The Program Review and Investigations Committee met on Thursday, May 18, 2006, at 10:00 AM, in Room 131 of the Capitol Annex. Senator Ernie Harris, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Ernie Harris, Co-Chair; Representative Tommy Thompson, Co-Chair; Senators Brett Guthrie, Vernie McGaha, R J Palmer II, Joey Pendleton, Dan Seum, and Katie Stine; Representatives Adrian K Arnold, Sheldon E Baugh, Dwight D Butler, Charlie Hoffman, Ruth Ann Palumbo, and Arnold Simpson.
Guests: Robert J. Benvenuti, Inspector General; Zach Ramsey, Director, Division for Fraud, Waste and Abuse/Identification and Prevention, Office of the Inspector General; Cabinet for Health and Family Services. Pamela Murphy, Director, Medicaid Fraud and Abuse Control Division, Office of the Attorney General. Bonnie Howell, Office of the Attorney General. John Hicks, Deputy State Budget Director.
LRC Staff: Greg Hager, Committee Staff Administrator; Kara Daniel; Rick Graycarek; Jim Guinn; Margaret Hurst; Van Knowles; Nadezda Nikolova; Rkia Rhrib; Cindy Upton; and Jennifer Howard, Committee Assistant.
Upon motion made by Rep. Simpson, and seconded by Rep. Palumbo, Rep. Tommy Thompson was nominated for the position of House co-chair.
Upon motion made by Rep. Palumbo, and seconded by Rep. Hoffman that nominations cease, Rep. Tommy Thompson was elected House co-chair by acclamation; without objection.
Upon motion made by Sen. Stine and seconded by Sen. Guthrie, Sen. Ernie Harris was nominated for the position of Senate co-chair.
Upon motion made by Sen. Palmer and seconded by Sen. Guthrie that nominations cease, Sen. Ernie Harris was elected Senate co-chair by acclamation; without objection.
Minutes of the December 8, 2005 meeting were approved, without objection, upon motion made by Sen. Pendleton and seconded by Sen. Palmer.
Cindy Upton and Van Knowles, Program Review staff, presented the report Information Systems Can Help Prevent Health Care Fraud and Abuse but Are No Panacea.
Ms. Upton stated that on November 9, 2004 the Program Review and Investigations Committee directed that staff review two computerized information systems: the Kentucky All Schedule Prescription Electronic Reporting System (KASPER) and the Medicaid Management Information System (MMIS). She stated that staff was also directed to review fraud and abuse in Kentucky’s Medicaid program.
Ms. Upton began by reviewing the main objectives of the report. The first objective was to review the new and proposed contracts for MMIS services and assess their features for identifying and controlling Medicaid fraud and abuse and misuse of prescription drugs. She stated the second was to determine how the Cabinet for Health and Family Services (CHFS) and law enforcement agencies can coordinate efforts in identifying and controlling Medicaid fraud and abuse and misuse of prescription drugs.
Ms. Upton said that the first major conclusion of the report was that eKASPER—the Web-based enhanced KASPER—the only system of its kind in the United states--- is effective in preventing and detecting prescription drug abuse and diversion. She stated that the system could be more effective by adding information on the method of payment and obtaining prescription information more quickly. She said that having an interface with the MMIS would strengthen the integrity of the Medicaid program.
Ms. Upton said that the second conclusion was that the new MMIS and Kentucky’s Medicaid modernization plan must be considered together to understand either. She stated that several vendors have contracts for MMIS functions that are tied to modernization initiatives, and other contractors and the CHFS’s Office of Inspector General (OIG) and the Office of Attorney General are involved in assessing improper payments made by Medicaid. She stated that the systems and initiatives are not yet in place, so they cannot be assessed. She said that another review by Program Review staff could be conducted as early as 2007 after the new MMIS had been operating for several months.
Ms. Upton explained the third major conclusion was that Medicaid makes improper payments because of fraud, abuse, and error. She stated that some improper payments can be detected through the use of information in computerized systems, but others cannot. She said that Medicaid also makes unnecessary payments because of unfulfilled dependent medical support orders.
Ms. Upton stated that KRS 218A.202 requires CHFS to establish a system to monitor the dispensing of Schedule II through V controlled substances. KASPER is that system. Officials with the Office of Attorney General and OIG indicated that KASPER was effective in law enforcement investigations and also in determining appropriate medical care. She stated that the average investigation time fell from 156 days to 16 days after KASPER was introduced. She said that physicians and pharmacists use it in prescribing and dispensing medications. She said that eKASPER made reporting faster, often producing a report within 15 minutes of the request.
Referring to Recommendation 2.1, Ms. Upton stated that potential improvements to KASPER include an interface between MMIS and eKASPER to improve CHFS’s ability to detect controlled substance abusers who receive Medicaid benefits, adding method of payment to the KASPER database, and obtaining more timely information in the KASPER database.
Van Knowles presented Chapter 3 of the report regarding Kentucky’s Medicaid modernization. He stated that Kentucky’s Medicaid modernization includes a new MMIS and two related systems, the Pharmacy Benefit Administrator (PBA) and Kentucky Medicaid Administrative Agent (KMAA). He said that the new MMIS is still in the design stage and KMAA systems are not fully implemented.
Mr. Knowles explained that the report has eleven recommendations that apply to Medicaid information systems, PBA, and KMAA. The recommendations relate to the physical location of the Medicaid data, MMIS’s inclusion of other vendors’ claims information, potential duplication of effort and resources, prevention and detection of improper payments, measurement of cost savings and health care outcomes, and additional federal funding that may be available.
Mr. Knowles stated that the three contracts are at different stages of implementation. The PBA has been operational for more than a year, and the KMAA was scheduled to be in full operation on January 1, 2006 using new and existing systems. All new KMAA systems should be operational later in 2006.
Mr. Knowles explained that Electronic Data Systems (EDS) took over operation of the existing MMIS from Unisys in November 2005. He said that the new MMIS is scheduled to in operation by October 1, 2006.
Mr. Knowles stated that the MMIS is built and operated by a vendor called the fiscal agent. He stated that in some states the fiscal agent also provides staff to carry out such tasks as enrolling providers, reviewing claims, or answering recipients’ questions. Mr. Knowles stated that the MMIS’ provider subsystem allows staff to enroll and certify providers. The recipient subsystem stores information about recipient eligibility and other health coverage. The reference file system stores information about Medicaid benefit plans, procedure codes, medication, and more. The claims processing subsystem processes and pays claims and attempts to prevent improper payments. The surveillance and utilization review subsystem provides tools to review and improve health care services, control costs, and identify improper payments. The management and administrative subsystem provides reports for overall program management, budgeting, and accountability. Mr. Knowles said that some of these tasks may be performed by more than one software package, but these subsystems are still the fundamental business functions that a Medicaid agency has to perform.
Mr. Knowles stated that as technology matured, federal regulators recognized that some MMIS functions were better performed by specialized software packages working together. He said that a core MMIS could perform the benefit administration and claims processing functions with the assistance of a specialized point-of-service network. He also said that a data warehouse combines MMIS data with data from other sources and makes it all available to other systems and users. The management reporting tasks could be handled with a reporting system based on a commercial reporting product. Mr. Knowles said that the surveillance and utilization review tasks could be handled by a commercial decision support system designed for the health care market.
Mr. Knowles stated that there are several systems supporting the Kentucky Medicaid modernization. He gave an overview of how different types of information and claims were processed through interactions between the MMIS, PBA, KMAA, other vendors, and CHFS agencies.
Mr. Knowles stated that the PBA, First Health, uses a system with many MMIS capabilities. It has its own data warehouse and decision support system.
He said that the PBA point-of-service network gives pharmacies an immediate decision on whether a claim will be paid or denied. The PBA pays approved claims during its regular payment cycle. Mr. Knowles said that the PBA maintains the state’s preferred drug list, a means of ensuring that effective drugs are prescribed at a managed cost. He said that prior authorization is required for drugs not on the preferred drug list, and the PBA maintains a prior authorization system.
Mr. Knowles explained that to ensure the best medical treatment and to contain costs, the PBA performs drug utilization review. Some tasks are performed by the claims processing system and some by the decision support system. In addition to optimizing the use of drugs, the PBA looks for and reports improper payments to the OIG.
Mr. Knowles stated that the KMAA has information systems that are capable of performing most, if not all, of the MMIS functions. The KMAA enrolls, certifies, and manages providers and serves as the point of contact for Medicaid recipient questions. The KMAA also performs prior service authorizations except for prescriptions. He said that the KMAA manages health care utilization and provides special disease management for selected recipients, and it uses its own data warehouse and decision support system. The KMAA also monitors the benefit plans and suggests improvements in coverage and medical policy.
Mr. Knowles said that the new MMIS will be able to perform all federally required functions, including pharmacy point-of-service claims processing. The KMAA will enroll and certify providers, while the new MMIS will perform some other provider tasks. He stated that the new MMIS will adjudicate and pay medical service claims but not pharmacy claims. He also said that EDS provides and maintains the Medicaid enterprise data warehouse and a decision support system that Medicaid personnel and others can use.
Mr. Knowles stated that Medicaid modernization vendors are placing their databases and processing systems in Florida, Virginia, and Arizona. He said that when sensitive and mission-critical information is in the hands of a third party in another state, there might be problems related to access and control. He said that Recommendation 3.1 asks the Department for Medicaid Services (DMS) to evaluate keeping a duplicate copy of Medicaid data in Kentucky and to ensure that all contracts provide for a smooth transfer when the contracts terminate.
Mr. Knowles said that MMIS will contain complete information about claims that it processes, but to optimize health care and identify improper payments, analysts will need to complete information about pharmacy claims and managed care claims.
Recommendation 3.2 asks DMS to include all claims-related information from all sources in the MMIS and enterprise data warehouse.
Mr. Knowles stated that a number of cases of duplication of functions was identified, one involving the PBA. He stated that there are some possible justifications for duplication of systems. He also said that the PBA may have had specialized pharmacy systems that are superior to those of an MMIS. Mr. Knowles said when the new MMIS is built and becomes operational, it might be cost-effective for the MMIS to take over some of the functions. Recommendation 3.3 asks the Department for Medicaid Services and the vendors to consider the costs and benefits of this approach and to use the MMIS when it is feasible and cost-effective.
Mr. Knowles stated that KMAA systems appeared to duplicate capabilities of the new MMIS. He stated that when the new MMIS is built and becomes operational, it might be cost-effective in the long run for the MMIS to take over some of these functions. Recommendation 3.4 asks the DMS and then vendors to consider the costs and benefits of the approach and to use the MMIS when it is feasible and cost-effective.
Mr. Knowles stated that vendors have copies of MMIS data that they use to perform their tasks; some vendors have full data warehouses and decision support systems. Recommendation 3.5 asks DMS, OIG, and the vendors to consider the costs and benefits of this approach and to use the MMIS data warehouse and decision support system when it is feasible and cost-effective.
Mr. Knowles stated that the report contained three recommendations pertaining to the handling of improper payments. Recommendation 3.6 asks DMS and OIG to take an aggressive stance on preventing improper payments and to evaluate manual review of claims versus fully automated claims processing. Recommendation 3.7 asks DMS to document and follow strict and vigorous procedures to control disabling and reactivating edits and audits.
Recommendation 3.8 asked the relevant vendors and OIG to include all relevant data in their efforts to optimize care and recover improper payments.
Mr. Knowles stated that in order to know if the goals of improving health care and containing costs are being achieved, Recommendation 3.9 asks that DMS describe how the efforts of the PBA and KMAA will be measured. It also asks that the department describe how Kentucky Health Choices will be evaluated.
Mr. Knowles stated that there is potential for enhanced federal funding for the PBA and KMAA. Recommendation 3.10 asks DMS to consult with Centers for Medicare and Medicaid Services (CMS) and submit a proposal for enhanced funding if CMS so advises.
Mr. Knowles said that the state must have ownership of the MMIS software to obtain enhanced federal funding. Recommendation 3.11 asks DMS officials to review the contract language and report their findings to the committee.
Ms. Upton resumed her presentation by discussing improper payments made by the Medicaid program. She explained that in this report improper payments are defined as overpayments, which include fraud, abuse, and error.
Ms. Upton stated that investigations by federal and state officials found fraud and abuse by corporations and individuals amounting to almost $2 billion a year. She a 2005 reported potential overpayments in 13.7 percent of a sample of Medicaid fee-for-service payments.
Ms. Upton stated that the Office of Attorney General’s Medicaid Fraud Control Division investigated many of the allegations of provider fraud. She said that the CHFS' OIG is responsible for the cost of preliminary investigations and investigating recipient fraud because the federal government will not fund the Attorney General’s Medicaid Fraud Control Division for these functions. She stated that some incidents of fraud were discovered by analyzing information in computerized systems. She said that some incidents involve the use of information to determine overpayments to providers, and that some incidents are not apparent from systems.
Ms. Upton stated that adequate funding of the Medicaid Fraud Control Division is essential to controlling Medicaid fraud and abuse. Federal reimbursements to the division account for 75 percent of its funds. She said $9.6 million in federal funding was not accessed in 2005, which represents 87 percent of federal funding available for Kentucky. She also explained that $3.2 million in state funding would be required to fully access federal funding.
She reviewed two recommendations that addressed the need for additional state funding for the division. Recommendation 4.1 asks the Office of Attorney General to request additional state funding from the General Assembly to more fully access the federal funds available to operate its Medicaid Fraud Control Division. The Office of Attorney General should develop a plan showing how the additional funds would be used and the expected results. Recommendation 4.2 asks the General Assembly to consider appropriating sufficient state funds to the Office of Attorney General to enable the office to more fully access the federal funds available to operate its Medicaid Fraud Control Division. Additional funding should be made contingent on planned and actual results of the division.
Ms. Upton stated that the extent of Medicaid’s improper payments has not been measured. She said that DMS voluntarily participated in a federally funded Payment Accuracy Measurement Project from October 2003 to January 2005. Overall, the department reported a 94 percent payment accuracy rate. She stated that because of the methodology required by the federal government, the department did not report total estimated overpayments nor did it consider false claims. She stated that in order to identify false claims, a fraud audit would be needed.
Ms. Upton stated that the OIG was addressing Medicaid overpayment issues. She said that the OIG coordinates the work of Medicaid program integrity contractors. The contractor reviews paid claims data, identifying outliers for investigations, and recommends policy changes and prepayment computer system edits for preventing improper payments.
Ms. Upton reviewed Recommendation 4.3: To maximize Medicaid’s ability to avoid paying claims that are the responsibility of a liable third party, the General Assembly may wish to consider amending KRS 205.623 to include a penalty for noncompliance.
Ms. Upton stated that the OIG conducts preliminary investigations of suspected recipient fraud and abuse, which are referred to the Office of Attorney General. Because the federal government does not fund investigations of recipient fraud by the Office of Attorney General, the recipient cases are returned to the OIG.
Ms. Upton stated that the OIG also conducts preliminary investigations of provider fraud and abuse. The OIG refers its findings to the Office of Attorney General’s Medicaid Fraud Control Division, which can decline the case and return it to the OIG. She stated that the OIG is limited in its ability to pursue the case because the office does not have administrative subpoena power and has limited ability to impose civil penalties. She stated that Recommendation 4.4 asks the General Assembly to consider amending KRS 194A.020(5) to enhance the ability of the Office of Inspector General to pursue the administrative actions in allegations of fraud and abuse against the Medicaid program, including the ability to issue administrative subpoenas and impose civil penalties.
Ms. Upton stated that the OIG had implemented new initiatives to prevent and detect improper payments by the Medicaid Program. Within the Division of Special Investigations, there is a new civil enforcement team that recovers overpayments through civil settlements. She said there is also an internal audit group in the Division of Audits and Detection that will conduct prepayment reviews. Recommendation 4.5 asks the OIG to conduct a cost-benefit analysis of the initiatives of its Division of Special Investigations and its Division of Audits and Detection and report the results to the Program Review and Investigations Committee, the Medicaid Oversight Committee, and the Health and Welfare Committee.
Ms. Upton stated that Medicaid normally does not know whether a billed service was actually performed or was submitted in the correct amount. She said that fraudulent bills can range from individual claims to multi-party criminal conspiracies. Recommendation 4.6 asks the DMS, OIG, and the Office of Attorney General to work with Medicaid contractors to develop a plan for controlling fraud against Kentucky’s Medicaid program. The plan should consider the roles of the DMS, the OIG, the Office of Attorney General, and each relevant contractor, and should provide a timeline for implementing a cohesive fraud control strategy. The DMS should report the plan to the Program Review and Investigations Committee, the Medicaid Oversight Committee, and the Health and Welfare Committee.
Ms. Upton explained that the federal False Claims Act is used by prosecutors to pursue civil actions involving false claims against the federal government, including its Medicaid program. She stated that under the act, a prosecutor only has to prove that an entity knowingly made a false claim or presented false information to an agent to obtain payment. She explained that under the act, recoveries have totaled more than $12 billion, and 18 of the top 20 recoveries involve health care corporations. She stated that some states have false claims statutes, but Kentucky does not. She explained that the Federal Deficit Reduction Act of 2005 provides incentives to states that have the statutes. Recommendation 4.7 asks the Office of Attorney General’s Medicaid Fraud Control Division, and the CHFS’s Office of Inspector General to work together to explore the feasibility of implementing a false claims statute in Kentucky. Issues to be considered include required staffing of all agencies, required monetary resources, and a cost-benefit analysis of implementing such a statute. The two agencies should present a joint report to the Program Review and Investigations Committee, the Health and Welfare Committee, and the Judiciary Committee.
Ms. Upton stated that the issue of unfulfilled medical support orders was addressed in the Uncollected Revenues and Improper Payments report. She said that unfulfilled medical support orders do not constitute improper payments by the Medicaid program. She explained that Program Review staff estimated that between $10 million and $46 million in Medicaid costs could have been avoided in 2005. Recommendation 4.8 asks that CHFS reexamine the costs and benefits of providing greater financial incentives to county child support offices for improving enforcement of medical support orders and determine whether noncustodial parents who cannot provide dependent health insurance should be required to provide some financial assistance for dependent medical care through the Medicaid program. The cabinet’s Department for Medicaid Services and Department for Community Based Services should provide a joint report to the Program Review and Investigations Committee, the Medicaid Oversight Committee, and the Health and Welfare Committee.
Sen. Stine asked whether it would provide more employment of Kentuckians if third-party data centers were located in Kentucky.
Mr. Knowles stated that the selected vendors would be using their existing data centers in Virginia and Florida.
Sen. Stine asked why the federal government does not fund investigation of recipient fraud.
Ms. Upton stated that recipient fraud normally does not involve a significant amount of money for the state to recover. The federal government is trying to focus the Attorney General on provider fraud because it involves more money and the Attorney General can pursue legal action. The Inspector General pursues recipient fraud cases.
Sen. Stine asked whether the Attorney General pursues recipient fraud cases.
Ms. Upton explained that the Attorney General gets the information from the Inspector General and compares it to ongoing investigations, for example, in provider fraud cases or prescription drug diversion cases. After the information is received, it is returned to the Inspector General.
Sen. Stine asked why the Cabinet for Health and Family Services discontinued its contract with the Attorney General.
Ms. Upton stated that Medicaid and the Department for Community Based Services had a contract with the Attorney General to pursue some of the tasks that the Inspector General has now taken over. She was unsure as to the reason why the contract was not renewed.
Rep. Baugh asked whether it would be more efficient for one vendor to handle all the tasks assigned to different vendors.
Mr. Knowles explained that, in principal, any of the companies could perform the entire set of tasks. He said that the Department for Medicaid Services could explain the reasoning for using multiple contractors. He noted that other states have successfully divided the tasks among different vendors.
Rep. Baugh asked if the PBA just deals with the dispensing of prescription drugs or if it also deals with utilization issues, including fraud.
Mr. Knowles explained that the PBA looks at the overall set of prescriptions that each recipient is getting and can help evaluate utilization.
Rep. Baugh asked if that included checking for generic prescriptions.
Mr. Knowles explained that one of the tasks of the PBA is to ensure generic prescriptions are used, consistent with good medical practice.
Sen. McGaha asked if there was a timeline of when MMIS-eKASPER will be functional.
Mr. Knowles stated that there is no specific timeline but that the Inspector General would be able to provide more information.
Sen. McGaha asked if noncompliant online pharmacies are identified.
Ms. Upton explained that noncompliant pharmacies typically cannot be identified until they are caught. She added that this problem is not due to a shortcoming of KASPER.
Sen. McGaha asked what managed care included.
Ms. Upton stated that it included all managed care, Passport, and KenPac.
Sen. Harris asked if we should wait past 2007 to restudy this issue.
Mr. Knowles responded that late 2007 would be the earliest time at which several of the systems would have been in operation for months.
Rep. Hoffman complimented Ms. Upton and Mr. Knowles on their presentation and asked them to explain the need to add form of payment to the KASPER database.
Ms. Upton stated it would provide to Medicaid information in the system on prescriptions paid for by Medicaid as well as prescriptions paid for by cash.
Rep. Hoffman asked how difficult it would be to implement.
Ms. Upton stated that the question could be better answered by the Inspector General.
Sen. Harris welcomed Pamela Murphy, Director of the Office of Attorney General’s Medicaid Fraud and Abuse Control Division.
Ms. Murphy stated that, in response to Sen. Stine’s questions, the Attorney General’s office is only allowed to investigate provider fraud under federal contract. She said that she did not know why the contract between CHFS and the Office of Attorney General was discontinued. She stated that the Office of Attorney General is still handling cases that were ongoing at the time. She also said the only real change from her December 2005 presentation to the committee was that she wanted to mention House Bill 735, a proposal for false claims legislation from the 2006 session. The Attorney General is considering whether to bring the issue of false claims before the interim committee of jurisdiction.
Sen. Harris asked if most of the offenses of Medicaid fraud were misdemeanors or felonies.
Ms. Murphy stated that most are felonies, but it depends on the amount that was stolen. She added that the Attorney General’s office has been receiving more abuse allegations than in the past, which has changed the work their office does. She said that the office has nearly 30 death investigations that are ongoing.
Sen. Harris asked how many staff members work on Medicaid fraud and abuse.
Ms. Murphy stated that the division has 27 employees, out of 220 employees of the Office of Attorney General.
Sen. Harris asked why 87 percent of available federal funds were not accessed.
Ms. Murphy stated that it depends on the state funds appropriated to the Attorney General’s office and that no state is close to using all available money.
Sen. Harris asked who gets the money that is returned.
Ms. Murphy explained that Medicaid gets returned money, but the state gets to retain its portion, which is approximately 30 percent.
Sen. Harris asked that if the Attorney General’s office received an increase in its budget, then theoretically it would result in more returned money.
Ms. Murphy agreed with Sen. Harris’s statement.
Sen. Seum asked how many cases are pending at this time.
Ms. Murphy stated that at the end of 2005 they had 105 fraud cases and 100 abuse cases. She added that at the end of 2003 they had only 43 pending abuse cases.
Sen. Seum asked if people can go to jail for fraud.
Ms. Murphy stated that people do go to jail for fraud.
Rep. Thompson asked if there should be a fraud audit performed and, if so, who would do it.
Ms. Murphy stated that it would be beneficial but it is a question of resources. She commented that they enjoy an excellent working relationship with the Office of Inspector General and he will have to explain the availability of his staff to conduct audits.
Sen. Harris introduced Robert J. Benvenuti, Inspector General, Cabinet for Health and Family Services; and Zach Ramsey, Director, Division of Fraud, Waste and Abuse/Identification and Prevention, Office of Inspector General, Cabinet for Health and Family Services.
Sen. Stine asked why the Attorney General’s contract with the Cabinet for Health and Family Services was not renewed.
Mr. Benvenuti stated that the Fletcher administration evaluated contracts, and it was thought more cases could be worked more effectively and with less redundancy if the money remained within CHFS. He explained that by statute the Inspector General is required to send some cases to the Attorney General’s office. Mr. Benvenuti explained that most recipient fraud cases involved multiple programs, and they are working successfully with prosecutors to tie sentencing with restitution orders to provide an incentive for payments to be made.
Rep. Hoffman asked how difficult would it be to implement form of payment in KASPER, and how useful would it be.
Mr. Benvenuti responded that they do identify Medicaid payers, but identifying other sources of payment is on the to do list based on suggestions from KASPER users.
Sen. Stine asked, regarding Recommendations 4.1 and 4.2, why the Office of Attorney General cannot use currently available funds to access more federal money.
Ms. Upton stated that the division uses all the money appropriated to it for this purpose.
Sen. Harris stated that it would depend on whether budget language allows reallocation of those funds.
Sen. Harris asked if KASPER is the leading system of its kind in the U.S.
Mr. Benvenuti stated that eKASPER is the leading system and that other states want to learn about Kentucky’s system.
Sen. Harris asked if the MMIS duplication is being addressed.
Mr. Ramsey stated that the Inspector General’s office works very closely with the Medicaid department and are involved in any decision making as things move forward.
Sen. Harris asked if all the Medicaid waivers have been approved.
Mr. Benvenuti stated that was not a question he could answer.
Sen. Harris asked what was being done to reduce improper payments.
Mr. Benvenuti explained that they are making great strides, but there is a trade-off between what Medicaid needs to do to make sure providers are paid fairly and in a timely fashion and what the Inspector General’s office is concerned with, which is preventing improper payments. He said many recommendations from the Inspector General to better balance those two functions have been implemented.
Rep. Thompson asked what are the most significant obstacles to eliminating fraud.
Mr. Benvenuti stated that one is the need for stronger tools to investigate and the second is more resources. He stated that getting more scheduled professionals on staff would help them be more proactive with their fraud fighting capabilities. He said that if Kentucky had a Civil False Claims Act it would be very beneficial, but there would be some upfront costs.
Mr. Benvenuti stated that they are using the money from the budget to create specialized squads to work on specific issues to work together and send findings to the Attorney General’s office and to CHFS.
Sen. Stine reviewed Recommendations 4.1 and 4.2 stating that the Attorney General’s office should request more funds and the General Assembly should consider appropriating more funds. She asked whether it was possible that, with funds already in the budget, they could access more federal money.
Deputy Budget Director John Hicks stated that any state agency can reallocate funds with the approval of the state budget director unless specific budget language prohibits this.
Sen. Stine stated that Recommendation 4.1 should be amended to say the Office of Attorney General should request additional state funding from the General Assembly after utilizing all funds within their budget. She said that Recommendation 4.2 should be amended to say the General Assembly should consider appropriating additional state funds to the Office of Attorney General after the office has utilized all internal funds available.
Bonnie Howell, Director of Administrative Service, Office of Attorney General, stated that the office does have the discretion to reallocate funds, but the new budget assumes a reduction of 23 positions and the Attorney General’s office does not have funds to move to the Medicaid program unless there are layoffs.
Sen. Harris asked whether in past budget cycles the Attorney General’s office could reallocate funds.
Ms. Howell answered yes.
Sen. Stine stated that the state is missing out on federal money and so the Attorney General should be encouraged to use money already appropriated to the best advantage. She added the reallocated funding would pay for itself.
Ms. Howell replied that over the past several years the Attorney General’s office has increased funds to the Medicaid program and increased the number of investigators by 5 or 6. She said that at some point it becomes an issue of funding other programs too.
Sen. Pendleton said that the office should be allowed to investigate many areas, and to do the best with the existing federal funds.
Sen. Stine proposed that Recommendations 4.1 and 4.2 be revised to ensure that the Office of Attorney General is able to access as much federal funding as possible.
Rep. Simpson stated that based on his understanding of the proposal, the Attorney General would have to use all funds that have been allocated to his office, so the office could not do anything but investigate Medicaid fraud.
Sen. Stine stated that intent was to ensure that the Attorney General has fully utilized all funds that are at his disposal within his own budget before asking for additional funds.
Sen. Stine suggested that staff draft revisions to the two recommendations that would address the concerns under discussion.
Rep. Palumbo stated the Attorney General’s office has already made the Medicaid program a priority so reallocation would come at the expense of other programs.
Sen. Harris stated that without objection the staff is to provide different wording of the two recommendations for the next meeting to reflect the concerns of Sen. Stine and Rep. Simpson.
Sen. Harris stated the next meeting was scheduled for June 8, 2006.
Sen. Harris asked the staff to hand out the list of suggested study topics, and encouraged committee members to suggest additional topics.
Rep. Simpson said that gas prices in different states did not seem consistent with differences in gas taxes, so he would suggest this topic.
Meeting adjourned at 12:05 p.m.