The third meeting of the Program Review and Investigations Committee was held on Thursday, September 14, 2000 at 10:00 AM, in Room 131 of the Capitol Annex. Senator Katie Stine, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Katie Stine, Chair; Senators: Charlie Borders, Ernie Harris, Paul Herron, Vernie McGaha, Dan Seum, Ed Worley; Representatives: Adrian Arnold, Sheldon Baugh, Dwight Butler, H. "Gippy" Graham, Charlie Hoffman, Susan Johns, Ruth Ann Palumbo and Dottie Sims.
Guests: Secretary Jimmy D. Helton, Cabinet for Health Services; Deputy Secretary Ann Marks, Cabinet for Health Services; Lynne Flynn, Director, KCHIP, Department for Medicaid Services, Cabinet for Health Services; Phil Kremer, Director of Physical Health, Department for Medicaid Services, Cabinet for Health Services; Teri Mehler, Early Childhood Development Authority.
LRC Staff: Ginny Wilson, Ph.D., Committee Staff Administrator, Lowell Atchley, Greg Hager, Tom Hewlett, Alice Hobson, Joseph Hood, Doug Huddleston, Margaret Hurst, Dan Jacovitch and Susan Spoonamore, secretary, Program Review Staff and Mike Clark, Ph.D., LRC Staff Economist.
Minutes of the August 10, 2000 meeting were approved by voice vote upon motion made by Sen. Charlie Borders and seconded by Rep. Sheldon Baugh.
Ginny Wilson, Ph.D., committee staff administrator gave a brief narrative on the Performance Based Budgeting study proposal and the Personal Service Contracts study proposal.
The Performance Based Budgeting study proposal and the Personal Service Contracts study proposal were approved by voice vote upon motion of Sen. Ernie Harris and seconded by Rep. Ruth Ann Palumbo.
Professor Louise Graham of the University of Kentucky College of Law spoke to the Committee regarding child support guidelines (a copy of Professor Graham’s presentation can be found in the LRC Library file). Professor Graham summarized her presentation by stating that the General Assembly has the authority and responsibility to set fair child support guidelines for the Commonwealth of Kentucky. She also stated that the most unbiased way to study the fairness of child support awards is to look at economic outcomes for families. Her summary opinion was that there is not now and there is not likely ever to be unanimous agreement on the “cost” of raising a child since "cost” is not necessarily a neutral term with a fixed meaning. Furthermore, legislatures have not acted unfairly in directing legislative attention to the appropriate “living standard” to be provided for a child whose parent has a particular amount of gross income. Various economic models for determining a fair and equitable approximation depend upon expenditures in statistical samples. Professor Graham also stated that dependence does not necessarily make any model developed from the sample unfair, but public confidence in any model can be bolstered by careful studies that take into account information that is specific to a given state.
Professor Graham also told the Committee that the Child Support Guidelines Commission is an advisory commission rather than a full administrative agency and that, at best, it makes suggestions to the legislature about how child support statutes and guidelines might be constructed.
Senator Stine asked when the obligor loses a job or becomes ill, how long does it take the court to address the change in financial circumstances and whether that is set out statutory.
Professor Graham stated that it depends on the court docket. Obligors need to be timely and to plan because the federal requirement now says that once a child support obligation is vested, it becomes non-modifiable. If you lose your job, you still owe your child support obligation and it continues to accrue. There has to be a change in that person’s income or circumstances that would require a rather substantial modification.
Senator Stine asked if there was any recognition in the guidelines for monies that are expended while the children are in the non-custodial parent’s care that would offset the overall expenditures being made for the child’s benefit.
Professor Graham stated that the guidelines do not take into account what is called extended visitation. There is a national debate going on at this time over the definition of extended visitation.
Rep. Baugh asked if the child support obligation should be based upon a percentage of income as that of an intact family.
Professor Graham responded that she didn’t think it could be done that way. When you judge the economic outcome for families what you should do is take each family’s income after the transfer of child support and compare that to some kind of living standard for a family of that size.
Rep. Baugh asked if there could be an adverse effect on the child and the non-custodial parent by basing the support on that method.
Professor Graham stated that she didn’t think so. Her studies show that at, the low income level, the burden is being shared equally by each one of the households.
Rep. Baugh asked how a study could not include anecdotal information.
Professor Graham stated that the legislature will never act without anecdotal information. The legislature should think hard about the kind of empirical information that doesn't come straight from an individual parent who tells you a very difficult story.
Sen. Borders asked Professor Graham if she had ever attended a Child Support Commission meeting.
Professor Graham answered that she has been to a Child Support Commission meeting.
Sen. Seum asked if other states had a different system or way of addressing child support issues and if Kentucky had addressed those issues.
Professor Graham stated that the models were looked at by a group of people who were informally drafted by Eastern Kentucky University and Maximus Incorporated to make recommendations. Nationally, the two other ways to do this is the Melson formula and the other way is the Wisconsin system that only looks at a percentage of an obligor’s income, which was rejected in Kentucky.
Sen. Seum asked if child support continues if a non-custodial parent, who pays child support, is in a car wreck, losses a good paying job or has a serious illness.
Professor Graham stated that it does, unless the Court modifies the child support obligation.
Sen. Seum asked if a non-custodial parent who is paying child support has to retain the services of an attorney to go back into court to ask for a modification of child support if there is a reduction in the non-custodial parent’s wages.
Professor Graham stated that the non-custodial parent is permitted to appear pro se.
Rep. Palumbo asked Professor Graham for her opinion of a parent being voluntarily unemployed or under employed and if it is an area that the legislature needs to look into.
Professor Graham stated that it is difficult to look at potential income for somebody that has been long absent from the workforce. It is really important that the child support guidelines be applied in a gender neutral manner.
Rep. Arnold asked if the courts take into consideration the deductions of taxes before establishing a child support amount and if spending of child support money could be monitored.
Professor Graham stated that no deductions are taken into consideration. She also stated that if the custodial parent were to use the money for the purchase of alcohol or drugs, there is a monitoring system called modification of custody.
Rep. Sims asked how the living standard of a child who is receiving $500 in child support payments and a child who receives $200 in child support payments is determined, especially if the children have different fathers but are living in the same household. Is there a way to check to see how the child support money is actually being spent?
Professor Graham stated that each of the children are entitled to a different child support amount. If the child support monies are being misused and it can be proven, then certainly the courts would look at that misuse of child support money.
Rep. Arnold asked if a custodial parent still has to pay the same amount of child support for children of a previous marriage when the custodial parent remarries and has other children.
Professor Graham stated that the child support obligation remains the same. There is no provision for subsequent families.
Sen. McGaha asked if one of the models is Donald J. Bieniewicz and if not, why is it not one of the models?
Professor Graham stated that to her knowledge it is not and didn’t know why it wasn’t being used as a model.
Sen. Seum asked staff to read a Resolution that he presented to the Committee regarding the Kentucky Child Support Guidelines Commission.
Motion made by Sen. Dan Seum and seconded by Sen. Ernie Harris for passage of the Resolution.
Sen. Worley asked if the intent of the Resolution was to let it be known that the Program Review and Investigations Committee was not the appropriate place to effect a statutory change and that the more appropriate Committee for the review would be the Judiciary Committee or some other Committee rather than Program Review?
Sen. Seum stated that was correct.
Senator Stine stated that her impression of the Resolution is that Program Review is expressing concern about the operation of the Kentucky Child Support Guidelines Commission as to whether or not they have complied with the Open Meeting laws and are in essence giving them a recommendation that they make every effort to comply.
Rep. Johns stated that there are child support problems in Kentucky and as a legislative member, we need input and help in order to remedy a problem that seems very unfair to the people of this State.
Sen. Borders noted that Section 1 of the Resolution states that this Committee encourages the Commission to comply with open meetings, open records and other procedural laws of the Commonwealth.
Rep. Johns stated that the Resolution should read that the Commission has to follow or comply with the law of open records.
Sen. Worley stated that the Resolution is simply saying that the Program Review Committee is not the appropriate location for this policy debate and we want all laws complied with in the interim until this issue gets to the appropriate place to effect that change.
Senator Stine asked that a section 5 be added to the Resolution placing this issue back on the Program Review agenda for February in order to give the Commission time to respond and follow the recommendations. In the event the recommendations have not been followed, then this Committee will address the issues again.
Sen. McGaha asked that a recommendation from the Program Review Committee be added to Section 4 of the Resolution encouraging the appropriate standing committees of the House and Senate, to pursue this issue because this Committee feels like it is a crucial and important item that needs to be addressed.
Ginny Wilson, CSA, restated the amendments to the Resolution as follows: Add to Section 4 a recommendation that the Committee seriously consider the matters relating to child support guidelines in Kentucky, and include a list prepared by staff of the concerns raised regarding child support guidelines in Kentucky. The second amendment would be a new Section 5 that would say that the Program Review and Investigations Committee will hear testimony again on the conduct of the Child Support Guidelines Commission in February of 2001.
Upon motion made by Sen. Seum and seconded by Sen. Harris, the Resolution as amended was approved by roll call vote.
Mike Clark, Ph.D., LRC Staff Economist, gave a presentation regarding a decline in the rate of uninsured children (a copy of the presentation can be found, in its entirety, in the LRC Library file). Dr. Clark told the Committee that the percent of children in Kentucky without health insurance decreased from 13.5% in 1998 to 9.9% in 1999. A small portion of the decrease in the number of uninsured children can be explained by a slight drop in the total population aged 18 and under, as estimated by the U.S. Census Bureau. The majority of the decrease, however, is the result of a larger share of Kentucky’s children having health insurance. Although it is likely that a number of factors contributed to this decrease in the rate of uninsured children, these results suggest that the Kentucky Children’s Health Insurance Program (KCHIP) is having an effect on the number of uninsured children. Through the KCHIP application process, the Cabinet for Health Services identified uninsured children who were eligible for Medicaid, but not enrolled. It is also possible that a portion of the decrease resulted from a combination of children moving between types of insurance and the strong economy. In conclusion, Dr. Clark stated that KCHIP and Medicaid have enrolled a large number of children and substantially reduced the number of uninsured children; however, there remains approximately 101,000 uninsured children in Kentucky
Senator Stine asked if there were any conclusions as to why the remaining segment of the population is uninsured.
Dr. Clark stated that it could be that the word hasn’t reached some of the children; it is also possible that some of the children who remain uninsured are relatively healthy and it could be that some of these children are becoming uninsured because of changes in their parents’ employment or their finances.
Tom Hewlett, Program Review staff, presented a follow-up summary of the KCHIP study (a copy of which can be found, in its entirety, in the LRC Library file).
Lynne Flynn, Director, KCHIP, Department for Medicaid Services, Cabinet for Health Services discussed the outreach program and enrollment program of KCHIP (a copy of Ms. Flynn’s presentation can be found in the LRC Library file).
Senator Stine asked what mechanism is in place for children to get off of KCHIP in the event that their circumstances change and how we insure a continuum of care. Also, is there a mechanism to insure that we are not paying for people who don’t need it?
Ms. Flynn responded that folks who have KCHIP as well as folks who have Medicaid are asked to report any changes in their income within a reasonable period of time. When that occurs the information is entered into the system and they no longer receive a card in the future. The Department also redetermines eligibility each year and the information would be checked at that time. Income is checked after the fact against data bases that contain income information.
Teri Mehler, representing the Early Childhood Development Authority, told the Committee that the Authority has been collaborating with the Cabinet for Health Services by holding implementation meetings on a regular basis. The Authority has made sure that the medical services rendered to those recipients have used available KCHIP or Medicaid dollars, when allowed, thereby maximizing the use of federal dollars before the use of state dollars. When state dollars are used, it is used for a population that is either ineligible for Medicaid or KCHIP or does not have private insurance. The Authority will continue to use the Kids Now programs as points of entry for KCHIP or Medicaid.
Secretary Jimmy Helton, Cabinet for Health Services presented an update on Medicaid Managed Care. He told the Committee that, last November, the Cabinet decided to step away from the 1115 partnership waivers as a means of providing managed health care to Medicaid recipients. After several years of effort there were only two partnership programs, one being in Region 3 and the other in Region 5. The new approach to managing the medical program was to develop managed care programs by seeking managed care participation on a competitive basis and offer a choice to Medicaid providers and to the recipients. The Region 5 program was terminated on June 20, 2000 due to financial difficulties. He said the Partnership in Region 3 is doing well. Secretary Helton said, not knowing the level of interest the commercial managed care companies would have in Medicaid business, the Cabinet decided to begin work on enhancing the KenPAC program with the object being to have good statewide coverage and to create incentives for participating physicians to help manage patient care and improve the overall health status of the Medicaid recipients. The Cabinet’s intent was to keep the 1115 partnership waiver program in place, which is currently in Region 3 only. The Cabinet wanted to contract with commercial managed care companies, which would satisfy the Balanced Budget Act (BBA) requirement for competition, and to enhance the KenPAC program. He said this would give better management of the program and provide recipient choice within the KenPAC and between KenPAC and managed care companies. The Cabinet issued requests for information on December 16, 1999 to get an idea of the level of interest among commercial organizations. More than 20 companies responded. Following that, the Cabinet held a vendor’s forum in order to receive verbal input from the health care industry. Later, the Cabinet received additional input from consumers and providers through a meeting which was held April 2, 2000. On June 15 the Cabinet released a request for proposals for managed care services. Shortly after that, on June 29, a bidder’s conference was held to receive questions that any interested party might have about the RFP. Thirty two people attended that conference. On August 28, the date that the proposals and responses to the RFP were due, only 3 were received. One of those was received after the cutoff time and couldn’t be considered. The other two were not responsive to the RFP requirements and all 3 proposals were subsequently rejected. Secretary Helton said the Cabinet was disappointed by the lack of quality and responses received and by the small number received. The Cabinet was not necessarily surprised because over the past several months we have seen one after another HMO drop out of Kentucky’s Medicare business. The Cabinet can surmise that it is difficult to keep an established HMO going and it is even more difficult to move into a new line of business with a low end payer such as Medicaid. Nevertheless, the Cabinet has scheduled meetings with the larger managed care organizations to have discussions about why they were not interested in our business. We intend to meet with Humana, United Health Care, Anthem, Dayton Health Plan and Amerihealth Mercy. Those are these big players that seemed to have had an interest in what we were doing early on. He said the question is, where do we go from here? If we learn about critical barriers to bidding during our upcoming discussions with the managed care industry and if these barriers can be removed within the overall requirements of the BBA, the Cabinet would definitely consider making another contracting effort. We would also consider making another effort if a legitimate interest in competing for Medicaid business within BBA guidelines was expressed by qualified entities. Whether or not any of those things happen we will continue with development of the enhanced KenPAC program. Also, he reported that, when the Cabinet issued the managed care RFI’s back in December, it also issued RFI’s for pharmacy management and case management services. We couldn’t do much with the information we received from those two requests until our contracting effort had run its course and we knew what we were going to be dealing with in regard to contracting HMO’s. Now the Cabinet is ready to push forward on those two pieces of managed health care. At this point I don’t believe that we will be pursuing a pharmacy management services contract because legislation currently on the books pretty much ties our hands in regard to managing costly brand name drugs. Senate Bill 351, which was passed in the 1988 Session, prevented prior authorization of new drugs for the first 12 months that they are on the market and House Bill 608, which was passed in the last Session, requires us to remove drugs from the prior authorization list when an equivalent drug comes on the market. These two bills pretty much make our drug formulary an ineffective management tool for controlling pharmacy costs. The Cabinet will manage the utilization of drugs through the KenPAC doctors. The Cabinet will provide financial incentives for them to prescribe lower cost generic drugs rather than high cost brand name drugs when in their medical judgment it is appropriate to do so. Case management services, on the other hand, will fit very nicely with the KenPAC model and the Cabinet can begin to explore how to implement case management into the Medicaid program. The Cabinet will undoubtedly have to do most of that through contract because there is not enough experienced staff in the Department for Medicaid Services. This will be a major project for Deputy Ann Marks who is preeminently qualified as a case manager expert.
Sen. McGaha asked in what areas in the RFP’s were not responsive to the requirements. Have any discussions been held since the proposals were rejected?
Secretary Helton stated that across the board they were not responsive. They didn’t touch on the statement of work in any kind of an organized way, they didn’t comply with the requirements that the Cabinet had laid out for geographic boundaries for bidding. There were proposals that could never have been evaluated in any organized and legitimate way as the Cabinet is required to do in contracting. Secretary Helton stated that no discussions were held.
Ann Marks, Deputy Secretary, Cabinet for Health Services, stated that the program is in a state of transition. KenPAC itself is not a new program, as it began in 1985, and at that time was considered the first of its kind in the country as a statewide primary care case manager program. Kentucky Patient Access and Care or KenPAC is under the primary care case management model, where the physician is paid a primary care case management fee in addition to fee for services to manage care for the Medicaid members. As with many health care programs, KenPAC is in a state of transition, moving from what was primarily a payer program to that of actually being a managed health care program. Through the KenPAC program, the Cabinet will continue to contract with providers who agree to serve the Medicaid population, and Medicaid and has begun transitioning to the enhanced program with Phase I. Working to transition the KenPAC program is a process that will take a minimum of one year. The Cabinet will emphasize managing health care based on desired outcome.
Philip Kremer, Director of Physical Health, Department for Medicaid Services, Cabinet for Health Services, told the Committee that the enhanced KenPAC program is attempting to take the KenPAC program as originally conceived and use what has been learned with 15 years of experience. Kentucky Medicaid developing an enhanced KenPAC program in three distinct phases. Phase I began July 1, 2000 and will run through September 30, 2000. This Phase began by raising the monthly management fee one-third to $4.00 per member per month. This is effective with the payment made July 2000. Phase II is a phase that will run from October 1, 2000 to June 30, 2001. Phase III is a phase that will run from July 1, 2001 forward.
Ms. Marks stated that they still have direct access for the Medicaid members to OB care and Newborn care. The Cabinet has direct access to the preventative services within the local health departments including the Well Child Visits, the sexually transmitted diseases and TB clinics. The Cabinet must recognize the prudent lay person standard for emergency room access. Not being able to prior authorize a Medicaid member or any member’s entrance into an emergency room is a provision of the Balanced Budget Act of 1997. The Cabinet still retains a contract with a peer review organization that reviews hospitalizations and does the prior authorization and review for organ transplants. They also assist in evaluating high cost medical claims, typically those over $75,000. The Cabinet maintains access to the Commission for Children with Special Health Care Needs, which is the state’s Title V program and is very important to children with disabilities. The Cabinet is pleased to report that Medicaid, as a department, now has a full-time medical director experienced in Medicaid and Managed care and this medical doctor, Dr. Lewis Moore, is also a licensed pharmacist. He will serve in an advisory capacity not only to the Cabinet and to the Medicaid Department but to the physicians in the community as well.
Mr. Kremer stated that, in Phase I, the Department was successful in transitioning over 67,000 Medicaid members from the Region 5 partnership program. The Department, in collaboration with UNISYS, has improved the Medicaid provider enrollment process. The number of KenPAC providers in the greater Lexington area increased from 217 in 1997, prior to the Region 5 partnership, to 311 in July 2000. This is a 43% increase. Currently there are 837 participating KenPAC provider sites with 1,404 physicians. The monthly management fee has been increased from $3.00 to $4.00 effective July 1, 2000. Through meetings that Medicaid had with KenPAC providers, the need for more meaningful utilization reports was identified. The utilization reports have been modified to give KenPAC providers geographic comparisons to other KenPAC providers in the same county in contiguous counties and in the entire state. In Phase I of KenPAC enhancement, the providers have been given the list of their assigned KenPAC members as part of the regular remittance advice so that it is simpler for them to reconcile their monthly Medicaid KenPAC payment. Phase II runs from October 1, 2000 to June 30, 2001. This period allows Medicaid to have measured change in the direction, and Phase II is the opportunity for the Kentucky Medicaid program to introduce incentives based on key indicators determined from our Medicaid claims data. These indicators give KenPAC providers the chance to earn added payment amounts for measurable improvements in having specific preventive services performed and for insuring appropriate utilization of services, such as hospitalization or pharmacy. Medicaid is building a provider profile report for each KenPAC provider. This report is designed for the provider to be able to drill down to determine the high cost drivers associated with the provider’s practice and thus to effect the appropriate modifications. This report also provides Kentucky Medicaid with the tool for identifying the specific provider education needs.
Ms. Marks stated that in care coordination/disease management, the Cabinet will have the opportunity to introduce more of this into Phase II, but the Cabinet also recognizes the responsibility not to duplicate the care coordination services that are already in place with programs such as the Commission for Children, the new Hands program and other early intervention programs. Also, Phase II is the Phase where, statewide, we are projected and must be prepared to enroll 69,000 adults with SSI. This is typically the aged, blind, disabled population. The Medicaid staff within the Cabinet has quite a lot of experience having gone through similar enrollments of the SSI population into the managed care partnerships so that same staff, along with myself, will lead that charge.
Mr. Kremer stated that Phase III of KenPAC begins July 1, 2001. This phase offers the opportunity to give KenPAC providers increased payments for achieving benchmarks aimed at disease and case management programs. The maximum achievable incentive payment will be $9.00 per member per month if the provider is able to reach all goals established by Kentucky Medicaid in cooperation with KenPAC providers. The Cabinet has estimated that the average incentive earned will be approximately $6.00 per member per month. This phase will allow Medicaid to address the medical practice patterns of the KenPAC providers and interact directly through Medicaid care coordination resources.
Ms. Marks stated that by the time the Department gets to Phase III it will have one year’s worth of claims payment experience under its belt for this population so that this time the Department will be able to concentrate on some true disease management programs to target certain problems within a population of people and the Department hopes to be able to look at the outliers on those paid claims reports, study them closely with other studies and move forward with the KenPAC program.
Meeting adjourned.