Medicaid Managed Care Oversight Advisory Committee


Minutes of the<MeetNo1> 15th Meeting

of the 2001 Interim


<MeetMDY1> September 21, 2001


The<MeetNo2> 15th meeting of the Medicaid Managed Care Oversight Advisory Committee was held on<Day> Friday,<MeetMDY2> September 21, 2001, at<MeetTime> 10:30 AM, in<Room> Room 131 of the Capitol Annex. Representative Paul Bather, 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.


Present from the Interim Joint Committee on Health and Welfare were Senators Tom Buford, Ed Miller, Dick Roeding, Dan Seum, and Katie Stine; Representatives Bob Damron, Bob Heleringer, Jon David Reinhardt, Kathy Stein, Susan Westrom, and Tom Burch. Representative Jimmie Lee was also present.


Guests:  Claire Pomeroy of the University of Kentucky; Ronny Pryor of LifePoint Hospital; Gregory Barnes, M.D. of the University of Kentucky; Diana Kay Barnes, citizen; Carol Turner of the Department for Medicaid Services; Edwin Langford of the Cabinet for Families and Children; Marybeth Crouch of Doral Dental; Lewis Wilkerson of D&R Pharmacare; Elizabeth Hill of D&R Pharmacare; Angie Denten of the Office of Inspector General; Peter Hasselbacker of the University of Louisville; Helane Miller of Abbott Labs; Todd Short of the Cabinet for Families and Children James Millard of Equity Technologies; Frank Dickey, Jr. Of Equity Technologies; Chris Ramsey of Health 21 Online; Carolyn Kates-Glass of the Kentucky Consumer Advocate Network; Elise Kalika, citizen; John McCarthy of McBrayer, McGinnis, Leslie & Kirkland; Bob Babbage for GlaxoSmithKline; Henry Combs for Communicare; Bill Bowers for AstraZeneca; Scott Allocco for First Health Services; Ralph Hemingway for First Health Services; Bob Barnett for American Pharmacy Services; Ralph Bouvette for American Pharmacy Services; Brenda Rice for AARP; Tom Utterback for AARP; Crystal Johnston for FEAT of Louisville; Norma France for Impact Plus; Garth Splinter for Health 21 Online; Sharon Fields for Kentucky Disabilities Coalition; Pat Duncan, citizen; Sheila Schuster for the Kentucky Mental Health Coalition; Mike Mayes for the Kentucky Pharmacists Association; Steve Hill for Hill’s Pharmacy; Jan Gould for the Kentucky Retail Federation; Johnna Reeder for the United Way; Pet McLain for Flexis; Tom Brown for Seven Counties Services; George Graham for the Department for Public Health; Steve Shannon for AARP; Scott Wegenast for the Catholic Conference; Dan Howard for the Kentucky Association of Retired Persons; Marty White for the Kentucky Medical Association; Gary Blalack for GlaxoSmithKline; Dianna McClure for the Department for Medicaid Services; Prentice Harvey for Norton; Sean Cutter for McBrayer, McGinnis, Leslie & Kirkland; Rose Blaneford for the Department for Mental Health Mental Retardation Services; Rich Seckel for the Office of Kentucky Legal Services; Lowell Jones for Catholic Health Initiatives; Ann Gordon for the Cabinet for Health Services; Donna Littrell, citizen; Nancy Galvagni for the Kentucky Hospital Association; Steve Miller for the Kentucky Hospital Association; Bill Doll for the Kentucky Medical Association; Chris Beal for Eli Lilly and Company; John Brazel for the Kentucky Pharmacists Association; Don Muse for Muse and Association; Karen Thomas Lentz for Johnson & Johnson; Lean Tolliver for Omnicare; Anne Joseph for the Kentucky Task Force on Hunger.


Guests joining the meeting by teleconference were: Dennis Chaney for Hazard Appalachian Regional Hospital; Stephen Hanson for Appalachia Regional Healthcare; Sharon Edwards for Highland Regional Medical Center; Bob Riley for Highlands Regional Medical Center; Judy Lykins for Morgan County Appalachian Regional Hospital; Leslie Lindon for Morgan County Appalachia Regional Hospital; and Paul Caudill for Morgan County Appalachia Regional Hospital.


LRC Staff:  Barbara Baker, Robert Jenkins, Eric Clark, and Cindy Smith.


The minutes of the August 24, 2001 meeting were approved without objection.


The first agenda item was testimony from Medicaid recipients, recipient advocacy groups, and other interested citizens.  First, Crystal Johnson spoke on behalf of her eleven year-old autistic child.  She noted that the Kentucky Autistic Training Center is only available for school districts or families that can or will agree to pay for their information.  It is information only and they provide no direct therapy for children which is what is needed.  She said that Medicaid staff members have made comments that parents of autistic children are getting services only because of a loophole and that autism services are the responsibility of education.  She stressed that families need all the help them can get and asked for the members to support the children by telling the families that services will be continued to autistic children.


Next, Dr. Gregory Barnes, Director of Developmental and Neural Biology Laboratories at the Department of Neurology at the University of Kentucky, and the parent of a child with autism spoke.  He said the enormity of children with neuralgic disease is great, with between 60,000 and 120,000 children having some type of child neurological disease.  He pointed out the number of providers are small.  He said he would like to see delivery improved by improving the quality and the cost effectiveness of patient care without cutting access.  He also talked about his seven year old autistic son who was diagnosed with autism at age four.  Initially, they had no idea about how to access those services.  Most providers have no idea how to access services, and that is very difficult for families. Most children with autism have a normal IQ, as opposed to the small minority that have mental retardation.  As a result, they are educable.  Early intervention results in a tremendous amount of cost savings to society and the future.   Next, Dr. Barnes’ wife, Dianna Barnes, spoke on behalf of their autistic son. She stressed that it is hard on families to have an autistic child.  She said they started services over a year ago in North Carolina, and started the same services in Kentucky in June to help autistic children.  Since then, her son has made many improvements.  She also stressed that the teachers and the schools cannot do everything to help autistic children, but her son’s teacher has done a tremendous job with him.


Next, Alyce Kalika spoke on behalf of her two autistic children.  Her daughter received Impact Plus services through the waiver system.  She does not feel that Kentucky has the resources to institutionalize all people with autism.  She reported that children with autism who receive year round, intensive, behavioral intervention have a good prognosis to learn to communicate and interact. It has been shown that their prognosis for increased, independent functionality dramatically reduces their need for institutionalization.  She said that her daughter was diagnosed as being severally retarded, and they felt as if they could only take care of her at home for a few years.  At her family’s own expense, they began intensive behavioral therapy at home and flew in a therapist from California.  This made drastic improvements in her daughter.  She noted that studies show that the earlier the intervention, the more effective it is for the child.  Yet, Kentucky is not taking advantage of this knowledge.  She said she had three requests for the members to consider: (1) not to curtail the vital Impact Plus services that autistic children are currently receiving; (2) make access to the waiver system easier and faster, and insure that families in all counties have access to Impact Plus services for autistic children; and (3) lift the current Medicaid freeze that has put many families on waiting lists and will cost the state millions of dollars because the chance for early intervention has been lost.


Next, Brenda Rice, an AARP volunteer spoke.  She said they have a newly formed coalition called Kentuckians for Quality of Life.  This group is composed of advocates, consumers, service providers, and others who are willing to help.  They are advocating for expansion in home and community based services.  They believe that individuals have the right to receive treatment in their homes or nursing homes.  People have the right to chose their own service provider and the types of services they will receive.


Next, Carolyn Kates Glass, Executive Director of the Kentucky Consumer Advocate Network, spoke on behalf of consumers with mental illness and their need for access to prescription medications.  She asked the members to look within the budget and within their hearts to make sure that the people who need the services continue to get them.  


The next agenda item was a presentation on Medicaid information technology by Dr. Claire Pomeroy, Associate Chief of Staff, and Chair of the Division of Infectious Disease at the University of Kentucky and Mark Rothstein, Director, Institute for Biotheics, Health Policy and Law at the University of Louisville.  Dr. Pomeroy gave a presentation on improving quality and cost effectiveness of patient care.  She said that currently there is a disjointed system of patient, financial, and administrative paper records.  She stated that there is a goal to implement an electronic system that allows immediate access to the information needed to provide quality patient care and support cost effective practices.  She said that an electronic medical system would lead to quality, cost-effective patient care and cost effective medical systems.  An electronic patient medical record would provide immediate access to patient information, immediate availability of test results, and increased legibility of medical records, while the information would be presented in the most useful form for each individual.  The physician order entry would (1) eliminate transcription errors; (2) decrease communication time; (3)  allow for access to rules; (4)  help to avoid duplicate orders;  and (5) allow the use of clinical decision support systems to improve quality of care. 


Dr. Pomeroy reported that electronic disease management does the following: (1) allows patient care tracking; (2) provides immediate access about clinical pathways, guidelines and algorithms; (3) provides benchmarks; and (4) decreases medical costs, especially for patients with high-risk, high-cost medical conditions. She said that having an integrated clinical information system would do the following: (1) allow for a single patient identifier to track patients across multiple providers; (2) facilitate communication between providers to improve consistency of patient care; (3) allow building of a data repository; and (4) link support administrative and financial computer systems.  New technologies support access to care by providing (1) e-mail communications that can prevent the need for office visits; (2) tele-medicine that provides cost-effective access to specialized care; and (3) patient access to their own medical record, laboratory and test results. 


Electronic billing and claims processing will provide the following: (1) more efficient physician/hospital billing; (2) paperless transmission; (3) marked reduction in costs related to process claims for both providers and payors; and (4) potential for significant savings in Medicaid program and for physician/other providers.  She reported that an electronic medical system would provide operational efficiency and cost savings by offering the following: (1) more efficient supply ordering and tracking; (2) employee management; (3) cost savings in labor, paper, and duplication; and (4) cost savings for purchasers and decreased costs for suppliers and distributors through e-commerce.  In summary, the benefits of  an electronic medical system would improve quality of patient care, and  increase efficiency.  The caveats would include (1) up-front investment; (2) examination of systems, process, and practices; (3) “culture” change; (4) provider incentives to support the change; and (5) systems that make change easy.


Representative Bather said this Committee is going to form a working group to look at this issue, and asked Dr. Pomeroy to serve on that group.  Dr. Pomeroy said she would.


Representative Burch asked which states have adopted this program.  Dr. Pomeroy said some stated have adopted parts of an electronic medical system, but no state has adopted a true, integrated, clinical system that spans the entire system.


Senator Stine asked about privacy issues of the patients.  Dr. Pomeroy said an electronic system would involve a complex system to ensure the patients’ privacy. Senator Stine recommended plenty of input from the provider community to ensure that the system is workable to everyone.


Representative Westrom asked if the federal government has any money set aside for institutions that support graduate medical education for electronic systems.  Dr. Pomeroy said that they do not have any money set aside specifically for electronic systems.


Senator Mongiardo asked if it is possible to set up a system that would accomplish everything that has been discussed.  Dr. Pomeroy said it could not be done quickly, and it would require some standardization.


Next, Mark Rothstein, Director, Institute for Biotheics, Health Policy and Law at the University of Louisville spoke regarding the federal Health Insurance Portability and Protection Act (HIPPA) and its general provisions.  HIPPA was enacted in 1996.  The main purpose of the law was to deal with the issue of portability of health insurance.  HIPPA also required the Secretary of the Department of Health and Human Services to establish regulations related to health privacy.  These regulations were final this year, and there is a two year phase in period so they become effective by April of 2003.  The regulations create new rights for consumers and impose new restrictions on those who handle health information.  The regulations as promulgated by HHS have the force of law.  States may enact more stringent laws to protect patient privacy, but HIPPA sets minimal privacy protections.  HIPPA regulates health plans which include HMO’s, health insurers, group health plans, employee welfare benefit plans, and state Medicaid programs.  A key part of HIPPA is the issue of consent.  Covered entities must obtain written consent to disclose protected health information.  Another key provision under the HIPPA privacy rule is the principle of minimum necessary.  Covered entities are required to take appropriate steps to limit the use and disclosure of protected health information to the minimum amount necessary to accomplish the intended function.  The minimum necessary provisions do not apply to use disclosure or request by providers for the purpose of treatment.


Representative Bather asked Mr. Rothstein to serve on the workgroup that is being formed.  Mr. Rothstein agreed.  Representative Bather also said that Aldona Valicenti and Janie Miller will serve on the workgroup.


The next agenda item was a presentation on Medicaid pharmaceutical use and expenditures by Don Muse, Ph.D., Consultant.  He reported that, from the data analyzed, significant savings are possible from targeted disease management.  Kentucky should persist in its efforts to implement such programs. Disease management not only saves money, but is good for recipients.  Savings are possible from targeted case management of high cost recipients.  The quality of life of high cost recipients would also be increased.  Programs that focus on utilization of recipients with very high prescription drug utilization have potential for savings.  They also believe that savings from prescription drugs coming off patent will significantly benefit Kentucky.  He said that Kentucky should consider expanded use of its database for identification of hospitals and long-term care providers with utilization problems.  Kentucky should examine drug utilization in nursing homes. He reported that Kentucky ranks below the national average in capitated service plans, and ranks above the national average in fee for service plans.  Kentucky also ranks below the national average in the number of patients in capitated service plans, and above the national average in the number of patients in fee for service plans. He said in regard to the “big 3” diseases in Kentucky, the distribution of costs for those with asthma, diabetes, and heart failure were as follows (1) top 10 percent of recipients cost $387 million and averaged $40,645 per recipient; (2) long-term care patients accounted for 49 percent of expenditures in the group; and (3) 51 percent of patients had heavy use of hospital outpatient services.  In regard to research on long-term care facilities, he reported that there are 35,975 Medicaid patients in long-term care, in approximately 425 facilities.  Of patients in long-term care facilities, 24,289 patients had nine or more prescriptions in 180 days.  These persons had $83 million in prescription drug expenditures.  Of the total facilities, 91 facilities had more than 85 percent of their patients with nine or more prescriptions.  Also, 11,589 (32 percent) of long-term care patients had 20 or more prescriptions in 180 days.  These patients had $55 million in prescription drug expenditures. There were 20,862 (58 percent) long-term care patients that had nine or more prescriptions in 30 days; these expenditures accounted for $78.  Of the total facilities, 77 had more than 78 percent of their patients with nine or more prescriptions.  Of the persons with 20 or more unique prescriptions in 30 days, 4,590 of long-term care patients had 20 or more prescriptions.  These persons had $27 million in prescription drug expenditures.


Representative Lee said it should not be said that Kentucky spent “x” number of dollars on a capitated rate when we cannot locate the utilization for that money within those programs and what that money was spent for and what the diagnosis was for those services.


Senator Roeding asked if the Cabinet uses the figures that Mr. Muse provided.  Representative Lee said there needs to be a determination of what needs to be changed in order to have the utilization and data that are necessary so the General Assembly can make informed decisions about changes that need to be made in Medicaid.  Mr. Muse said it is not a reporting requirement in Medicaid.  Representative Lee said members of the General Assembly have the right to ask capitated organizations to produce the data on where the money is spent, and that data is available if it is requested.


Representative Bather asked if a letter could be written asking for the backup data from the capitated plans on the diseases and uses of that money.  Senator Roeding said to make that letter very specific so the members will know what the diseases are so it can be characterized where the expense is being paid and what diseases are driving up costs.  Representative Bather asked for the letter to break out emergency room usage in the state. 


Senator Mongiardo asked what the increase in cost has been over the last five years of drugs that were available then as compared to drugs that are available today in the Medicaid program.  Mr. Muse said that has to be separated due to the rebate law. The most that a drug can cost is about three percent more per year due to inflation.


Representative Coleman asked where the data came from.  Mr. Muse said this is the state’s data on all the claims that were paid for all services in year 2000 for Medicaid from the MMIS system.


The next item on the agenda was a presentation on the role of pharmacy benefits management by Scott Alloco, Vice-President, Government Relations, First Health Services Corporation, and Ralph Hemingway, Senior Clinical Director, First Health Services Corporation.  They said the services available to Kentucky are claims processing, drug utilization review, formulary management, Medicaid rebate management, and disease state management.  Pharmacy benefit management improves the cost effectiveness of pharmaceuticals by offering state specific maximum allowable cost calculation, pharmacy reimbursement rates, differential co-payment schedules, differential dispensing fee schedules, and cognitive reimbursement program.  Pharmacy benefit management improves the utilization of pharmaceuticals by improving quality of care through reducing inappropriate prescribing, reducing drug costs through improved formulary and rebate management and heightened fraud and abuse detection, and establishing population health management protocols to control pharmaceutical utilization in special needs populations.  Both prospective and retrospective utilization edits are based on diagnosis, dosage, duplication, duration, and drug interactions.  They reported that the components of the voluntary preferred drug list are educational prospective messages, soft utilization edits, and education retrospective utilization programs.  The components of the mandatory preferred drug list are prior authorization, hard utilization edits, and educational retrospective utilization programs.


Senator Miller asked for an explanation of inappropriate prescribing.  Mr. Hemingway said inappropriate prescribing is prescribing outside of FDA guidelines.  Senator Miller asked who prescribes what is inappropriate and what is not.  Mr. Hemmingway said it is in federal statute that a state Drug Utilization Review Board or a state Pharmacy and Therapeutics Committee makes the decision.


Senator Mongiardo asked what their experiences had been with multi-state coalitions as far as gathering a market force to negotiate with drug companies.  Mr. Alloco said that the Tri-State Coalition is the first one they are looking at.  Other than the Tri-State Coalition there has not been another group of states that have gotten together. Many logistical problems have centered around getting the states to talk to each other.


Next, the members heard testimony from Medicaid providers.  First, Steve Hill, and independent pharmacist from Liberty, and a member of the Drug Management Review Advisory Board (DMRAB) said he sees problems with Medicaid on a daily basis.  He said the DMRAB Board needs more input.  He also thinks they need step therapy implemented.  Another problem they run into is that the Department for Medicaid Services needs to act quicker to recommendations made by DMRAB.  He also recommended that all generic drugs that are non-controlled be placed on the non pre-approved list, except cough and cold medicines which are excludable.


Representative Westrom asked why it takes so long to approve a drug that is recommended by DMRAB.  Mr. Hill said that is a question that someone from the Department for Medicaid Services needs to answer.


Next, Tom Brown said he was speaking for those with serious mental illness and psychiatric disorders.  He said whatever is done with the formulary and trying to control costs, an open formulary should be kept for psychiatric drugs.  He supports excluding psychiatric drugs from a pre-authorization process.  He thinks the hallmark of any effective price control of costs is getting providers educated and using other technology tools.  He strongly supported having the member talk to the Passport providers about what the are doing in the pharmacy and therapeutics area.


Next on the agenda was supposed to be a presentation on the pharmacist perspective of the Medicaid program.  Jan Gould from the Kentucky Retail Federation deferred their presentation until the next meeting due to the lateness of the hour.


The next item on the agenda was a presentation on the Kasper II system by Frank Dickey, Jr., President and CEO of Equity Technologies and Resources, Inc., and James Kemper Millard, Executive Vice-President of Equity Technologies and Resources, Inc.  They said the goal is to have a controlled prescription drug delivery system, using advanced technology that is safe, secure, more economically efficient for all concerned, and one that improves patient care.  The objective is to create a safe, secure, and traceable environment in which physicians and pharmacies will deliver just the right medicine to the right patient with real time quality assurance oversight by physicians, pharmacies, and regulators.  They reported that only 17 states track controlled drugs, including Kentucky.  Although KASPER is a good system, it experiences two-week reporting delays, and does not track Medicaid prescriptions.  Regulators and law enforcement authorities still face a rising tide of drug diversion and doctors can not determine which patients are receiving similar prescription from other doctors.  Drug diversion and Medicaid fraud are similar in that they share a population that is historically non-compliant, patients doctor-shop, and pharmacy-shop.  Many times the physician and/or pharmacy are accomplices.  They said that the solution is simple by doing the following: (1) eliminate the prescription pad for controlled drugs and for Medicaid; (2) harness the power of new technology; (3) put a safe, secure, traceable prescription system in every doctor’s office and pharmacy; and (4) provide real time, accurate records for practices, pharmacies, hospitals, regulators, licensing boards, and patients.  KASPER II would do the following: (1) provide a protective umbrella over the prescription process; (2) incorporate discrete patient identification with real time reporting to regulators; (3) track controlled substance and Medicaid; (4) patent-pending personal identification and security technologies; (5)  reduce risk for all parties; (6) improve efficiency and save money for all parties; and (7) save lives.  Mr. Dickey identified potential benefits of KASPER II to physicians, hospitals, pharmacies, and regulators.  When KASPER II works, the license fee will be $1 per capita, payable in three to five installments spread over multiple years.  The access fee will be 25 cents per record (prescription issue or filled).  The next steps include Kentucky pressing the  initiative with the other 17 diversion-monitoring states, rolling up to all 50 states, the District, U.S. Possession and Territories, and to adopt KASPER II as the national gold standard.


Representative Westrom asked how they deal with someone taking a prescription across the state line.  Mr. Dickey said in the controlled substance area that is supposed to be illegal.  As a matter of courtesy, some have been allowed to take prescrptions across state lines.  They said that is something they can not control.


Senator Mongiardo asked what the cost of prescriptions written per year was.  Mr. Dickey said they based the cost on the drug diversion side.  There are about 704,000 prescriptions written per month (controlled substances only) based on the KASPER I model.  They would have to have a better understanding of the total number of prescriptions written under Medicaid  to know that answer.  They are not including the number of Medicaid prescriptions written per month in the 704,000 number.


The meeting was adjourned at 5:05 P.M.