Medicaid Oversight and Advisory Committee (HB 90)


<MeetMDY1> September 20, 2004


The<MeetNo2> meeting of the Medicaid Oversight and Advisory Committee (HB 90) was held on<Day> Monday,<MeetMDY2> September 20, 2004, at<MeetTime> 1:00 PM, 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; Senators Walter Blevins, Tom Buford, Julie Denton, and Dan Seum; Representatives James Bruce, Jack Coleman, and Dottie Sims.


Guest Legislators:  Representative Tom Burch.


Guests:  Bill Doll for the Kentucky Medical Association; Barbara Anderson for Electronic Data Systems; Sister Mary Luann Bender for St. Charles Care Center; Robert Long for Baptist Life Communities; Jan Gould for the Kentucky Retail Federation; Allison Cubit for the University of Kentucky College of Pharmacy; Martin Koetters for the Office of Insurance; Tom Young for the Cabinet for Health Services; Jim McWilliams for the Governor's Office of Policy and Management; John Byrd for the Kentucky Pharmacists Association; Pam Jenkins for Health Management Systems; Ellen Kershaw for the Alzheimer's Association; Sheila Schuster for the Kentucky Mental Health Coalition; Jill Bell for Passport; Karen Thomas Lentz for Johnson & Johnson; Prentice Harvey for Norton Healthcare; Sarah Nicholson for the Kentucky Hospital Association; and S. Cunningham for the Mental Health Association of Kentucky.


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


The minutes of the June 28, 2004 meeting were approved without objection.


The first item on the agenda was an update on Medicaid Modernization by Shannon Turner, Deputy Commissioner, Department for Medicaid Services, Cabinet for Health and Family Services.  Ms. Turner said the goal of Medicaid Modernization is to bring Medicaid administration into the 21st century by implementing approaches and practices that have proven to be successful in other states and the commercial sector.  The three components are (1) benefit management; (2) care management; and (3) improvements in technology.  In regard to benefit management, the Pharmacy Benefits Administrator has been awarded to First Health Services.  First Health has pharmacy management contracts in 22 state Medicaid programs. The anticipated full-implementation timeframe is approximately 75 days.  First Health Services' dedicated project team is working with Medicaid to ensure a smooth transition.  They will support the Pharmacy & Therapeutics Committee's activities, perform clinical review, and process point of sale claims.  First Health Services will also perform supplemental rebate negotiations.  In regard to care management, she said the Kentucky Medicaid Administrative Agent's (KMAA) procurement objectives are: (1) single contractor to consolidate administrative responsibilities; (2) implement new medical and care management functions; (3) coordinate quality improvement; and (4) enhanced program accountability.  The successful vendor will provide: (1) enhanced medical management through case management, care coordination and disease management; (2) provider credentialing and enrollment; (3) provider and member education and outreach; and (4) comprehensive customer service via a call center and the internet.  Next, Ms. Turner spoke about initiatives to improve technology.  She said Medicaid currently has an active procurement for the MMIS system.  The Request for Proposal (RFP) emphasizes flexibility and the opportunity for system enhancement.  It aligns the Commonwealth with the Centers for Medicare and Medicaid (CMS).  It also provides better interoperability, easier data sharing and reusable components.  She said the target award date for the MMIS system is February 15, 2005 while the target date for the KMAA is January 27, 2005.


Senator Denton asked if the meeting of the Pharmacy & Therapeutics (P&T) Committee last week made recommendations related to atypical antipsychotics.  Ms. Turner said there was an outcry from the provider community regarding atypical antipsychotics.  She responded that Medicaid is the first one to take responsibility for having a very poor communication process on that issue.  She reported that the Department for Medicaid Services is still seeking diagnosis codes on prescriptions for atypical antipsychotics.  Diagnosis code edits are not going to be put in place restricting diagnosis codes for which you can receive the medication.  They are going to gather data for the next 30 days and bring that data to the next P&T Committee meeting.  Persons of all ages currently on a regimen of drugs are grandfathered in under that regimen.


Representative Burch asked about the Department's plan to meet with providers and consumers.  Ms. Turner said part of the Medicaid Administrative Agent is that it contains a provider and member education component.


Representative Coleman asked where First Health Select fits right now with the current UNISYS system.  Ms. Turner said that UNISYS currently processes point of sale pharmacy claims.  First Health will take over the processing of that type of claim from the UNISYS system.  They are now in a transition phase, but First Health will take over the processing of pharmacy claims between now and the first of December.  Representative Coleman asked if UNISYS is going to bid on the new contract.  Ms. Turner said she didn't know, and that procurement is now available.  They can bid on that contract.


Representative Coleman asked if the new system will have on line capability.  Ms. Turner said it would.  They are planning to use web-enabled technology so providers and get information and submit claims on-line.


Representative Coleman asked what will happen if the claim is denied at the pharmacy.  Ms. Turner said it would error out provide an explanation.


Representative Coleman asked how advanced medical management will fit with KENPAC.  Ms. Turner said KENPAC will be part of that program.  This will give Medicaid an opportunity to talk to providers and work with them to develop KENPAC as a primary care case management system, as it was originally intended.  They don't have that because there are areas where there are no KENPAC providers which hindered its original purpose.  The program design lends itself to be inefficient because it is so tightly locked in at that primary care physician.


Senator Blevins asked if UNISYS was going to be phased out.  Ms. Turner said only on the pharmacy claims piece.  UNISYS is still the fiscal agent.  They will continue to operate as the MMIS.  They have the opportunity to bid and be selected during the MMIS procurement.


Senator Blevins asked how First Health Services is paid.  Ms. Turner said they are paid different metrics for different functions.  Prior authorization is paid on a per transaction basis.  Point of sale is paid according to the claim volume that is processed.


Senator Blevins asked how much the drug benefit is of Medicaid right now.  Ms. Turner said it is $750 million right now.


Senator Blevins asked about state employee's children being part of the KCHIP program.   Ms. Turner said they are currently allowed under the KCHIP program.  They are paid for with 100 percent state dollars, and Kentucky receives no federal match on the state employee children in the KCHIP program because they are exempted from the SCHIP programmatic structure at the federal level.   Senator Blevins asked if Kentucky has asked for a waiver in that regard.  Ms. Turner said Kentucky can't get a waiver in that regard.


Senator Denton asked if the Cabinet has looked at vouchering the children of the state employees that are in the KCHIP program in regard to their parent's insurance.  Ms. Turner said the Cabinet is exploring a Medicaid buy out.  They would like to look at it for the Medicaid population as a whole.


The next item on the agenda was an update on the KASPER system and Medicaid Utilization by Zac Ramsey, Division Director, Division of Fraud, Waste and Abuse, Identification and Prevention.  Mr. Ramsey said effective July 16, the Drug Enforcement Branch, which includes the KASPER system, was taken out of the Department for Public Health and placed in the Office of Inspector General.  He said there were an average of 500 requests for KASPER reports per day which caused a considerable back log.  Those request and back log are now caught up and there is only a 6-8 hour turnaround for requests now.  They are still on track for the web based e-KASPER system.  They should be able to test the system in the next few months and they hope to be up and operational by the first quarter of 2005.  Specific to Medicaid utilization, part of the decision to move KASPER is to be more efficient in that area.  With the implementation of Senate Bill 14, many positive changes have taken place.  They can now run the trend analysis and can share information with the regulatory boards and with law enforcement.  In certain areas they can look at physicians in the same practice or office if there is an investigation.  All that work is now underway, but it is still early in that process. Mr. Ramsey also mentioned the $350,000 Hal Rogers Grant that is being used to implement user awareness, education and outreach, which is part of the statutory mandate under Senate Bill 14.


Representative Burch asked if the KASPER system can monitor anyone with prescriptive authority.  Mr. Ramsey said it could.  Representative Burch asked if the prescriber or the consumer is monitored.  Mr. Ramsey said both can be monitored. Representative Burch asked if there is enough information in place to prosecute should there be a need. Mr. Ramsey affirmed that this exists.


Representative Coleman asked what is trying to be accomplished with the KASPER system.  Mr. Ramsey said they are trying to get real time information to better management care for patients. 


Representative Coleman said that the higher utilization was never anticipated in the 1999 Task Force, and that over 75 percent of the requests are from providers for KASPER reports.  Mr. Ramsey said that is what caused the back log.  Representative Coleman said the system was set up to process between 5,000 and 7,000 reports per year.


Senator Buford asked if the KASPER system could track drugs coming in from Canada.  Mr. Ramsey said not under the current system.


Senator Buford said in the late 90's, the KASPER system was going to be on the cutting edge, and Kentucky could have marketed that and been able to recover some of the costs.  Mr. Ramsey said that is still being discussed, because it is still a model program.


The last item on the agenda was a discussion on Long-Term Care Liability Insurance and Worker's Compensation by Martin Koetters, Executive Director, Kentucky Office of Insurance, Sister Mary Luann Bender, St. Charles Care Center, and Robert Long, Th.D., CEO, Baptist Life Communities.  Mr. Koetters discussed the number of companies reporting Kentucky premiums in class 8829 (primary classification for nursing homes) for policies expiring in recent years.  He said there were 21 in 1997, and in 2002 there were 31.  In regard to the Kentucky advisory loss cost for class 8829 per $100 payroll, in 1988 it was $2.87, while in 2004, it was $3.73.  The National Council on Compensation Insurance (NCCI) advisory loss costs have not returned to the September 1, 1996 level of $4.52.  He said Kentucky Employer's Mutual Insurance (KEMI) is included in the NCCI data.  NCCI data does not include individual self-insureds or self insurance groups.  Mr. Koetters also discussed lost time claims on policies expiring in a  number of years, including the severity and frequency of claims.  He noted that Kentucky has far more claims than average.  In regard to general and professional liability, there was a comment from a large Kentucky broker that generally physicians and nursing homes have trouble first and are last to feel relief.  The climate is improving and relief may be in sight, but it is not here yet.  MedCap, a Kentucky licensed captive also writes nursing homes.  He said that the advisory loss filing  for professional liability is currently under review.  The charge for profit is $207, and the cost for non-profit is $149.  Mr. Koetters also discussed the Kentucky loss cost per occupied bed.  He said that Kentucky is lower than the national average, but the trend is still up.  He also reported that until 1995, nursing homes were generally considered good profitable liability insurance risks and rated as a sub-classification of hospital but with rates much lower than hospitals because: (1) nursing home suits were for lower amounts, because injured nursing home residents could not claim lost earnings; (2) reduction to an injured claimant's life expectancy due to an injury was small compared to reduced life expectancy of a younger claimant with a comparable injury; (3) nursing home residents did not undergo hazardous operations which in the event of a bad outcome might be blamed on the nursing home professional; and (4) it was expected that in the normal course of events nursing home patients would die within  a few years after entering a home so it was difficult to provide the death was abnormal and would not have occurred anyway.  Several socio-economic changes took place during the mid 1990's which change the situation.  These included a decrease in Government reimbursement rates for nursing home costs, and the inability to pass costs on to the government Medicare and Medicaid programs.  Since reimbursements have been reduced, homes struggle to maintain profits and standards of care.  Legislation was enacted to protect residents against abuse and guaranty a minimum standard of care, including resident's bill of rights laws which established standards that increased support of plaintiff's claims.  Increased information is available to the public related to care at nursing homes, including federal and state inspection reports.  Law firms began specializing in nursing home suits and targeting facilities in Florida and Texas, making effective use of the standards and public information.  Beginning in 1996, more unexpected claims were made to insurers in the soft market.  Claim severity increased as well.  In excess of $1,000,000 and punitive damages were awarded where it was claimed that nursing homes violated patient's rights or did not meet legal standards of care.  Rates rose from 7 percent of the hospital class up to 100 percent of the hospital class.


Senator Denton asked if Mr. Koetters was aware of any nursing homes operating without liability insurance.  Mr. Koetters said he does not know of any and they are required by the state to have liability insurance.


Next, Sister Mary Luann Bender said that the availability of finding worker's compensation insurance is getting more difficult.  The cost of the insurance is increasing because of the cost of medical care, and also because physicians are over loaded.  Her nursing home has found that the worker's compensation insurance companies are doing less and less up front investigation into the actual claims.  At her facility, they de-licensed 44 beds so they could have the type of staffing required for their mission.  Their worker's compensation premium this year is $101,000, and they also have an assessment from AIK of $84,000.  To address the issue of general and professional liability insurance, she said their liability insurance premium in 1999 was $36,000 with a $5 million umbrella.  They de-licensed 44 beds by 2000 and thought their premiums would drop, but it went from $36,000 to $91,650.  Their liability insurance premium last year was $241,381.  In forty three years they have only had one claim for $3000.  Their liability insurance has gone from $36,000 in 1999 to $241,381 in 2004.


Next, Dr. Robert Long said Baptist Life Communities is a group of four different facilities, with numerous care levels.  Generally when professional liability and general liability is given to a consumer, it is priced together.  About ten years ago, the combination on his skilled care beds only was about $50 per skilled care bed.  Last year, for the 267 skilled beds was $842 per bed.  In the last three years, they have been with the same insurance broker.  Their general liability/professional liability has cost them between $260,000 and $285,000 for the last three years.  There have been four claims in the past three years totaling $35,414, and they have paid $815,527. Only two of the claims were actual operation of a skilled care facility and one of those was a visitor who fell.  There is also $5,000 set aside for open files. 


Senator Denton said the inspections were brought to her attention several years ago.  She asked if the inspectors and the inspections are good, or if they feel their premiums are getting raised due to the inspection surveys.  Sister Bender said one year they had an unbelievable survey and their insurance company asked them if they would be willing to have an independent entity brought in to do a re-inspection.  They agreed and the person who did the re-inspection was very impressed and they couldn't find anything that compared to the original report.  She noted that lately the inspections have been much more reasonable.  Senator Denton also asked Dr. Long the same question.  He said that state surveys are essential to the system.  There needs to be some degree of an adversarial type of relationship.  The inspectors need to look everything over as carefully as possible.  Senator Denton said some operators and owners have said there are some inspectors that are out of line, and they also complained about the survey itself and how some of the items being looked at had nothing to do with patient care.


Senator Denton suggested that the committee make sure the Inspector General's Office understands that they don't want the survey to be sugar coated, and they want them to insure the safety and the health of the people in the facilities.  They also don't need to gouge the facilities because of the problems it causes with the liability insurance and those premiums.


The meeting was adjourned at 3:00 p.m.