Medicaid Managed Care Oversight Advisory Committee (HB 785)


<MeetMDY1> August 18, 2003


The<MeetNo2> meeting of the Medicaid Managed Care Oversight Advisory Committee (HB 785) was held on<Day> Monday,<MeetMDY2> August 18, 2003, at<MeetTime> 10:30 AM, in<Room> Room 131 of the Capitol Annex. Senator Richard Roeding, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Richard Roeding, Co-Chair; Representative Paul Bather, Co-Chair; Senators Tom Buford, Julie Denton, and Dan Seum; Representatives James Bruce,  Stephen Nunn, and Dottie Sims.


Guests:  Kelly Upchurch, Kentucky Association of Adult Day Centers; Robin Rhoads, Georgetown Active Day; Suzanne Rinne, Kentucky Association of Health Care Facilities; Martha Graves, Department for Public Health; Karen Hinkle and Susan Dale, Kentucky Home Health Association; Amy Turner, Legal Aid Society; Mike Wooden, Eli Lilly & Co.; Rich Seckel, Office of Kentucky Legal Services; Maureen Fitzgerald and Jim Kimbrough, Protection and Advocacy; Bill Harned and Kathy Allgood-Murphy, American Association of Retired Persons; Sheila Schuster, Kentucky Mental Health Coalition; Darla Bailey, Kaleidoscope; and Jenny Miller, Almost Family.


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


The minutes of the June 9, 2003 meeting were approved without objection.


The first item on the agenda was a Medicaid update regarding level of care criteria for nursing facility and home and community based waiver (HCBW) services, and future cost containment strategies by Marcia Morgan, Secretary, Cabinet for Health Services. Secretary Morgan stated that, to date, the cabinet has balanced the Medicaid budget with limited reductions in eligibles and without the elimination of services.  On January 16, 2003, Governor Patton announced the changes in nursing facility level of care as part of the $250 million cost containment actions to addressed the Medicaid shortfall.  The administrative regulation, 907 KAR 1:022E became effective April 4, 2003. This regulation requires that individuals must meet the nursing facility level of care in order to be eligible for care in a nursing facility HCBW program services.  It will also ensure that the most acutely ill or medically fragile individuals qualify for care in these programs. In FY 2003, 25,657 recipients were served in nursing facilities and 15,214 received HCBW program services.


Secretary Morgan explained that the previous version of the regulation was confusing and contained vague criteria for determining nursing facility level of care, lack of uniformity or consistency, and a need for better provider input into determinations. She described the nine medical care parameters used to determine nursing facility level of care, and said that the Department for Medicaid Services contracts with a Peer Review Organization (PRO) to make the determinations.  Since April 4, 2003, 198 residents failed to meet level of care standards during the recertification process and another 50 individuals were denied admission.  She said that 30 percent of the individuals decertified were SSI eligible and retained Medicaid coverage.  Approximately 70 percent of the denied residents would lose their Medicaid coverage unless their monthly medical costs exceed their monthly income.  If medical costs do not exceed the monthly income, an individual would be eligible under the quarterly spend down program.


Secretary Morgan said the HCBW is approved for 17,050 participants.  During FY 2003, there were 15,214 unduplicated recipients in the HCBW with $75.2 million expenditures.  She said that 3,818 individuals had been approved for the HCBW and 1,209 individual were denied recertification for not meeting nursing facility level of care.  The range of client-based loss due to denials is from 1 percent to 33 percent.  She said that 1,962 individuals receive adult day services from 118 providers.  Presently, 46 counties have no Medicaid adult day providers.  Adult day expenditures have grown from $2.4 million in FY 1997 to $22.1 million in FY 2003.


Secretary Morgan said that many families seeking services for autistic children found their child was not categorically Medicaid or KCHIP eligible.  Many children with pervasive developmental disorders (PDD) were erroneously certified by the Peer Review Organization as meeting eligibility criteria for the HCBW.  The decertification of children with PDD from the HCBW is unrelated to any regulatory change, but as a result of correcting the erroneous certifications.  There have not been changes to the IMPACT Plus program relating to children with PDD.  Colorado, Connecticut, Hawaii, and New Hampshire have mandated health benefit provisions for autism.


Secretary Morgan reported there have been 1,307 appeals filed because of the nursing facility and home and community based levels of care determinations.  The majority of the appeals were filed after April 4, 2003 when the cabinet and PRO implemented the revised nursing facility level of care regulation.


Senator Denton asked Barbara Baker which facilities besides Ohio County have been closed.  Ms. Baker said that the Board of one agency approved closure of two of their facilities.  Also, two other facilities combined into one facility.  Senator Denton said while there have been three that have opened, there have been about four closed.  She said even though facilities may not be closing, they are reducing the number of slots they have available.  She asked if the Cabinet has information as to the number of slots available now compared to January.  Secretary Morgan said they do have that information, but she did not have it with her.  Secretary Morgan pointed out that currently 44 counties in Kentucky have no adult day centers.


Representative Bruce mentioned the provider tax bill from a previous session sponsored by Representative Lee, and asked Secretary Morgan what happened with that situation.  Secretary  Morgan said any time the provider tax is increased, revenue will be generated.  The provider tax is very contentious.  With nursing homes it would have generated additional revenue.  Because of the way the provider tax is structured, there can be no guarantee that all revenues go back to the provider that was taxed, and because of the running rate and the pricing structure, they will have a structural imbalance in 2005. 


Representative Nunn asked what the alternatives are for the people under the age of 21 deemed ineligible.  Secretary Morgan said that adult day centers were set up for adults.  They had a wide age range accessing adult day care.  In terms of alternative services, depending on what the diagnosis is of the individual, Impact Plus after school services could be used, or a more appropriate rehabilitation workshop for the adult end of the spectrum.  She said that population should not have been authorized to be in an adult day center.  Representative Nunn asked if discharge planning was in place to assist individuals who are no  longer eligible for adult day services.  Secretary Morgan said the Cabinet had no discharge planners.  A discharge planner is in the nursing facility.


Senator Buford asked if the patient or guardian can view their file at the nursing home.  Secretary Morgan said they can review their own file.  He also asked if Heath Care Review will show their files, with notes, and documents to help the individual understand why they are in the appeal process.  Secretary Morgan said they will have access to those records as long as it is done in a HIPAA compliant manner, but there is a definition of what constitutes a work product and what is a public document. 


Senator Denton asked how much money has been spent on individuals who have been decertified upon re-evaluation because the PRO inappropriately qualified them for services.  Secretary Morgan said she could not give an estimate of the cost.  They started monitoring the PRO’s work in October.  They found they weren’t following their own checklist. The amount of time that lapsed between an application and the certification was a long at 30 days.  The Cabinet told the PRO that was unacceptable.  Senator Denton asked if any penalties had been levied at this time.  Secretary Morgan said no.


Representative Bather asked the Cabinet to come up with a plan for the committee within one month that would provide a safety net for continuing care.  He said it would be helpful to the Legislature if there was a plan to allow for a process where the entire issue could be looked at not only in terms of what the numbers are, but how transitioning people into another service can be achieved so that there is some criteria to provide the appropriate level of care.  Secretary Morgan said the Cabinet is in the process of doing that, but she added that there is no absolute safety net for these individuals.


Representative Nunn asked for the representatives of the Health Care Review Organization to be invited to the September meeting of the Committee.  They are the ones making the decisions about the well-being of the most vulnerable people.  They need to tell the public how and why they make these decisions.


Next, Secretary Morgan addressed resource limitation and estate recovery practices.  She said the four components of Medicaid’s resource limitations initiative are: (1) elimination of the eligibility for nursing facility services based on medical need, except for individuals establish a Miller Trust Program; (2) elimination of the homestead deduction from estate recovery; (3) recognition of the homestead as a resource after six months of institutionalization; and (4) considering the addition of a name to a deed as a transfer of resources.  The total fiscal impact in 2004 from resource limitations components will total $16,695,840.  Pursuant to federal requirements, an estate recovery program has existed since 1994 to recover up to the total amount of claims for nursing facility care, home and community based waiver and intermediate care facilities for the mentally retarded.  With removal of nursing facility care from the medically needy program, Kentucky will be giving individuals the opportunity to establish a Miller or Qualifying Income Trust.  The trust must contain the following provisions to be exempt from being counted as available to the individual for eligibility determination: (1) contain only pension, social security, and other income of the individual, including accumulated interest in the trust; (2) include a provision that upon the death of the individual, the state has access to all amounts remaining in the trust, up to an amount equal to the total medical assistance paid on behalf of he individual by Medicaid; (3) be irrevocable; and (4) allow the Department for Medicaid Services to review all medical expenditures of the income placed in the trust.  The fiscal impact in Kentucky of the Miller Trust Initiative predicted for fiscal year 2004 savings is $3,767,040, with the total ongoing savings being $15,687,887.  Initially, 1,025 current nursing facility recipients would need to establish a Miller Trust or lose Medicaid eligibility.  Most, if not all, of the current recipients will establish a trust to continue their Medicaid eligibility.  Based on data from other states with Miller Trusts, approximately 42 percent of potential eligibles will decide not to establish a Miller Trust in the future.  The federal government mandates the recovery of estates but does not require states to allow a homestead deduction.  The initiative will eliminate the deduction or exemption in Kentucky from estate recovery.  Federal law was amended in 1993 to allow states to  expand beyond the probate limitation.  As of 1998, 14 states had expanded definitions of property from which they could recover beyond probate.  This initiative is estimate to increase recoveries by approximately  $3.75 million during fiscal year 2004.  In regard to transfer of resources, currently a transfer is subject to the limitation that assets transferred for less than fair market value within 3 years of application for Medicaid, may subject the individual to a period of Medicaid ineligibility.   Under current guidelines, applicants who have added names to a property deed, will not be subject to the transfer of resources rules as long as the applicant’s name remains on the deed.  Medicaid will begin considering the additional of names to a property deed to constitute a transfer of resources for determining eligibility under the three year look back rule.   Legally, adding a name to a deed is a conveyance of an interest in that property.  For recovery purposes, having real property with multiple owners, in addition to the recipient, limits the value from which the state can recover to the recipient’s ownership interest.  These changes enhance both the eligibility savings and the estate recoveries.


Representative Burch asked Secretary Morgan to walk through the appeal process for denials, and the time period from the time of the appeal to when it is heard.  Secretary Morgan said it is generally 6 to 8 months from the time the appeal is actually filed for there to be an administrative decision issued.  She said they have expedited that process, but normally it is 6 to 8 months.


Next on the agenda was a discussion on the impact of level of care criteria, with comments from providers and consumer advocates.  First, Suzanne Rinne, Board Chair, Kentucky Association of Health Care Facilities discussed the providers standpoint of the level of care determination.  She said they began working with the Cabinet and the Cabinet explained the changes to the regulation and the reasons for the changes.  The Cabinet allowed them to have input into the language of the regulation.  They educated members of the provider community about the regulation changes.  They also worked with the Cabinet to provide training programs on the regulation changes.  They have made sure that facilities are aware that people are going through the appeals process, and they are looking at what they should do to document care to be sure the assessment is appropriate. 


Representative Nunn asked if each facility has discharge planners.  Ms.  Rinne said they do.  Representative Nunn asked about their experience with the Peer Review Organization (PRO) and their decertification procedures.  She said one of her facilities has become a test site with the PRO to establish a better system of communicating information from their facility back to the PRO on the initial assessment of information.  She said communication must go on in every community with the PRO workers to discuss the issues as they come up, not only at the end after decertification.


Next, Bill Harned, State President of the American Association for Retired Persons (AARP) said Kentucky’s senior population will explode as a proportion of the total population in the near future.  At a time services should be developed and innovative ways to provide for needs must be developed, Kentucky is strangling the Medicaid system and shutting off initiatives that could improve its service and efficiency.  Kentucky is the fourth highest in the nation in senior poverty, and first in the nation with seniors who have mobility or self-care limitations.  Kentucky’s poor health profile with high rates of heart disease and cancer is a legacy from those who did not understand the health effects of life-style.  The Medicaid program provides vital health care services to these people, especially during hard economic times.  The Medicaid program was doing what it was supposed to do before the most recent cuts in funding hacked away at its resources.  Cuts should not be imposed on persons already deemed eligible and who are receiving Medicaid benefits.  He asked for the public officials to rescind the administrative cuts to Medicaid and restore all the services that have been or soon will be terminated.  He asked the committee to use its influence to move Kentucky forward, and not to allow the state to decline into a society that cares little for those who have little.  The old, the ill, and those with handicaps deserve to have the best possible life they can have in Kentucky.


Next, Karen Hinkle, Executive Director of the Kentucky Home Health Association said the issues Secretary Morgan talked about were a look at specific medical issues in response to a budget crisis, and that in no way says that it is the way it should be.  Her agency compared one state to another, and they found that each state has defined their criteria within some broad federal parameters, but there is no one right way to do it.  In looking at level of care needs, and the definition applied, there are few that strictly say one thing.  Long-term care services are more than just needing a nurse to do a procedure for a patient.  The way the criteria has been revised, Medicaid has impacted many people who are severely limited and their ability to take care of their daily needs.  The criteria for meeting the skilled nursing facility level of need identifies individuals who happen to have needs for a feeding tube, or catheter, or other things.  For the person needing the nursing facility level of care, if their condition is stable, they may have other needs.  Comparing Kentucky’s numbers to other states is inconsistent, because the programs are different.  She said that Secretary Morgan mentioned 56 individuals who had reduced homemaker services since it went into effect.  Ms. Hinkle said that may have been new people identified who had their services automatically reduced to four units per week.  Actually, there were 4,000 of the 15,000 Medicaid recipients who received notice that their homemaking units were being arbitrarily cut across the board.  She said the HCBW providers have been the safety net for people who chose to stay at home. The Homecare program serves about 10,000 people, but it is not a medical model.  It does address people with functional limitations.  Further, she said the regulation that governs the opportunity for clients to appeal has been confusing and has been interpreted in different ways.  The Department covers the services if the appeal is filed within ten days.  It will cover services for nursing facilities, mental retardation/developmentally disabled facilities, adult day facilities, and for the home health facilities providing the HCBW. That is the only provider it says it will pay.  They discovered that they will cover, but until last week, they hadn’t gotten confirmation from the Cabinet saying they would change their internal procedures to allow them to get paid.  The Cabinet has made that adjustment.  She noted that other services, such as transportation and pharmacy are not covered during the appeals process.


Next, Rich Seckel, Director of the Office of Kentucky Legal Services Program said when the Cabinet announced the proposed changed in January, the Secretary made clear that the goal of the changes were budgetary and argued that the people affected would be relatively well.  In four months, dozens of legal service cases have been brought, and all too many need the care.  Federal law requires a medically driven rather than budget driven standard.  Nursing level care is a mandatory services.  Kentucky must establish reasonable standards based on medical necessity.  Medical necessity is different from budgetary affordability.  Kentucky law makes professional assessment the hallmark of PRO review.  He thinks this standard needs to be redefined based on other ways to save money. 


Next, Maureen Fitzgerald, Director, Office of Protection and Advocacy (P&A), Public Protection and Regulation Cabinet said her office is the designated agency in Kentucky that provides legally-based advocacy to individuals with disabilities.  She said P&A began to receive calls about terminations from the HCBW in January, 2003.  The initial calls concerned children with autism who were no longer eligible for the waiver and no longer eligible for IMPACT Plus services.  The calls have continued and since April, have concerned children and adults who are losing services through the HCBW or losing nursing facility services.  She said between January 10, 2003 and August 11, 2003, 21 people have called P&A concerning denial of HCBW services.  Nine of those calls were about children with autism; five were about children with mental retardation or other disabilities; and seven were about adults with mental retardation, stroke or epilepsy.  Thus far, one person has contacted PA concerning denial of nursing facility services.  When people contact P&A about losing their HCBW services or nursing facility services, P&A provides information to them about their rights to appeal the loss of services and about the ten day rule.  They also inform them about possible alternative services, and they ask if they have contacted their Representative and Senator to make them aware of the situation and if they have not, they encouraged them to do so.  Ms. Fitzgerald also provided the members examples of the types of callers to whom P&A provides information services.


Representative Bather said he wants the Cabinet to look at the issue of notice and what the notice says and that it meets both federal and state law.  Legally that is a big issue that needs to be looked at.  Secretary Morgan said the Cabinet shares the concerns regarding notice, and she assured the members that relative to the notice provisions, all of the Cabinet attorneys and CMS legal staff are comfortable with the notice.


Representative Bather said he wants to see in writing clarification of federal and state laws regarding direct services, as well as ancillary services and the review process issue.

Senator Roeding asked Ms. Hinkle to work with the regulation review staff because they can give answers and work with the Cabinet on the regulations.


Representative Bather suggested the Cabinet, providers and advocates work together to find solutions to the problems. 


Senator Roeding made a motion for a resolution that would ask the Governor to cut personal service contracts another $50 million to $100 million and put that money into Medicaid.  That is a solution that could be followed. Representative Bather asked Senator Roeding to give the committee 30 days to come together and look at a plan.  He requested that the administration and the legislature could come up with recommendations.  Representative Bather suggested not coming up with a solution today.  Representative Bruce pointed out that the quorum had been lost, therefore, we could not vote on Senator Roeding’s motion.


The meeting was adjourned at 1:20 p.m.