Call to Order and Roll Call
The Medicaid Oversight and Advisory Committee meeting was held on Monday, August 22, 2011, at 10:00 AM, in Room 129 of the Capitol Annex. Senator Katie Kratz Stine, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Katie Kratz Stine, Co-Chair; Representative Jimmie Lee, Co-Chair; Senators Walter Blevins Jr., Tom Buford, Julie Denton, and Dan "Malano" Seum; Representatives Bob M. DeWeese, and Joni L. Jenkins.
Guest Legislators: Senate President David Williams, and Representative John Will Stacy.
Guests: Tim Pickerina for AirEvac; Greg Gwinnup and Russell Palk for Medimmune; Jeff Presser for PDAF; Gary Blalack for Glaxo Smith Kline; Eric Clark for the Kentucky Association of Health Care Facilities; Anne Hadreas for the Kentucky Equal Justice Center; Anne Joseph for Covering Kentucky Kids and Families; and Jodi Mitchell for Kentucky Voices for Health.
LRC Staff: Miriam Fordham, Jonathan Scott, and Cindy Smith.
Briefing on the Implementation of the Medicaid Managed Care Expansion
Janie Miller, Secretary, Cabinet for Health and Family Services and Neville Wise, Acting Commissioner, Department for Medicaid Services, Cabinet for Health and Family Services discussed the Medicaid managed care expansion. Carrie Banahan, Executive Director, Office of Health Policy, Cabinet for Health and Family Services, Eric Friedlander, Deputy Secretary, Cabinet for Health and Family Services, and Don Speer, Executive Director, Office of Procurement Services, Finance and Administration Cabinet, were present to answer questions. Secretary Miller stated that the Medicaid plan had to address $80.2 million in program management savings and the remaining budgeted shortfall of $97.3 million. After the savings amounts, the expenditure reductions, and fees, the Medicaid budget for fiscal year (FY) 2012 was balanced with a state overage of $0.2 million and an overage of all funds of $0.7 million. The Passport contract was extended for one year with 1.6 percent in rate reductions and budgetary savings. This provides a continuity of care for Medicaid recipients in Jefferson County and surrounding regions. Passport continues to deliver high quality care and high patient satisfaction.
The three managed care organizations (MCOs) are CoventryCares of Kentucky; Kentucky Spirit Health Plan; and WellCare of Kentucky. These MCOs will provide selected Medicaid covered benefits for selected Medicaid recipients for a fixed per member per month price. The contracts are for a three year term effective July 6, 2011. The commencement of the MCO services is scheduled for October 1, 2011. The contracts exclude Medicaid recipients in long-term care waivers and nursing homes. The contracts will reduce Medicaid expenditures and create within the MCOs the infrastructure to improve health care outcomes and quality of care. The patient protection contract provisions include grievance and appeals; direct state fair hearings; robust reporting requirements; an external quality review organization; quality assessment/performance improvement programs; network adequacy standards; and the choice of three MCOs. The MCO savings estimate for FY 2012 is $289,346,272. The savings estimate for FY 2013-2014 is $1.3 billion in total funds. In regard to the managed care organization oversight, there will be an administrative unit established; statutory accounting and financial analysis; contract monitoring; audit and accounting; medical management oversight; and data analysis. The current implement status includes daily communication and weekly meetings with key MCO staff and communication with external parties. Once implemented and stabilized, the expansion of managed care will favorably position Kentucky. The Implementation will allow Kentucky to focus on three key areas: better information on performance; improved quality initiatives; and effective reimbursement strategies.
In response to a question by Senator Denton, Secretary Miller said that the general policy is that the state does not dictate what rate the MCOs will negotiate with the providers. With pharmacy, the Cabinet is not specific on what MCOs pay to pharmacy providers, but there has to be an adequate number of pharmacists within reach of the members. Other provider types were dictated in the contract.
In response to a question by Senator Denton, Commissioner Wise said that pharmacy will be transferred to the MCOs at two points, one at the initial membership, and again at the beginning of October to catch others recently issued.
In response to a question by Senator Denton, Commissioner Wise said that each MCO will have its own formulary.
In response to a question by Senator Denton, Commissioner Wise said that the Pharmacy and Therapeutics (P&T) Committee will probably have once per quarter meetings, and the meetings will be open to the public whenever staff from the Department for Medicaid Service participates.
In response to a question by Senator Denton, Carrie Banahan said that the formulary for CoventryCares has been approved, and the formularies for the other two MCOs will be available shortly.
In response to a question by Senator Denton, Secretary Miller said that the formularies will be available in the member packets when they are mailed, and on the website of the MCOs.
In response to a question by Senator Denton, Secretary Miller said the P&T committee meetings will be held in the Kentucky offices of the MCOs.
In response to a question by Senator Denton, Commissioner Wise said that the MCOs are transferring the prior authorizations to the plans and there will be no change in the basic Medicaid coverage. But there will be different prior authorization criteria.
In response to a question by Senator Denton, Secretary Miller said she is not aware of any discussion with the MCOs allowing certain drug classes to be protected so there would be no prior authorizations.
In response to a question by Senator Denton, Secretary Miller said that mail order drugs are not prohibited in the contract, but they are for maintenance only. And, they must be approved.
In response to a question by Senator Denton, Carrie Banahan said that all the provider contract application templates have been approved and most sub-contracts have been approved.
In response to a question by Senator Denton, Secretary Miller said that there is a contact number on every letter regarding the MCOs of whom to contact with questions.
In response to a question by Senator Denton, Secretary Miller said that primary care homes will be included in managed care.
In response to a question by Senator Denton, Secretary Miller said there are some carve-outs, such as school based services under the child’s IEP Plan, the First Steps Program, and the HANDS program.
In response to a question by Senator Denton, Secretary Miller said the waiver for the groups that are not covered (disabled kids, foster care, dual eligibles) was submitted to the Centers for Medicare and Medicaid Services (CMS) a few months ago and has been received and reviewed.
In response to a question by Senator Denton, Secretary Miller said the RFI is open for companies that provide managed care for long-term care, but the interested companies tend to be more interested in a region based area, rather than statewide.
In response to question by Senator Seum, Secretary Miller said the hospitals that have said they do not know how they are affected by the MCOs should have received letters regarding the contract process, and those letters have contact numbers on them for questions.
In response to a question by Senator Seum, Secretary Miller said there will be three MCOs available for the rest of the state, plus Passport, which makes the total number of MCOs four.
In response to a question by Senator Seum, Secretary Miller said that different billing rules are possible for each MCO.
In response to a question by Senator Seum, Secretary Miller said the Passport contract was up, and the contract has never been extended for more than one year at a time.
In response to a question by Representative DeWeese, Secretary Miller said there is a basis for matching the members to the MCOs. The matching gets them together, then the plans can compete. The members have an immediate opportunity to change plans on October 1. The plans will be capped at a membership of 55 percent unless a member chooses them.
In response to a question by Representative DeWeese, Secretary Miller said there are not a lot of paper claims, and almost everything is done digitally. So, not many jobs are affected. If there are jobs affected, a number of staff will be transferred to member services.
In response to a question by Representative Jenkins, Secretary Miller said that clients who are not content with the plan can change on October 1. Then there are a couple of times the plans can be changed after that date. After that time, changes are made annually.
In response to a question by Senator Stine, Secretary Miller said that high risk people are not necessarily transferred, but there is a transfer of money between one plan and another.
In response to a question by Senator Stine, Secretary Miller does not think the MCOs are allowed to pass on the risk.
In response to a question by Senator Stine, Secretary Miller said it is between the provider and the MCO as to how often provider reimbursement can be changed.
In response to a question by Senator Stine, Secretary Miller said that the contracts are contingent on approval and the MCOs are contractually bound.
In response to a question by Senator Stine, Secretary Miller said she corresponded with the Medicaid Oversight and Advisory Committee before the meeting, and the Cabinet does not believe there is any reason to delay the October 1 commencement.
In response to a question by Senator Stine, Secretary Miller said the MCOs must get at least 20 percent membership to remain a viable company, and the maximum is 55 percent.
In response to a question by Senator Stine, Secretary Miller said the match is based on what is best for the member, and the choice is always honored. Less than 20 percent actually make a change, and there is not a huge change expected from the membership.
In response to a question from Representative Stacy, Secretary Miller said the billing to the state is what is paid through the contractual relationship. Eligibles are broken down by age and gender and payments will be made in advance of the month.
In response to a question from Representative Stacy, Secretary Miller said the billing forms are standardized and have been for some time.
In response to a question from Representative Stacy, Secretary Miller said all providers should be signed up by September 14.
In response to a question from Representative Stacy, Secretary Miller said the federal reporting is the same process as the state reporting.
In response to a question from Representative Stacy, Secretary Miller said that as of the week before, approximately 15 hospitals have signed on, out of the 109 general hospitals in Kentucky.
In response to a question from Representative Stacy, Secretary Miller said information was provided early to hospitals in medically underserved areas, and the numbers are robust and continuing to climb.
In response to a question from Representative Stacy, Secretary Miller said in the contract there are standards for miles and minutes, and all provider types have been looked at.
In response to a question from Representative Stacy, Secretary Miller said the numbers have been run to see if the members have access to providers, and the standards are reasonable.
In response to a question from Representative Stacy, Secretary Miller said assigning the members to the MCOs was just a way to get the 560,000 assigned, but the members can still choose.
In response to a question from Representative Stacy, Secretary Miller said there are about 15 percent of hospitals signed on, and the goal is to have all hospitals sign.
In response to a question from Representative Stacy, Secretary Miller said each company will have its own credentialing and enrollment standards.
In response to a question from Representative Stacy, Secretary Miller said the any willing provider statute is included in the RFP and the contract.
In response to a question from Senator Stine, Secretary Miller said that St. Elizabeth Hospital has signed on with one MCO and will be signing with a second shortly. The Children’s Hospital of Cincinnati is being encouraged to sign as well.
In response to a question by Senator Blevins, Commissioner Wise said that the external quality review contract will be re-bid soon.
In response to a question by Senator Denton, Secretary Miller said the foster care children will come in with the waiver.
In response to a question by Senator Denton, Secretary Miller said that in regard to out of state kids, Commissioner Pat Wilson is developing a process to track those children and care plans will also be developed. Senator Denton noted that some Medicaid services are leveled and she does not want those kids caught in the middle.
In response to a question by Senator Denton, Secretary Miller said the contracts are the same with a few variations. The target date is still October 1, and the MCOs will be ready. The contracts call for managed care to be up and running by October 1. If two MCOs are ready, start up could be with those two and the third could come on board later, but members have already been matched with all three. If it seems like the MCOs will not be ready, the Cabinet will assess how close they are and how much more it would take to be on board by the target date.
In response to a question by Senator Denton, Secretary Miller said that so far the MCOs have met all the time frames and should be up and running by October 1.
In response to a question by Senator Denton, Secretary Miller said the establishment of medical homes for all patients would be best handled by the MCOs.
In response to a question by Senator Denton, Commissioner Wise said that Passport is still on a year-by-year contract. The federal government does raise concerns at every renewal about Passport being sole-sourced, and the Cabinet is waiting for feedback on the issue from CMS. Passport would like to have a longer contract.
In response to a question by Senator Denton, Commissioner Wise said the rates have been actuarially certified.
In response to a question by Senator Denton, Secretary Miller said Passport was a not for profit organization. The three new MCOs are for profit. There are provisions in the contract that state the MCOs will have to show net pre-tax earnings and notify the state of the distributions if there is money left over.
In response to a question by Senator Denton, Mr. Speer said there seven companies that submitted bids.
In response to a question by Senator Stine, Mr. Speer, said that the procurement is handled through the Finance and Administration Cabinet, through an open procurement and the bid file contains all the documents which can all be seen under the open records requirements. The same policies are followed as through any regular procurement.
In response to a question by Senator Stine, Mr. Speer said that these MCO contracts do not go through the Government Contract Review Committee because the MCO contracts are not two year personal services contracts and have to go through a different process. The MCO contracts were done as a Master Agreement and longer than the two year period as allotted under the Contract Review standards.
In response to a question by Senator Stine, Secretary Miller said the Cabinet will have to talk to the federal government about the contractual agreement that has been set that would give the state additional payments back and whether or not those payments would have to be shared with the federal government.
In response to a question by Senator Stine, Secretary Miller said that providers at the local level work out the arrangements to provide services after hours.
In response to a question by Senator Stine, Secretary Miller said that the lock-in program has been around for years and is operated by Medicaid for individuals that have been identified with high usage.
In response to a question by Senator Stine, Secretary Miller said there is no interface between the KASPER system and the MMIS system.
Representatives of the three managed care organizations answered questions. On hand were Mike Minor, Chief Operating Officer, WellCare of Kentucky; Jesse Hunter, Executive Vice-President, Kentucky Spirit Health Plan; and Claudia Bjerre, Senior Vice President, Medicaid, CoventryCares of Kentucky; and Barbara Witte, CEO, CoventryCares of Kentucky.
In response to a question by Representative Stacy, Mr. Minor said WellCare would have to get the exact number of hospitals signed, but it is under 10. Ms. Bjerre said that CoventryCares has 57 hospitals with LOIs, and 6 with full contracts. Mr. Hunter said that Kentucky Spirit has 11 hospitals under contract, and over 40 that have LOIs.
In response to a question by Representative Stacy, Mr. Minor said WellCare’s network of pharmacies is over 900, which includes some specialty pharmacies. He will report back on the number of independent pharmacies. Ms. Bjerre said she would have to get the number of pharmacies that Coventry has and report back to the committee. Mr. Hunter said that Kentucky Spirit is in active discussions about pharmacy, but he did not have the exact number with him.
In response to a question by Representative Stacy, Mr. Hunter said that Kentucky Spirit has about 2,000 primary care physicians (PCPs) under contract. Ms. Bjerre said that Coventry has 2,476 PCPs on LOI, and 769 under contract. Mr. Minor said that WellCare has 5,000 locations, with 1,100 PCPs and 1,400 specialists.
In response to a question by Representative Stacy, Mr. Minor said that WellCare has 75 active negations with hospitals, and WellCare would like to contract with all hospitals. Ms. Bjerre said the Coventry is in active negations with 63 of 89. Mr. Hunter said that Kentucky Spirit is negotiating with 43 hospitals.
In response to a question by Representative Stacy, Ms. Bjerre said the emphasis was on PCPs because of the assignment. Coventry has been actively engaged with all hospitals throughout the Commonwealth.
In response to a question by Representative Stacy, Mr. Minor said that WellCare has outreached to all the hospitals in Eastern Kentucky, and there is an agreement with one Eastern Kentucky hospital. Ms. Bjerre said that Coventry has 12 LOIs and two contracts with hospitals in Eastern Kentucky. Mr. Hunter said that Kentucky Spirit is in active negations in five hospitals in that region, but none is under contract.
In response to a question by Representative Stacy, Ms. Bjerre said that MEDCO does Coventry’s contracting, and she will have to report back on the pharmacy numbers in Eastern Kentucky. Mr. Minor said he does not have WellCare’s pharmacy numbers for that region.
In response to a question by Representative Stacy, Ms. Bjerre said that Coventry does business in eight states. Mr. Minor said that WellCare does business with 13 other states besides Kentucky.
In response to a question by Representative Stacy, Mr. Minor said that WellCare has worked with the Cabinet to know who is providing the majority of services to Medicaid members to be sure that as care is transitioned, WellCare can manage and continue that care.
In response to a question by Representative Stacy, Mr. Hunter said that Kentucky Spirit owns its own pharmacy benefits manager (PBM) and that the Medicaid population is not a mail order group of individuals. Ms. Bjerre said it is the same situation for CoventryCares; and Mr. Minor said it is the same situation for WellCare.
In response to a question by Senator Stine, Mr. Minor said WellCare has finalized its contracts and has agreed to the rates with those providers.
In response to a question by Senator Denton, Ms. Bjerre said that she will find out if Coventry is rolling into a contract or using an existing contract. Mr. Hunter said that Kentucky Spirit has direct contracts. Mr. Minor said that with WellCare, pharmacies will be provided a reimbursement for Kentucky, and it will be the decision of the pharmacies if they want to take that reimbursement.
Senator Denton requested that all the MCOs send copies of their reimbursement fee schedules for dental and pharmacy, between generic and brand name, to staff to distribute to the members.
In response to a question by Senator Denton, Ms. Bjerre said that Coventry does not know what its PBMs will be doing in regard to RSV season, but it is a good point to look into. Mr. Minor said that WellCare will be able to identify individuals that have been in that program before.
In response to a question by Senator Denton, all three MCOs said their P&T Committees will meet quarterly.
In response to a question by Senator Denton, Mr. Hunter said that Kentucky Spirit is working on individual contract negotiations, and Kentucky Spirit wants to increase the amount of primary care utilization for each member through its medical home and do its best to make the providers whole. The KENPAC program was not included in the data book that was provided with the procurement process. Ms. Bjerre said that the $4 was not included in the rates that were paid to them. Mr. Minor said that WellCare is working with primary care for different reimbursement methodologies.
In response to a question from Senator Denton, Mr. Hunter said that Kentucky Spirit is negotiating with independent pharmacies separately than chain pharmacies with different reimbursements and dispensing fees. Mr. Bjerre said that she believes that Coventry has national contracts with chains, and she is assuming it will be separate from the independents. Mr. Minor said that WellCare has different agreements with independent pharmacies.
In response to a question by Senator Denton, Ms. Bjerre said that Coventry’s formulary has been approved. Mr. Hunter said that the formulary for Kentucky Spirit is market specific, and Kentucky Spirit is awaiting the P&T Committee to modify the national form. Mr. Minor said that WellCare is in the final stages of its formulary.
In response to a question by Senator Denton, Mr. Hunter said that Kentucky Spirit will pay pharmacy with real time adjudication with real time payment. Ms. Bjerre said that Coventry pays the same way. Mr. Minor said that he has to check on that for WellCare.
In response to a question by Senator Denton, Ms. Bjerre said that Coventry’s rates are tied to the Medicaid reimbursement. Mr. Minor said WellCare, for providers tied to the Medicaid fee schedule, will make updates with the notice WellCare is required to give. For pharmacy, the rates are based on MAC pricing, and it is updated as the new MAC pricing comes out. Mr. Hunter said it is the same for Kentucky Spirit.
In response to a question by Representative Stacy, all three MCOs said they do not know how pharmacy is handled in the Passport region.
In response to a question from President Williams, all three MCOs said there is no way to know how much of the Medicaid budget will be covered by the three different plans.
In response to a question from President Williams, Mr. Hunter said that Kentucky Spirit was the low cost bidder. And, Kentucky Spirit is confident and have a lot of experience in the rates, and the ability to perform on that basis. He does not believe it will be a high margin business for Kentucky Spirit and will possibly yield a pre-tax margin range of three to five percent. Administrative costs plus profit will be within the 10 percent total. Ms. Bjerre said that Coventry will be between six to seven percent, higher the first year, with little profit, if any. Mr. Minor said that WellCare, with administrative fees and profit, will be in the range of eight to eleven percent.
In response to a question by President Williams, Mr. Minor said the bid rates required the companies to fund administrative costs with minimal profit.
In response to a question by President Williams, Mr. Minor said WellCare is not offering any group less than 100 percent of the Medicaid rate. The savings will be with utilization, care management, and care coordination.
In response to a question from President Williams, Mr. Minor said that there will be a shift in utilization, with the goal and the objective being additional primary care visits, additional coordination of care to services such as home health and specialty services. With that, there is a reduction in the number of expensive inpatient stays.
In response to a question from President Williams, Ms. Bjerre said on a fee-for-service basis, providers will be reimbursed for the services provided.
In response to a question from President Williams, Mr. Minor said the $475 million less is the exchange between the cost for seeing specialists and primary care providers seeing more patients because of the preventive services, and better quality of care of the members. There will be fewer patients that end up in the hospital due to the care coordination. One of the goals of the program is a change in utilization.
In response to a question by President Williams, Secretary Miller said that the administrative fees come out of the $1.3 million and that includes the total payment paid to the MCOs. The MCOs have to take their administrative costs out of what is paid to them, and are not given additional money.
In response to a question by President Williams, Secretary Miller said that the savings the Cabinet demonstrated would be the estimate of what the costs would have been if fee-for-service were continued on the benefit side, without adding the administrative cost. When that is added on the fee-for-service, the contracted rates are for the entire package. The MCOs have to take their administrative costs out of what was paid to them by the state.
In response to a question by President Williams, Secretary Miller said the savings of $1.3 million over the 33 months were projected by actuaries and are very much in line with what the historic growth has been. The savings calculations are based on what the fee-for-service would be compared to the contract prices the state has contractually agreed to.
In response to a question by President Williams, Secretary Miller said she believes that the projections are good projections of what the expenditures would be assuming that appropriated dollars are made available to cover expenses. The program expenditures are what they are, and are driven by a number of different factors.
In response to a question by President Williams, Secretary Miller said the actuary projected that $2.7 billion would be spent in 2012. With the MCO contracts in place, the projection would be $2.3 billion.
In response to a question by President Williams, Secretary Miller said she does not know how much money will go out to the providers.
In response to a question by President Williams, Secretary Miller said it was difficult to project the amount that would have been in the budget at the end of the year. The Medicaid program pays out about $70 million each week. A big portion of the $53 million is in the supplemental rebates. Medicaid out performed on the amount of supplemental rebates being received. The impact of the cost containment was coming in at different times, in different ways. In a period of instability it is difficult to make projections. Medicaid rarely ends the program with nothing, but the ways the cost containment worked and the time frames outstripped the savings in some areas.
Adjournment
The meeting was adjourned at 2:30 p.m.