Task Force on Medicaid Cost Containment



<MeetMDY1> August 31, 2010


Call to Order and Roll Call

A<MeetNo2> joint meeting of the Task Force on Medicaid Cost Containment and the Medicaid Oversight and Advisory Committee was held on<Day> Tuesday,<MeetMDY2> August 31, 2010, at<MeetTime> 10:00 AM, in<Room> Room 131 of the Capitol Annex. Representative Jimmie Lee, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Katie Kratz Stine, Co-Chair; Representative Jimmie Lee, Co-Chair; Senators Walter Blevins, Tom Buford, Julie Denton, Denise Harper Angel, Bob Leeper, Dan Seum, and David L. Williams; Representatives Tom Burch, Bob DeWeese, Jim Glenn, Joni Jenkins, Rick Rand, Greg Stumbo, David Watkins, and Jill York.


Guests:  Eric Clark for the Kentucky Association of Health Care Facilities; Bryce McGowan for Kentuckians for Nursing Home Reform; Ben Waide, citizen; Ellen Kershaw and Toni Miles for the Alzheimer’s Association; Dee Werline for the Bluegrass Mental Health/Mental Retardation Board; Dave Croft for Bristol-Myers Squibb; Kasia Harshaw for Lilly; Amy Watts for the Foundation for a Health Kentucky; Sarah Nicholson and Mike Rust for the Kentucky Hospital Association; Jim Kimbrough for AARP; Sheila Schuster for the Kentucky Mental Health Coalition; Jan Gould for the Kentucky Retail Federation; Jeff Presser for Dean Dorton Ford; Walter Gosa for S. Anofi-Aventis; and Donovan Fornwalt for the Council on Developmental Disabilities.


LRC Staff:  Miriam Fordham, Pam Thomas, Cindy Murray, Mike Clark, DeeAnn Mansfield, Frank Willey, Lashae Kittinger, and Cindy Smith.


Approval of Minutes

The minutes of the August 17, 2010 meeting of the Medicaid Cost Containment Task Force were approved without objection.


Long Term Care Issues

Jim Kimbrough of AARP gave an overview of long-term care issues.  He said that in the previous administration he worked with Medicaid Services in redesigning how services and benefits for Kentucky Medicaid recipients should be delivered.  They developed an extensive new bundling of benefits aimed to different populations of Kentucky Medicaid recipients.  Just as they finished this 1115 waiver proposal, Congress passed the Deficit Reduction Act and it was determined that no 1115 waivers would be approved.  When looking at what services and benefits can be provided through Medicaid, there are three separate sets available.  The first is mandatory services which must be provided to all Medicaid participants, unless specifically waived through a  policy waiver.  The second is optional services, which are services that a state may elect to provide in its Medicaid plan.  The third is waiver services, where states may elect to target services to a specific population or condition and tailor services to meet the needs of that population or condition.  Kentucky has seven waiver programs each of which has a unique set of defined services for the individuals served under each waiver.  Elderly and disabled individuals account for about 38 percent of Medicaid participants, and 67 percent of the Medicaid expenditures in Kentucky.  Surveys have shown that nearly all individuals want to remain in their own homes and local communities.  It costs Medicaid significantly less to provide services and supports in a person’s home or community setting than it does in an institution.  In 2008, the per capita expenditure for nursing home services was $188.95, while Medicaid Home and Community Based Waivers for the elderly and disabled was $17.01.  In 2007, Kentucky expended an average of $9,303 for each of its elderly Medicaid participants and $9,456 for each of its disabled participants.  For non-aged and disabled adults, the average was $3,831 while children were $2,399.  The average for all participants was $5,244, close to the national average of $5,163. In 1990, a physician-educator at the University of Michigan’s Medical School, Dr. Donabedian, stated that a quality health care system had seven pillars: efficacy; effectiveness; efficiency; optimality; acceptability; legitimacy; and equity.  Mr. Kimbrough suggested that in deliberations about Kentucky’s Medicaid program’s cost, these factors should be used as benchmarks to measure improvements in how this part of the publicly financed health care program functions.  They believe that Kentucky can serve more people, with better success, in a more cost-effective manner.


Mental Health Issues

Sheila Schuster, Ph.D., Executive Director, Kentucky Mental Health Coalition, gave an overview of mental health issues.  She reported that there are three very costly issues that affect those with mental illness: premature death; repeated psychiatric hospitalizations; and babies born with addiction.  An investment of new or additional money results in cost savings in the long run.  People with severe mental illness have much poorer physical health than the general population.  By 2000, people with severe mental illness in the United States were dying at twice the rate of, and approximately 25 years earlier than, the general population.  She encouraged the establishment of a non-psychiatrist physician rate in the community mental health centers, and the re-evaluation of the prohibition against paying for two Medicaid services delivered in the same day.    A model program for recovery for individuals with severe mental illness is Bridgehaven Mental Health Services.  By preventing almost 20,000 days of hospitalizations, they have saved the state at least $17 million dollars over a nine year period.  In addition to cost savings, Bridgehaven members experience recovery.  A model for treating substance abuse in pregnant women is Independence House.  They received a federal grant for $400,000 per year for a three year period and have been able to offer services to women beyond the 90 day post- partum period when Medicaid stops paying for services.  In the first year, Independence House has had 35 “clean” babies born into the program.  The estimate is that an addicted baby costs approximately $500,000 in a lifetime.  Therefore, $400,000 has saved approximately $17.5 million. 


Discussion of Health Care Reform

Neville Wise, Deputy Commissioner, Department for Medicaid Services, Cabinet for Health and Family Services gave an overview of the provisions in the Public Protection and Affordable Care Act (PPACA) regarding Medicaid and the Children’s Health Insurance Program (CHIP).  Commissioner Wise said that the maintenance of eligibility requires states to maintain current income eligibility levels in place on the dates of enactment for children in Medicaid and CHIP through September 30, 2019.  The PPACA requires states to maintain Medicaid eligibility levels for adults in place on the date of enactment until the Secretary of Health and Human Services determines that the state exchanges are fully operational.  States are exempted from the maintenance of effort requirement for non-disabled adults with incomes above 133 percent of the federal poverty level starting in January, 2011 if the state certifies that it is experiencing a budget deficit or will in the following year.  The income eligibility standard section establishes minimum eligibility level at 133 percent of the federal poverty level effective January 1, 2014.  It adds three new mandatory eligibility categories and allows states to cover these populations at 133 percent of the federal poverty level effective April 1, 2010.  The health care reform law permits states the option to create a basic health plan for uninsured individuals with income between 133 and 200 percent of the federal poverty level who would otherwise be eligible to receive premium subsidies in the exchange. 


The health care reform bill provides full federal funding for individuals newly eligible for Medicaid.  Funding for CHIP is extended through 2015 and requires states to maintain income eligibility levels in place on the date of enactment.  It provides for a 23 percentage point increase in the CHIP match rate up to a cap of 100 percent and creates a new option for states to provide CHIP coverage to children of state employees.  The PPACA allows the state Medicaid and CHIP agency to enter into an agreement with the exchanges to determine eligibility for premium subsidies through the exchange. In regard to presumptive eligibility, hospitals participating in Medicaid are permitted to make presumptive eligibility determinations allows hospitals and other providers currently eligible are allowed to determine presumptive eligibility for all Medicaid eligible populations.  Medicaid payments to primary care physicians for providing primary care services are required to be no less than 100 percent of Medicare payment rates in 2013 and 2014. In regard to employer sponsored insurance (ESI), the PPACA requires states to offer premium assistance and wrap-around benefits to Medicaid beneficiaries who are offered ESI if it is cost-effective.  Medicaid and CHIP eligible children will be allowed to receive hospice services concurrent with other treatment.  And, the law provides for a state option to provide Medicaid coverage for family planning services through a State Plan Amendment to certain low-income individuals up to the highest level of eligibility for pregnant women. 


Commissioner Wise discussed the health care reform provisions relating to long-term care.  The PPACA establishes the Community First Choice Option in Medicaid to allow states to provide community-based attendant supports and services through a state plan amendment to individuals with incomes up to 150% FPL with disabilities who require an institutional level of care.   The law provides states with an enhanced federal matching rate of an additional six percentage points for reimbursable expenses in the program.   States are required to establish a system for the removal of barriers to providing home and community based waiver services.  The Money Follows the Person Rebalancing Demonstration program is extended through 2016 and requires that individuals reside in a nursing home for not less than 90 consecutive days.


The provisions related to drug rebates, quality measures, and preventative care were also discussed.  The law increases the Medicaid drug rebate percentage for brand name drugs from 15.1 percent to 23.1 percent.  Aggregate allotments for disproportionate share hospital (DSH) payments are reduced and the Secretary of HHS is required to develop a methodology to distribute the DSH reductions.  It establishes the Medicaid Quality Measurement Program for the development and advancement of quality measures for adults in Medicaid and sets deadlines for development of measures, standardization of reporting formats, and requires a report to Congress in January 2014 and then every 3 years.  States would receive grant funding to support the development and reporting of quality measures.  Under the law, states are allowed the option to provide coordinated care through a health home for individuals with chronic conditions.  States will be provided with a 1 percent increase in the FMAP for preventive services recommended by the US Preventive Services Task Force and recommended immunization for adults if offered with no cost sharing.  In regard to incentives for prevention of chronic diseases in Medicaid, PPACA authorizes $100 million in grant funding for states to establish programs for Medicaid beneficiaries to cease tobacco use, control weight, lower cholesterol, lower blood pressure and avoid or improve management of diabetes. Grants are for 3 years.


The law requires the Secretary of HHS to establish a nationwide program for national and state background checks on direct patient access employees of certain long-term care facilities or providers and to provide federal matching funds to states to conduct these activities. It also requires the Secretary to establish procedures for screening providers and suppliers, with the level of screening based on the risk of fraud, waste and abuse by provider type. 


In regard to enhanced program integrity provisions, PPACA requires CMS to include Medicare, Medicaid, CHIP, VA, DOD, SSA and IHS in the integrated Data Repository (IDR) and requires the Secretary of HHS to enter into data-sharing agreements with these agencies to identify waste, fraud and abuse. The law allows the Department of Justice to access the IDR to conduct law enforcement activities.  It requires all Medicaid, Medicare and CHIP providers to include their National Provider Identifier on enrollment applications and claims. Civil monetary penalties are established for individuals who provide false information on applications or contracts to participate in a federal health care program or know of an overpayment and do not return it.  In regard to the expansion of the Recovery Audit Contractor Program, the law requires states, by December 31, 2010, to establish a program to contract with one or more recovery audit contractors to identify Medicaid underpayments and overpayments and recoup overpayments. 


Commissioner Wise discussed other provision related to fraud and abuse.  The law requires states to submit data elements from their claims processing systems that the Secretary of HHS determines are needed for program integrity, program oversight, and administration.  Medicaid managed care contracts must require the contractor to maintain sufficient patient encounter data to identify the physician who serves a patient (as under current law) at a frequency and level of detail to be specified by the Secretary of HHS. 


The law requires a state Medicaid plan to prohibit the state from making any payments for items or services under a Medicaid state plan or a waiver to any financial institution or entity located outside of the United States.  In regard to overpayments, it extends the period for states to repay overpayments to one year when a final determination of the amount of the overpayment has not been made due to an ongoing judicial or administrative process. When overpayments due to fraud are pending, state repayments of the federal portion would not be due until 30 days after the date of the final judgment. 


The law also established a number of demonstration projects including an emergency psychiatric demonstration project to provide emergency medical conditions by Institutions for Mental Disease for individuals 21 to 65 who require stabilization in these settings as required by the Emergency Medical Treatment and Active Labor Act.  Other provisions of the law include: waiver authority for dual eligible demonstrations; federal coverage and payment coordination for dual eligibles; payment adjustments for health acquired conditions; comprehensive tobacco cessation for pregnant women in Medicaid; a Medicaid global payment system demonstration project; pediatric accountable care organization demonstration project; face to face encounter with patent required before physicians may certify eligibility for home health services or DME under Medicare; termination of provider participation under Medicaid if terminated under Medicare or other state plans; mandatory state use of national correct coding initiative; and a comprehensive approach to long-term care services and supports.


In response to a question by Representative Lee, Commissioner Wise said it has been a very slow process getting the regulations, and he doesn’t know when they will be available.


In response to a question by Representative Lee, Commissioner Wise said there will be two different Medicaid groups maintained, and the benefit packages will be different as well.


In response to a question by Senator Buford, Commissioner Wise said the state will have to pick up ten percent eventually, of the 150,000 to 200,000 new eligibles, but he is not sure of the dollar amount.


In response to questions by Senator Buford, Commissioner Wise said that even today hospitals face the issue that DSH payments are currently exceeded.  In regard to presumptive eligibility, the idea is that the care the recipients get that day would be covered under Medicaid.  It is a way to get them into the system earlier.  In regard to employer sponsored insurance, participants are made aware that Medicaid would pay the premium and wrap around services when it is cost-effective for the state to do that.


In response to a question by Senator Stine, Commissioner Wise said that even if an individual is determined to be ineligible, there are still 60 days of coverage and the provider can keep 60 days of funds. 


In response to a question by Representative Lee, Commissioner Wise said he has not found a triage provision in the bill yet. 


Representative Lee noted that it is important to understand how all the provisions of this health care bill will be paid for.  He requested a breakdown of where the money comes from.


In response to questions by Senator Williams, Commissioner Wise said the Cabinet has identified $87.5 million annually in savings and it could be more than that after looking further at the budget.  The deficit for 2011 could be between $200 and $300 million.  The shortage in the stimulus money is causing a greater deficit than anticipated.  The deficit for 2012 could be slightly better.  The Cabinet is searching for efficiencies to handle the deficit situation. 


Senator Williams requested that at one of the next meetings the Cabinet presents their strategy for reductions to the committee.  Representative Lee pointed out that information is something we need in order to make final recommendations. With the next meeting being so close, the committee may not get exacts from the Cabinet. But somewhere in the near future, the committee does need to know what direction those reductions will take in order for the members to consider recommendations that need to be made.


In response to a question by Representative Stumbo, Commissioner Wise said that an increase to 200 percent of the federal poverty level would not cover all individuals without insurance, but it would cover a majority of them.


In response to a question by Representative Stumbo, Commissioner Wise said mechanisms to control quality of care include looking at claims data and identifying claims outcomes, and looking for good data that compares to benchmarks from other agencies.


Representative Lee pointed out that the number of uninsured in Kentucky is between 600,000 and 700,000 and with the new health care reform law, additional eligibles could total another 275,000 to 350,000.


In response to a question by Senator Stine, Commissioner Wise said that packages for providers have to match the plans offered under the exchange.  He does think that podiatrists, optometrists and chiropractors will be covered, but he will check to be sure.


Sharon Clark, Commissioner, Department of Insurance (DOI) gave an overview of health insurance reform and state implementation.  She discussed the decision timeline of the high risk pool.  She said on April 2, 2010 HHS asked states to make decisions regarding operation of a temporary high risk pool by April 30.  From April 9 to April 23, 2010, DOI provided the following information to the Governor: a white paper outlining the pros and cons of each option outlined in the request letter; a comparison of the requirements for Kentucky Access, Kentucky’s current high risk pool; and the requirements for the temporary high risk pool.  On April 29, 2010, Kentucky expressed its interest to HHS in operating a high risk pool, but identified areas needing additional information and assurances.  On May 17, 2010, DOI recommended to Governor Beshear that Kentucky opt for the operation of the temporary high risk pool by the federal government. 


Grandfathered plans are defined as a health plan existing on March 23, 2010.  Changes to grandfathered plans will result in a loss of grandfathered status.  Grandfathered plans can: raise premiums to reasonably keep pace with health care costs; make some changes in the benefits; increase deductibles and other out-of-pocket costs within limits; and continue to enroll new employees and new family members.   There are immediate market reforms that apply to all plans and some that apply to new plans, not grandfathered plans.  Kentucky has many of those provisions on the books now.  There is a lot of frustration because there are major issues pending guidance from the federal Health and Human Services.  The rate review process requires HHS, in conjunction with the states, to develop a process for annual review of unreasonable premium increases for health insurance coverage.  Insurers must issue a refund to enrollees if the percentage of premium expended for medical claims and health care quality improvement is less than 85 percent in the large group market or less than 80 percent in the small group or individual market. 


Commissioner Clark also discussed the grants available to states related to health care reform.  Kentucky was awarded a $1 million grant on August 16.  The acceptance letter is due by September 13. Kentucky proposed the following for use of the grant funds: increase the categories of data required to be filed by large groups and expand DOI review of large group rate filings to include analysis of rate factors; increase the amount of data to be provided in a rate filing and modify the review process to include consideration of plan years, underwriting issues and policy forms; develop a publication to explain the rate review process, including the information submitted by insurers and reviewed by the DOI, in plain language, to give notice of specific rate increases and decreases; and conduct surveys and hold open meetings for consumers in order to determine what information would be useful for them to make well-informed health insurance decisions.  There is $30 million in grants to states to establish and operate offices of health insurance consumer assistance or health insurance ombudsman programs.  The department is currently working on the grant submission.  There is $1 million in grant funds available to states for planning and activities related to the establishment of an exchange.  DOI and the Cabinet for Health and Family Services are working collaboratively on the grant application.  An exchange is an organized market place for the purchase of health insurance which has general requirements.  Kentucky can have multiple exchanges. 


Representative Lee pointed out that Kentucky needs to have some type of legislation in the 2011 Session to deal with exchanges.  Commissioner Clark said that she agrees because the exchanges have to be operational by January 1, 2014, but the capability to operate the exchange has to be demonstrated y January 1, 2013.


Representative Lee noted that the Task Force received a letter from Senator Denton and Senator Harper Angel relative to colon cancer, and he asked that staff forward that letter to the Cabinet and asked that the Cabinet supply the information to the committee.


The meeting was adjourned at 12:15 p.m.