pennyrile Family Physician; Gale Cherry, Pennroyal MHC; Todd Stiles, Western Kentucky Pathology; Linda Eaton, Office of J. Terry Fuqua; Patricia Tomkowiak, Center for Accessible Living; Danny Perry, Center for Accessible Living; Cliff Hunniman, University of Kentucky College of Pharmacy; Terese Campbell, Kentucky Hospital Association; Pat Padgett, Kentucky Medical Association; Agnes Davis, Paducah Area Development District; Brenda Orten, Paducah Area Development District; Jim Dailey, NAMI Kentucky; Sheila Schuster, Kentucky Mental Health Coalition; Libby Davis, Pennyroyal Center; Margie Johnson, Pennyroyal Center; M.J. Gothard, Pennyroyal Center; Krista Wood, Heartland CARES; John Adams, State Representative; Marybeth Crouch, Doral Dental; Gloria Moss, Parent; John Heltsley, Optometry; Judy Greene, Physical Therapy; Dr. Robert Hughes, physician; Peter Hasselbacker, University of Kentucky; Anita Simmons, Christian County Health Department; Bob Fritz, Christian County Health Department; Michael Gross, Dentist; Martha Cross, patient; Cyndee Burton, RN, Mathew 25 AIDS Services; Pam Bridgeman, Mathew 25 AIDS Services; Lewis Carter, PLANS; Betty Adams, FHC Cumberland Hall; Karen Thomas Lentz, Johnson & Johnson; Mike Vandeveer, Bristol-Myers Squibb.
LRC Staff: Barbara Baker, Eric Clark, and Cindy Smith.
The minutes of the July 27, 2001 meeting were approved without objection.
The first item on the agenda was testimony from Medicaid recipients, recipient advocacy groups and other interested citizens. The first speaker was Gayle Cherry, Chairman of the Mental Health Regional Planning Council. She stated that initiatives derived from the Regional Planning Council, organized as a result of House Bill 843, are valid. The main issue in their region is alcohol and drug abuse among adolescents and adults. According to research by the University of Kentucky for the State Division of Substance Abuse Service, an estimated 21,000 adults and 1,700 adolescents in the region need substance abuse treatment. Ninety percent of those are uninsured. She also reported that the intensive outpatient services are very limited in case management with no wrap around dollars attached. The patients with dual diagnosis of mental illness and substance abuse disorders that have a medical card can officially only bill for mental health problems. She recommended the following ideas: (1) expanding substance abuse prevention and early intervention services in every county in Kentucky; (2) developing a funding mechanism for substance abuse services for both genders and all age groups who are uninsured or underinsured; (3) increasing the adult stabilization options by funding adult crisis programs; (4) developing a transitional program from hospitals, rehabilitation programs and jails to the community to prevent re-admission; (5) placing additional Medicaid dollars into the treatment programs, including wrap around services to ensure that treatment will be effective; (6) determining which providers are most comprehensive and provide the best care in the shortest term; and (7) developing model programs by region.
Next, Louise Brown, the parent of a disabled adult child spoke about her concerns. Her son received Medicaid once he became SSI eligible. He is also on her husband’s insurance program. She said that they started having trouble receiving medical care when her son became a KENPAC recipient. She was assured his medical care would not change under the KENPAC program. She said they used Medicaid strictly to pay their co-pay and their $200 yearly deductible. They have never received a prescription using Medicaid, and have always paid their prescription co-pay. Her son’s blood work has also always been covered through private insurance. Now, they have no control regarding her son’s medical care. She has had extensive trouble getting referrals for her son. Ann Gordon, Legislative Liaison, Cabinet for Health Services assured Ms. Brown that this problem would be addressed.
Ms. Brown asked why Lock-In cannot be a coordinated benefit between KENPAC, Medicaid, and SSI. Senator Mongiardo said there are two parts of KENPAC. One is a primary care physician to coordinate services. The other is to have someone coordinate and maintain information and identify patients that are at high risk for certain diseases. He said what has happened in Ms. Brown’s circumstance is not the way KENPAC is meant to work.
Duane Dringenburg of the Cabinet for Health Services asked Ms. Brown when her son was placed into the KENPAC program. He asked if her son’s doctor was contacted by the Cabinet and asked if he would be a KENPAC provider for her son. Ms. Brown stated that she did not know if the doctor had been contacted. Mr. Dringenburg said the Cabinet would look into that for her.
Next was a focus on pharmaceuticals, with an industry perspective on options to control costs by Jeann Lee Gillespie, PhD, Director of Scientific Affairs, from the National Pharmaceutical Council (NPC). Dr. Gillespie reported that the primary function of NPC is to contact research on the economic, clinical, social and optimal use of pharmaceuticals. They address issues on underuse, as well as overuse. They strive to identify what can be done to insure that patients get diagnosed and get the medications they need, and remain on those medications. Next, she spoke about disease management programs and discussed the programs implemented in Virginia and in West Virginia by the National Pharmaceutical Council. She said NPC refers to disease management as an evidence based approach to health care. The goals of disease management are to improve the quality of care and the quality of life, and to reduce total health care costs by implementing preventive measures. Disease management recognizes that a majority of the people in the health care system are actually healthy, and that people who need the most help are the people at most risk. The two things that are different about disease management is that it focuses on measuring outcome, and improving quality of care. In a majority of states, Medicaid patients with chronic disease account for less than twenty percent of the population. It works by identifying patients most likely to benefit. They establish appropriate outcome measures and then form management teams. They improve patient compliance through education and improved communication. In Virginia, NPC implemented the Virginia Health Outcomes Partnership Program (VHOP), beginning in 1993. Later, they implemented a disease management pilot project in West Virginia.
Senator Mongiardo asked if Virginia is having drug cost problems, and Ms. Gillespie said Virginia was having drug cost problems. At the time Virginia was having drug cost problems, they were going to implement a draconian prior authorization policy, where all patients were eligible for generics, but it would be hard to get name brands. NPC started communicating with Virginia to help them understand what would be a better program. She explained that the VHOP was a partnership with Virginia. After implementation, Virginia’s drug costs went up, but there was a reduction in emergency room visits with a total net savings for Virginia.
Senator Mongiardo asked how money can be saved when it comes to pharmaceutical costs. Ms. Gillespie said that is not the question Virginia is trying to answer now as they implement the disease management program. The issue is how to manage costs, and disease management is one mechanism to manage costs.
Senator Seum and Representative Bruce asked why prescription drug costs are cheaper in other countries. Ms. Gillespie said the cost of drugs depends upon other economic factors and the cost of other commodities in different countries.
Senator Mongiardo asked about other options to reduce medication costs. Ms. Gillespie replied by identifying the following options: (1) improve medical review management; (2) identify high utilization patients; (3) analyze practice patterns to identify and monitor drug utilization; (4) provide education and academic detailing for providers; (5) improve fraud and abuse programs; (6) limit drug therapy limits based on enhanced prospective drug utilization reviews and system filing; (7) develop clinical decision support systems; and (8) reevaluate reimbursement levels.
After Ms. Gillespie spoke, there was additional testimony from Medicaid recipients and advocacy groups. First, Patricia Tomkowiak from the Center for Accessible Living testified. She read a letter from Mike Smith, a homebound, quadriplegic from Livingston County. He is concerned because his home health will not let him travel because he is on homebound. Ms. Tomkowiak said Mike is one among many people that she is familiar with that feel trapped in their homes. She is concerned that people she knows do not have a choice because they are told that they cannot have home health unless that are homebound.
Representative Nunn said in the past Kentucky has been negligent in helping persons with disabilities, but in the 2000 Session, House Bill 144 was passed which provides almost $50 million new additional dollars for persons with mental retardation and developmental disabilities. A ten year plan is also being developed to better respond to persons who are identified as developmentally disabled or mentally retarded.
Next, Danny Perry voiced his concern about the lack of dental programs in Murray, Kentucky that will accept Medicaid. He is only familiar with one dentist that will accept Medicaid, and it is hard to get into his office. His previous dentist quit taking Medicaid because of the amount of paperwork involved with caring for Medicaid recipients. He also said that Medicaid does not cover many of the medications that his wife has to take because of drug allergies.
Senator Mongiardo said his wife’s doctor should be able to call to get prior authorization for the medications she is able to take due to her allergies to certain medications. Mr. Perry said her doctor does a good job, but there are many medications that Medicaid does not cover.
Senator Jackson said that the dental issue is a problem in Murray and in Western Kentucky. He said in the 2000 Session, Medicaid reimbursement amounts for dental were increased substantially. He has also met with many dentists to try to get them to accept Medicaid patients, and feels as if progress is being made.
Next, Jim Dailey, President of the National Organization for the Mentally Ill (NOMI) in Louisville spoke about the lack and accessibility of affordable medications. He stressed that services need to replicated, not eliminated. Services similar to wrap around services keep people out of institutions, which saves money. Effective partnerships are also being built between family members, consumers, providers and legislators. He asked for understanding of the stigma that affects the mentally ill and for the legislators to do what they can to assist the mentally ill with access and medications.
Representative Nunn encouraged Mr. Dailey to continue to advocate and attend the Tax Policy Subcommittee meetings and voice his concern to that group who are meeting and evaluating the tax structure in Kentucky.
Next, Bill Bowers, Chairman of the Kentucky Trade Association for the Pharmaceutical Industry, came forward to answer some of the questions that have been raised. He said the NPC is strictly a research organization funded by the industry, and that they do not deal with policy or the types of questions that were asked to Ms. Gillespie. Those questions should be addressed by the Pharmaceutical Research and Manufacturers Organization. As far as Medicaid is concerned, pharmaceutical manufacturers have to sign an agreement with the federal government that they will provide rebates through each of the states in order to participate in the Medicaid program. Those rebates have to be based on the best price, and they ensure that the state Medicaid Department gets the best price that anybody in any situation gets with those drugs.
Senator Mongiardo asked who audits the prices that are given to Humana, CHA, and other private companies. Mr. Bowers said he is not certain of the specific process involved. The company would be required to send a record of their transactions to HCFA at any point. It starts out as an honor system, with spot checks along the way.
Senator Mongiardo asked how to reduce drug costs. Mr. Bowers said there are many factors involved. The figures are about $800 million to bring a drug to market. It takes 12-15 years, with a patent at about 17 years. The first year a drug goes generic, forty percent is lost. There are also development costs. All those things add to high risk business.
Next, Sheila Schuster of the Mental Health Coalition spoke about mental health and substance abuse disorders. She reported that one in five Kentuckians will deal with a mental health or substance abuse disorder during their lifetime. She also addressed House Bill 843, a collaborative effort, and bottom up planning process. All stakeholders at the local level were brought to the table and each region decided what their pressing needs were and how to meet them. She urged the members to be careful and not end up with an absence of care, inappropriate care, or incomplete treatment. The House Bill 843 Commission is asking for an expansion of Medicaid. She said Kentucky is one of six states that does not provide substance abuse treatment for adults, unless they are pregnant, or a woman of childbearing age. She noted that the University of Kentucky completed a study that indicated for every dollar invested, $8 in savings is achieved. She said it is not wise to limit access to effective medications because those persons in need of them will end up needing hospitalization and institutionalization. She urged the members to be sure the entire treatment package is there, such as Impact Plus.
Next, Peter Hasselbacher spoke about generic drugs. He stressed the fact that there is no reason not to maximize generic drug use because they are clinically equivalent to the branded product. He also stated that using generic drugs would result in tremendous savings.
Next, Dr. Robert Hughes, a family practitioner, and Chairman of the Drug Management Review Advisory Board (DMRAB) spoke. He reported that roughly $470 million for prescription drugs in the Medicaid program are currently being spent. This contributes greatly to the Medicaid deficit. Pharmaceutical costs currently account for 10 percent of the nation’s $1.2 trillion health care bill, and it outpaces other health care spending by a 3-1 margin. Studies estimate an increase of 10 to 14 percent per year, and some experts say that over the next few years the portion spent on pharmaceuticals will be the largest portion of the health care dollar. The United States has the highest prescription drug prices, with the greatest amount of drug price inflation in the world. The trending cost annually is 14 to 18 percent per year. Last year there was a 24 percent rise in the cost of pharmaceuticals. The most alarming thing is when you look at per member, per month data for pharmaceuticals. In 1999, it was $89 per member, per month. If you trend that out, it would be close to $109 per member, per month. Some principles behind formularies are the more ability a purchaser has to drive market share toward the utilization of particular products, the more willing the brand name drug manufacturer is to offer the purchaser rebates or discounts. He said two ways the private side controls pharmaceutical costs is through a three-tiered pharmaceutical benefit design whereby the lowest tier is generic and it is provided with no co-pay, the one with a negotiated discount would be mid-level in price, and the one with no discount, would be higher. He does not think that a tiered benefit design will work in the Medicaid program. Another thing is placing the physicians at risk for pharmaceutical costs for pre-paid health care or managed care. In Medicaid, there is a risk of not having enough providers with the fee schedule already being low to keep them in the program. This would create an access problem, and it would drive up the costs through emergency room visits. He said the following ideas could work: (1) examine the dispensing cost to determine if it is a fair price; (2) increase the length of prescriptions; (3) work with other states to negotiate discounts in bulk purchasing; (4) create an evidenced based formulary with few exceptions; and (5) create a physician incentive plan for physicians to be cost effective in their prescribing habits. He said for all of this to occur, the legislature must empower the Drug Management Review Advisory Board (DMRAB) or the Pharmacy and Therapeutics (P&T) Committee to make balanced decisions on all of the above items that would come before them. Lastly, Dr. Hughes asked that Senate Bill 351 and House Bill 608 be repealed because he feels they are both bad public policy, and they have created the open formulary situation and no ability to control costs in Kentucky. If this is not done, he said, Medicaid spending will continue to skyrocket.
Next, Dr. Todd Stiles, a solo practitioner Pathologist from Muhlenburg County spoke. He said Medicaid uses Medicare’s fee schedules. For Pathology, the CPT codes are from codes 80,000 to 90,000. They involve both anatomic and clinical lab work. In March, Medicaid loaded a 1998 tape of Medicare fee schedules into its system, which caused certain things to no longer be reimbursed. This mistake was caught on March 6 and corrected on March 20 for some codes. The problem is the fee schedule for some codes were not changed. Medicare allows for fees to be raised if you can show that the cost of the test exceeds what is being reimbursed. He reported that in the last nine months he has had very little Medicaid in his county. His hospital, which is managed by a large management company, has learned that it is more profitable to steer people toward the hospital indigent program instead of advising the patient to apply for Medicaid spend down.
Next, Pam Ison, a private practice audiologist, and Judy Green, a private practice physical therapist spoke about their experiences with Medicaid. Ms. Ison said she had a meeting with the Department for Medicaid Services over a year ago to ask how they can bill their services. Medicaid was supposed to get back with her, but they have not. She said her fee schedule has not changed since 1989. She was promised by Medicaid that they would do cost reviews in June. Nothing has happened since that time. Ms. Ison said Ms. Green is in the same situation. If somebody wants to see a physical therapist, they either have to go to a home health agency, or they have to go to a physician, and each time that is an added cost.
Next on the agenda Clifford E. Hynniman, M.S., R. Ph, Associate Professor, College of Pharmacy, University of Kentucky spoke regarding Medicaid prescription services-prior authorization and drug review process. He said the roll of the College of Pharmacy has been to see what they can do to help Medicaid with drugs. They have access to many resources that helps some of the issues that Medicaid faces. Lately, their primary emphasis has been on doing drug reviews and serving as staff for the DMRAB. He said that there needs to be more flexibility in the use of managed care drug policies. He thinks there should be some relief from the regulations. He explained that new drugs must be available on the drug list without prior authorization for at least twelve months. In the past fiscal year, they have looked at about 39 classes of drugs. For fiscal year 2000, they spent $433 million, with $165 million of that being associated with those 39 classes. Mr. Hynniman provided information regarding the impact of Senate Bill 351 of the 1998 Regular Session of the General Assembly and House Bill 608 of the 2000 Regular Session of the General Assembly. He said that Kentucky spends more on proton pump inhibitors than any other state in the nation, and also more on non-steroidals than other state in the nation. He wonders if there is some inappropriate utilization going on since Kentucky is leading the nation. When looking at disease surveys, Kentucky has a lot more problems in many health areas than other states. He discussed prior authorization, but noted that just putting drugs on prior authorization is not the only answer. Formularies are a possibility, and most formularies are becoming more open. A reason that is being done is to avoid hassle from recipients. Instead, co-pays are put in place which take care of many of the problems they would see in utilization in many managed care groups.
Next, Mr. Hynniman mentioned preferred drug lists. In the reviews, they have been recommending preferred drugs that the Department should consider that would offer the best quality at the least price. Putting that in place requires education regarding the use of the preferred list. He said that in the past Kentucky used prior authorization primarily as a way to keep drugs under control. He pointed out that even though prior authorization is only a tool, and not the end all solution, it does have an effect. They are doing a survey on prenatal vitamins. He questions whether Medicaid should pay for the most expensive vitamin, or could a decision be made to cover a less expensive vitamin that is just as good. This is the type of decision that the DMRAB can no longer make because of the regulation resulting from Senate Bill 351. They can make a preferred list and recommend that be used.
Senator Mongiardo asked if negotiations can take place with wholesalers to get special prices for drugs. Mr. Hynniman said some states are requesting supplemental rebates. This was looked at years ago in Kentucky. They suggested the companies give the best price or a rebate and the drugs with the best result will be put on the list. He thinks that current law in Kentucky would require some changes in order to do this now.
Mr. Hynniman continued by saying major therapeutic groups need to be examined to see what can be done to reduce utilization that is inappropriate and choose the proper drugs that would be available to make sure Medicaid spends the least amount of money for the best results.
Senator Mongiardo asked what a benefit would be of Senate Bill 351 and House Bill 608 for patient quality of care. Mr. Hynniman said one benefit is these include the function of the DMRAB. He state that the group is written in and the functions they provide are written in. He said the definition of a drug included in that statute is not good. Instead of being a new molecule, any type of change to a drug makes it a new drug. He does not think they have a major quality impact except through DMRAB and what they are able to do.
Senator Mongiardo asked what the benefits are of allowing any drug on the formulary for the first twelve months and/or any drug in the class. Mr. Hynniman said the benefit is that it can begin to be utilized right away.
Next, Sherry Legrand, a nurse consultant inspector spoke. She has been with the Department for Medicaid Services since April. She has been visiting providers throughout the state and getting their input on many issues. She has heard concern because Medicaid does not pay for flu or pneumonia vaccines. She said putting a registered nurse in the community hospitals is important. Being a nurse consultant, she can connect an individual with a problem with the solution. She believes that having nurses in the field will have a positive impact on problems.
Senator Mongiardo asked if Ms. Legrand acts as a case manager. She said she is not a case manager, but is more of a liaison between providers, recipients and Medicaid. She does not see herself as a case manager because of the vast number of cases. Senator Mongiardo asked how many nurse consultants there are in Kentucky right now. Ms. Legrand said currently there are six, but new positions are being filled. The population of Medicaid across the state was evaluated and the nurse consultants were placed in the areas with the highest concentration of recipients.
Last on the agenda was a presentation by Carol Muldoon, Chief Operating Officer, of Passport Health Plan on disease management and cost containment initiatives. She said a unique thing with Passport is the three party contract with the state of Kentucky. The Commonwealth of Kentucky, University Health Care and the Region 3 Medicaid Partnership Council all signed a three-party contract when the managed care region was established. The current Passport Health Plan membership is 118,000. The reduction in health care cost trends saved by Passport is significant. For fiscal year 1999, $7.9 million was saved. In fiscal year 2000, $19 million was saved and in fiscal year 2001, $34.5 million was saved for a total of $61.4 million. She said provider profiling is an integral part of their program. They started a contract with Data Medica in 1999. Their program is population based, and case-mix adjusted. The index compares actual costs to expected costs, but an arbitrary cost goal was not set. Quarterly reports are sent to the primary care physicians, but not shared with other physicians. Expected costs are the mean for the entire Passport network peer group. The primary care physician incentive payment is paid when overall index is equal to or less than one. The Chief Medical Officer and Profiling Analyst are available to review profiles and discuss opportunities for improvement. Other methods for controlling the health care cost trend are: (1) pre-certification of inpatient admissions; (2) concurrent review of hospitalization; (3) pre-certification of selected out-patient services; (4) utilization of nationally recognized criteria; and (5) utilization of workgroups to identify drivers of emergency room use. She stated that the following things are done in regard to case management and care coordination: (1) both social and medical concerns of individual members are addressed; (2) medical homes for members are established; (3) education on health conditions and assistance with access to available resources to improve compliance with treatment plans; (4) relationships with community resources are established; and (5) a workteam to identify and address drivers of emergency room use is put in place.
Next, Ms. Muldoon reported that Passport is already doing a lot on disease management. Within the last eighteen months, new programs have been implemented. The programs are population-based in nature, and they outreach to providers and members. Patients receive education on their diagnosis, and they provide tools for better self-management. Quarterly feedback is given to providers on individual recipient adherence to guideline standards. There are only 3,000 providers in their network in over 220 locations. With respect to early childhood care and perinatal care, their rates improved from 1999 to 2000, and 1999 NCQA National Medicaid mean was exceeded.
Ms. Muldoon then discussed their pharmacy program. She said Passport has been able to keep their pharmacy trend at less than the average health plan. They contract with a pharmacy benefits management company that is a partner in what they are doing. Their contract gives incentives for meeting cost and quality indicators. Quality and cost management strategies include the following: (1) clinical leadership oversight; (2) formulary management; (3) provider committee activities; (4) formulary review; (5) clinical utilization review; (6) therapeutic interventions; (7) provider profiling; (8) contract performance measures; (9) rebate management; and (10) network management and pricing. In regard to dental, there is a capitated vendor contract for dental services.
Next, Ms. Muldoon discussed dental and vision services. She reported that the dental network has 268 dentists in 237 locations, who are reimbursed at 105 percent of the Medicaid schedule with a ten percent withhold. In regard to vision, they have a capitated vendor contract, and a network of 330 specialists. Their reimbursement is equal to or greater than the Medicaid fee schedule.
Senator Mongiardo asked how much is paid to the health departments. Ms. Muldoon said it is close to $1 million per year. Senator Mongiardo asked what the amount is per patient, per visit. Ms. Muldoon did not have those figures with her.
Senator Mongiardo asked how Passport’s physicians communicate. Ms. Muldoon said the doctors do communicate, so services are not duplicated. Senator Mongiardo asked if there is software to connect the physicians. Ms. Muldoon said there is not.
Senator Mongiardo asked what the administrative costs are. Ms. Muldoon said Passport has somewhere between 7.5 percent and 8 percent total administrative costs. Senator Mongiardo asked if that figure includes care and case management. Ms. Muldoon said that includes every administrative cost.
Senator Mongiardo asked if the pharmacy benefits manager negotiates for drugs. Ms. Muldoon said they negotiate their contracts and arrangements with the chains and pharmacies. Senator Mongiardo asked if that has been a big benefit. Ms. Muldoon said that it has.
The meeting was adjourned at 5:10 PM (central time).