The Medicaid Managed Care Oversight Advisory Committee (HB 785) was held on Tuesday, September 24, 2002, at 1:00 PM, in Room 131 of the Capitol Annex. Senator Vernie McGaha, Chair, called the meeting to order at 1:20 PM, and the secretary called the roll.
Present were:
Members: Senator Vernie McGaha, Co-Chair; Representative Paul Bather, Co-Chair; Senators Julie Denton, Dan Seum, and Johnny Ray Turner; Representatives Jack Coleman, and Dottie Sims.
Guests: Steve Shannon for the Kentucky Association of Regional Programs; Donovan Fornwalt for the Council on Mental Retardation; Ann Skinner for Behavioral Support; Marybeth Crouch for Doral Dental; Prentice Harvey for Norton Healthcare; Bonnie Howell for the Cabinet for Health Services; Bob Barnett for the American Pharmacy Services Corporation; Jim Baumgart for Microsoft; Sarah Nicholson for the Kentucky Hospital Association; Bart Baldwin for the Kentucky Children’s Alliance; Gerald Hoppmann, MPA, Director of Performance Audit Division, Office of the Auditor of Public Accounts, and Jetta Sparks, Performance Audit Manager from the Office of the Auditor of Public Accounts; Karen Thomas Lentz for Johnson & Johnson; Secretary Marcia Morgan, Cabinet for Health Services; Kathy Kustra, Governor’s Medicaid Steering Committee; and Commissioner Margaret Pennington, Department for Mental Health and Mental Retardation Services, Cabinet for Health Services.
LRC Staff: Barbara Baker, Eric Clark, Murray Wood, Robert Jenkins, and Cindy Smith.
The minutes of the February 5, 2002 meeting were approved without objection.
The first item on the agenda was an update on Medicaid by Marcia Morgan, Secretary, Cabinet for Health Services, and Kathy Kustra, Chair, Governor’s Medicaid Steering Committee. First, Secretary Morgan spoke about the budget crisis. She said Kentucky Medicaid is number one in the southeast region in FY 2000 for Medicaid expenditures as percent of total state expenditures. The Governor’s Medicaid Steering Committee was created to resolve the budget imbalance through management of utilization and cost, rather than cuts in services. She said that the committee has been successful in achieving this goal for FY 2001-02. Almost every state in the nation is now confronting a budget crisis. Forty-one states have cut rates to providers, services or eligibility during the last year, but Kentucky is not one of them.
Next, Kathy Kustra discussed key strategies in the Medicaid program. These included: (1) program integrity to assure services are going to the truly needy; (2) utilization management; (3) restructure of Medicaid rates; (4) reengineer of the Department for Medicaid Services; (5) retention of an Administrative Services Organization to manage KenPAC and a Pharmacy Benefits Manager; and (6) access all available federal matching funds and revenues. All of these strategies are either in process, or have been completed.
Representative Coleman asked about the collection of co-payments. Ms. Kustra said that the Kentucky Pharmacists Association representatives said the collections are nearly 100 percent.
Senator Denton asked if there was a way to tell how many prescriptions are not received due to someone’s inability to pay a co-payment. Ms. Kustra said that information is not available, but the administrative regulation requires a prescription to be filled and no one denied due to the inability to pay a co-payment.
Senator Denton asked if they had experienced any negative telephone calls. Ms. Kustra said there have been three phone calls regarding an inappropriate denial of services, two in Louisville and one in another area of Kentucky. Ms. Kustra stated that pharmacists are free to terminate the relationship with an individual at any time. Senator Denton asked if there was any data available. Ms. Kustra said that data is being tracked and will be forwarded to the Interim Joint Committee on Health and Welfare.
Secretary Morgan noted that the rebate on drugs administered to Medicaid patients in physicians’ offices and primary care centers have not been collected over the last seven years, but the cabinet is in the process of collecting them now.
Representative Coleman asked about the contract with MedImpact. Secretary Morgan stated that an approved personal services amendment contract for MedImpact is attached to the UNISYS contract. There is also a provision for pharmacy consultation which is paid monthly based upon the volume of transactions. The contract was recently amended to add a pharmacy director. It was noted that this was not a competitive bid. Senator Denton asked if the MedImpact contract ended at the same time as the UNISYS contract. Secretary Morgan stated that UNISYS has two one-year extensions after this fiscal year, and MedImpact has been extended through the current fiscal year. Senator Denton asked if the cabinet planned to look for a pharmacy benefits manager. Secretary Morgan stated not at this time. Senator Denton asked if the contract with MedImpact was capped on the amount that can be spent on services. Secretary Morgan said that she would have to look at the contract before she could answer the question. Ms. Kustra said payment is for the bulk of services and does have some provision if the volume went over a certain incremental amount they could be paid. Senator Denton asked if the cabinet had exceeded the threshold. Secretary Morgan said she would be happy to provide details as a contract abstract regarding what is being paid, how it is being paid, and what the triggers are, and if there are caps. Senator Denton asked for the trend to be shown if the state is going over the threshold. Senator McGaha asked for the cabinet to provide this information to staff. Senator McGaha asked how MedImpact was chosen as the subcontractor. Secretary Morgan stated that UNISYS obtained several proposals and consulted with the cabinet to make a final choice. Senator McGaha asked if there were any savings realized from UNISYS subcontracting instead of the cabinet directly contracting with MedImpact. She stated there were little savings, but now clinical analysis is being done. She agreed to provide the committee with information on the administrative expenditures paid to UNISYS.
Representative Coleman asked if an internet firewall had been set up to manage 800 numbers. Secretary Morgan said that she would have to defer to someone with more expertise. She said that she knew firewalls had been erected because of a HIPPA requirement. By law, the cabinet has to protect the recipients’ information.
Senator Denton commented about whether the contract with MedImpact reduces the liability at the state level for any inaccurate denials. Representative Coleman asked about third-party liability, and if it is a one-time influx of money. Ms. Kustra said yes, it is a one-time amount that is captured.
Secretary Morgan stated that the Department for Medicaid Services never developed a process by which it closed accounts. She indicated that the cabinet has gone through all avenues to collect accounts receivable. Once an account is receivable, the cabinet is required to return the 70 percent federal match. The department has bad debt on the books and needs to demonstrate that all avenues had been taken to rectify the problem. The department will be able to reduce the federal match up to approximately $47 million as accounts are closed. She said the United States Senate of the 107th Congress passed S.812 that provides $9 billion to state Medicaid programs for fiscal relief although final passage is unlikely.
Next, Secretary Morgan discussed the Disproportionate Share Hospital Program (DSH). In fiscal year 2002, Kentucky reimbursed the full Benefit Improvement Protection Act (BIPA) of $197.4 million to the 117 hospitals for indigent care. The Department for Medicaid Services is required by statute to pay the DSH in October. The cabinet is awaiting the federal government’s decision on the Medicare economic index from 2001 to 2002 in order to establish the fiscal year 2003 amount. The DSH amount is approximately $170 million.
Secretary Morgan discussed the Managed Care Contract with University Health Care doing business as Passport. She said Passport is the Department for Medicaid Service’s capitated managed care entity in Jefferson County and the contiguous counties. Passport is responsible on average for 105,000 to 110,000 Medicaid recipients each month. The department operates Passport under the authority of a 1115 demonstrative waiver that went into effect November 1997 and will expire October 31, 2002. The waiver renewal is pending before the Centers for Medicare and Medicaid Services for approval, meanwhile Passport is operating under an interim contract. The department and Passport have entered into rate negotiations for the new waiver period beginning November 1, 2002. Cost containment will impact the upper payment limit in Passport. Senator Denton asked how close the contract negotiations with Passport are. Secretary Morgan said there have been some good conversations, and she feels like the contract will go through.
Senator Denton said the Utah waiver structures the benefit package to certain populations within the program provided it expanded services to more members. She asked if Kentucky can submit a waiver to the Centers for Medicare and Medicaid Services similar to Utah with the exception that services would not be expanded. Ms. Kustra said Utah has a HIFFA waiver which gives states the ability to cover a new population, such as the parents of CHIP children, but has to be budget neutral. Kentucky has the latitude to reduce the benefits package in some areas for optional populations, but some reductions might take a waiver.
Senator Denton asked about the length of time required for failure of a H² antagonist prior to authorization of a proton pump inhibitor. Ms. Kustra agreed to provide that information.
Senator Denton asked if it was a federal mandate or state option to allow an individual to receive Medicaid benefits for a year after their TANF benefits end. Secretary Morgan said that it may be mandated but would get that information to the committee.
Representative Coleman asked if the cabinet still had communications with the KASPER system. Ms. Kustra said that a one-time match was done between the Department for Medicaid Services and KASPER to see if it presented additional information about patterns of utilization which should be forwarded to the appropriate legal authorities.
The next item on the agenda was a presentation on the Performance Audit Report by Gerald Hoppmann, MPA, Director of Performance Audit Division, Office of the Auditor of Public Accounts, and Jetta Sparks, Performance Audit Manager, from the Office of the Auditor of Public Accounts.
Mr. Hoppmann discussed quality of care and cost management and the recommendations of the Auditor’s Office for agency improvements. The performance audit objectives were to (1) determine whether the Commonwealth is providing optimal care to the mentally retarded/developmentally disabled persons; and (2) determine whether better cost management will permit the Commonwealth to expand community services to more persons.
The first finding was that the supports for community living investigation reports chronicled deficiencies in quality of care and oversight. Their recommendations were (1) The Cabinet for Health Services should eliminate abuse and neglect in community based settings; (2) The Cabinet for Families and Children should, as mandated by statute, notify appropriate law enforcement agencies of all incidents of alleged abuse, neglect or exploitation; (3) The Cabinet for Health Services should ensure that providers are in compliance with statutory requirement of reporting all incidents of alleged abuse, neglect, or exploitation to Cabinet for Families and Children; (4) The Cabinet for Families and Children should ensure that DCBS-284’s are completed and sent to the Attorney General’s Office; (5) The Cabinet for Families and Children should send final investigation reports of alleged incidents of abuse, neglect, or exploitation to all appropriate parties regardless of the outcome; (6) The Department for Medicaid Services should assess monetary damages or penalties against providers who fail to report incidents of abuse and neglect; and (7) The Cabinet for Health Services should ensure that investigation and complain files regarding abuse and neglect are complete, organized and safeguarded.
The next finding was that the supports for community living certification reviews report a high number of deficiencies. The Auditor’s Office recommended that the Department for Medicaid Services periodically report to the public its evaluation of provider compliance with community-based services requirements.
The next finding was that ResCare Corporation provides services to one-third of Kentucky’s supports for community living waiver consumers. The Auditor’s Office recommended that the Department for Medicaid Services develop an emergency placement plan for loss of services should a provider cease serving Kentucky residents. Senator Denton asked about Kentucky providers who provide the same services in other states. She was concerned that information on other providers besides ResCare was not available to make comparisons of the differences and similarities of each provider. Mr. Hoppmann also agreed to provide information regarding a breakdown of services paid by Medicaid verses private insurance.
The next finding was that there are deficient provider screening and hiring practices. The Auditor’s Office recommended that the Department for Medicaid Services develop a hiring and screening process to be used by all providers.
The next finding was that payments for community habilitation are too permissive. The Auditor’s Office recommended: (1) The Cabinet for Health Services tract the different types of services provided under community habilitation; (2) The Cabinet for Health Services should ensure that each mental retarded/developmentally disabled person’s individual support plan (ISP) define the individuals goals and interest and that strategies are tied to the achievement of those outcomes; and (3) The Department for Medicaid Services should require a high school diploma or GED for persons providing community habilitation services.
The next finding was that Kentucky falls shorts in providing services to mentally retarded/developmentally disabled persons. The Auditor’s Office recommended that Kentucky should ensure comprehensive services are available to meet needs of mentally retarded/developmentally disabled persons.
The next finding was that Kentucky’s average annual cost per person to deliver community-based services is almost twice as much as other states. The Auditor’s Office recommended: (1) The Department for Medicaid Services should consider a daily reimbursement rate for community habilitation services lasting over four hours per day; and (2) The Department for Medicaid Services should consider limiting the supports for community living waiver per person cost to the ICF/MR institutional per person cost.
The next finding was that billing review and recoupement is inadequate. The Auditor’s Office recommended: (1) The Department for Medicaid Services should provide fraud detection training to the community-based services administrators; (2) The Cabinet for Health Services should update the interagency agreement between the Department for Medicaid Services and the Division of Mental Retardation and include specific duties and responsibilities related to fraud detection; and (3) The Cabinet for Health Services should diligently identify, review, and pursue potential recoupments and maintain formal documentation related to billing reviews.
The next finding was that the Department for Medicaid Services has not adequately ensured that duplicative services are not being provided to supports for community living recipients. The Auditor’s Office recommended that the Cabinet for Health Services should eliminate any duplication of services by the federally-matched Supports for Community Living Waiver and the state-funded support living program.
In conclusion, Mr. Hoppmann said that quality of care issues exist and should be corrected through better communication and coordination, and cost containment measures are needed to ensure that community-based services can be expanded to more individuals.
Senator McGaha asked what the cap on services is in North Carolina. Mr. Hoppmann said it is $86,000 per year per person. Representative Bather pointed out that in Kentucky it is $75,000 per year per person.
Next, Secretary Morgan responded to some of the findings of the auditor’s office. She said when the Auditor’s Office compared Kentucky to other states on the average cost for services, they did not due a complete array of services that those states were reimbursing for. In addition, in regard to the background checks, it is important to recognize that a private provider will sometimes make a decision and go beyond the regulations. She also noted that twenty-one percent of Kentucky’s working population does not have a GED or a high school diploma. She also stated that in regard to the fraud data, the Auditor’s Office is basing that on a 1992 or 1994 GAO report, which is a huge assumption.
Due to the time factor, this audit will be discussed at the next meeting of the Medicaid Managed Care Oversight Committee, with the first item being a further response from the Cabinet for Health Services regarding the audit.
The meeting was adjourned at 4:25 p.m.