Program Review and Investigations Committee




<MeetMDY1> June 9, 2011


Call to Order and Roll Call

The<MeetNo2> Program Review and Investigations Committee met on<Day> Thursday,<MeetMDY2> June 9, 2011, at<MeetTime> 10:00 AM, in<Room> Room 131 of the Capitol Annex. Senator Jimmy Higdon, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Jimmy Higdon, Co-Chair; Representative Fitz Steele, Co-Chair; Senators Perry B. Clark, Vernie McGaha, Joey Pendleton, John Schickel, Dan "Malano" Seum, Brandon Smith, and Katie Kratz Stine; Representatives Dwight D. Butler, Leslie Combs, Ruth Ann Palumbo, and Rick Rand.


Legislative Guest:† Representative John Will Stacy.


Guests:† Neville Wise, Acting Commissioner, Department for Medicaid Services; Eric Friedlander, Deputy Secretary; Beth Jurek, Executive Director, Office of Policy and Budget; Cabinet for Health and Family Services. Mitchel Denham, Assistant Deputy Attorney General; Dave Johnstone, Assistant Attorney General, Medicaid Fraud and Abuse Control; Office of the Attorney General.


LRC Staff: Greg Hager, Committee Staff Administrator; Rick Graycarek; Christopher Hall; Colleen Kennedy; Van Knowles; Lora Littleton; Jean Ann Myatt; Cindy Upton; Kris Harmon, Graduate Fellow; Stella Mountain, Committee Assistant.


Approve Minutes for May 12, 2011

Upon motion by Senator Pendleton and second by Representative Rand, the minutes of the May 12, 2011 meeting were approved by voice vote, without objection.


Medicaid Management and Integrity: Update on Recommendations From Three Program Review Reports


Van Knowles gave a brief overview of the report and said that the Cabinet for Health and Family Services and the Office of the Attorney General had submitted the additional information requested at the May committee meeting.


Senator Higdon commented that this was the second meeting at which the follow-up report on Medicaid was being discussed.† With the changes in the way the Medicaid program will operate under managed care, the question of the cabinetís role remained unanswered. The General Assembly must understand how managed care is going to work, what preparations the cabinet has made, and how it will change the way the success of Medicaid is measured.† Some findings in the report raise concerns that the cabinet is not fully prepared for the sea change that will occur July 1.


Senator Higdon called attention to some of the findings in the report regarding cabinet administrative capacity for contract monitoring and oversight, tracking costs and benefits, information challenges, program integrity fragmentation, and quality of care.


††††††††††† Mr. Friedlander complimented the report and said that the cabinet takes it seriously. The cabinet was responsive to requests for information from Program Review staff and there was much communication back and forth. The cabinet is still in the procurement stage for the managed care initiative. Due to fiscal constraints, there are limits on what the cabinet can do.


††††††††††† Ms. Jurek also said that the report was taken seriously but that there were financial limits on the cabinet. She gave examples of accomplishments in the Medicaid program such as the Health Information Exchange program.


††††††††††† Senator Higdon asked what would be in place by July 1 in the managed care initiative.


††††††††††† Mr. Wise said that responses to the request for proposals (RFP) are being evaluated, so he was limited in what he could say. Negotiations will begin soon. July 1 is the target date for signature of contracts. Other steps will depend on provisions of the contracts.


††††††††††† Mr. Friedlander said that the RFP and responses to vendorsí questions were available on the Website.


††††††††††† Mr. Wise said that the bids were to provide comprehensive packages that would provide seamless services to recipients. There is external quality review now for Passport and there will also be external quality reviewed for the new managed care organizations (MCOs).


††††††††††† Senator Stine asked who was doing the negotiations and what their expertise was.

††††††††††† Mr. Wise said that it was a Finance and Administration Cabinet procurement, so they would be represented. He and the cabinetís secretary would be involved in negotiations. The actuary Pricewaterhouse Coopers will provide financial expertise.


††††††††††† Senator Stine said that it had been her understanding that enrollment would be taking place by July 1.


††††††††††† Mr. Wise said that July 1 is the target for signing contractors with vendors.


††††††††††† In response to questions from Senator Stine, Mr. Friedlander said that the intention is for all areas of the state to be covered. Mr. Wise could not say whether Passport has applied under the new RFP.


††††††††††† Senator Stine asked about changes at the cabinet in response to the shift to more managed care.


††††††††††† Mr. Wise said that they are recruiting staff and contract staff. Shifting of duties involving approximately one half of existing staff will occur after the RFP process.


††††††††††† Mr. Friedlander said that staff have already been working on the RFP and learning new systems.


††††††††††† Senator Stine commented that there seemed to be another layer of employees. If the purpose of the contracts is to save money, why would there be more staff?


††††††††††† Ms. Jurek said that the oversight role is critical and that Medicaid administrative costs are low compared to other states.


††††††††††† Senator Stine said that the Program Review report and the Auditorís report raised doubts about the cabinetís expertise in cost-benefit analysis. She asked what changes have occurred to ensure that this is working.


††††††††††† Mr. Wise said that outside staff are being brought in.


††††††††††† Ms. Jurek said that analysis is being done in house and they are looking at other states.


††††††††††† Senator Stine said that a concern was raised in the report about the lack of institutional knowledge. She asked what was being done about this.


††††††††††† Mr. Wise said that they are cross-training, but there is a shortage of administrative staff, and funding is an issue. There have been a lot of retirements.


††††††††††† Mr. Friedlander said that this is an honest criticism and that they are trying to do training.


††††††††††† Ms. Jurek said that the report notes that written procedures are better in some parts of the cabinet than others. They are working on memorializing better and putting more processes online.


††††††††††† In response to a question from Representative Rand, Mr. Wise said that there are 820,000 Kentucky Medicaid recipients. Ms. Jurek said that the number of recipients is growing but that the rate of growth has recently slowed.


††††††††††† Representative Rand commented that the 2010 Medicaid Cost-Containment Task Force had not offered any solutions to the cabinet.


††††††††††† Senator Higdon asked for a response to the recent comments by Citigroup related to the RFP, including the RFPís emphasis on price.


††††††††††† Mr. Wise said that Citigroup seemed to be saying that the RFP was different. Ms. Jurek added that it is difficult for them to know what Citigroup was trying to say. Mr. Friedlander said that Citigroupís perception that margins would be low for vendors the first year is correct; that is the intent of the RFP.


††††††††††† In response to a question from Representative Palumbo about what could be in place by July 1, Mr. Wise said that members could be assigned to an MCO by July 1.


††††††††††† Senator Stine asked whether the cabinet is ready to implement managed care given that the cost savings associated with Passport could not be determined and given the concerns raised in the Program Review report.


††††††††††† Mr. Wise said that comparing cost-effectiveness is easier at the beginning of the managed care process.


††††††††††† Senator Stine asked what incentive MCOs have to find fraudulent enrollments, and if there is no incentive for them, whether the cabinet has some sort of overview plan in place.


††††††††††† Mr. Wise said that the cabinet determines eligibility and the MCOs accept the members that the cabinet assigns them as being eligible for Medicaid. Mr. Friedlander said that the cabinetís present procedures for doing so would continue. Ms. Jurek said that the cabinet has requested funds in the capital plan to replace KAMES [Kentucky Automated Management Eligibility System].


††††††††††† Senator Stine quoted the Program Review reportís finding that there is no mechanism to record or estimate unreported income and resources discovered by caseworker verification.


††††††††††† Ms. Jurek said that was relating to that particular population segment which is a very small portion of the entire Medicaid population where one spouse is institutionalized and the other is still residing in the community.† Staff are permitted to check up to 5 years back if there is anything during the interview process that causes the worker to suspect some inconsistency.


††††††††††† Senator Stine quoted the Program Review reportís finding that the adult Medicaid eligibility error rate had increased from 7.5 percent to 10 percent and asked why this increase had occurred.


††††††††††† Ms. Jurek said that this is for a relatively small part of the Medicaid population; the overall eligibility error rate is less than 1 percent.


††††††††††† Senator Stine quoted the Program Review report that the cabinet was without a program integrity vendor for 30 months and asked why this had occurred.


††††††††††† Mr. Wise said that even when there was no external program integrity vendor, the cabinet was still doing program integrity work. There was no drop-off in collections in periods when there was no vendor.


††††††††††† Representative Stacy asked if MCOs have to be licensed as insurance companies, whether all respondents to the RFP are licensed or have sought licenses, and how long it takes to obtain a license.


††††††††††† Mr. Wise said that the vendors do have to be licensed. His impression is that respondents that are not licensed have sought licenses. It takes approximately 45 days to get a license but it could be less.


††††††††††† In response to a question from Representative Stacy, Mr. Wise said that MCOs are required to have provider networks.


††††††††††† Representative Stacy asked what the standards are for a provider network.


††††††††††† Mr. Wise said that the specifications include having access to a primary care physician within 30 miles, a specialist provider within 50 miles, and a hospital within 60 miles. Each recipient has to have at least two choices of a primary care physician and a network that can cover all the services that Medicaid covers as laid out in the RFP.†


††††††††††† Representative Stacy asked what the cabinet had learned from Passport.


††††††††††† Mr. Friedlander said that some aspects of Passport have worked better than others. He cited the Passport Mommy and Me program, a home visitation program, as a success.


††††††††††† In response to questions from Representative Stacy about the Passport pharmacy program, Mr. Wise said that he was not aware of any problems.


††††††††††† In response to a question from Representative Stacy, Mr. Wise said that how vendors would provide pharmacy services would be determined through the RFP process. Using the Passport model could be an option.


††††††††††† In response to a question from Senator Seum, Mr. Friedlander said they are moving to managed care because they are hoping to be able to manage costs, realize savings from what they are doing, be able to continue to provide quality care, and will benefit from the competition.


††††††††††† In response to a question from Senator Seum, Mr. Wise said that Passport has been successful in provision of care.


††††††††††† In response to a question from Senator Seum, Mr. Wise said that managed care would be creating jobs at the local level as there is a requirement in the RFP for a local presence.


††††††††††† Senator Seum asked whether the cabinet would be downsizing, whether there would be fewer employees, and if not, why not.


††††††††††† Ms. Jurek said that there would be shift in the role of employees. Administrative costs are already low and are only a very small portion of the whole Medicaid budget.


††††††††††† Senator Seum said that it was unclear how the state would be saving money if provision of care is being turned over to for-profit companies.


††††††††††† Ms. Jurek said that the savings would come in patient care and coordination.


††††††††††† Senator Schickel said that he is concerned about fraud. It seems that the emphasis is on detecting provider fraud. He asked if there is an identifier on Medicaid recipient ID cards and if not, why not.


††††††††††† Mr. Wise said that the card identifies someone as a Medicaid recipient, but there is no picture. Recipients must present other forms of ID too. A proposal about picture IDs was presented to a committee. The downside to having an identifier on the ID card is the cost as there are 820,000 recipients, some of whom are children. Ms. Jurek said there is a magnetic identifier on the card.


††††††††††† Senator Schickel asked whether it identifies through a thumbprint or something that tells for sure that the card bearer is the actual person.†


††††††††††† Mr. Wise said it only confirms their Medicaid ID number as valid.


††††††††††† In response to a question from Senator Schickel, Mr. Wise said that MCOs will be responsible for issuing cards and they may choose to have such an identifier on their cards.


††††††††††† Senator Schickel asked why the cabinet would not require them to do that and what the cons were.


††††††††††† Ms. Jurek said she can provide that report to the committee.


††††††††††† In response to a question from Senator Schickel, Mr. Wise said there are no restrictions on who can apply as long as they have the proper license; even nonprofits can apply.


††††††††††† In response to a question from Representative Steele, Mr. Wise said that better pharmaceutical rebates are being achieved by putting certain pharmaceuticals on their preferred drug list. Approximately 40 percent is received back in rebates to the pharmacy program, part of which goes back to the federal government. Ms. Jurek said that dollar figures would be provided to the committee.


††††††††††† Senator Higdon said that he had heard concerns from pharmacies regarding mail-orders, and from health departments as it relates to school nurses.†


††††††††††† Mr. Wise said that MCOs are required to contract with health departments at rates similar to current rates paid by Medicaid to health departments. He said that provision of pharmacy services would be subject to the contracts with MCOs, which would have to demonstrate the value of mail-order in terms of cost and provision of care and benefit to the recipient.


††††††††††† In response to a question from Senator Higdon, Mr. Friedlander said that there are many current mental health programs. Behavioral health is part of the MCO proposal. Ms. Jurek said that mental health providers will have a seat at the negotiating table.


††††††††††† In response to a question from Senator Higdon, Ms. Jurek said that the department has requested more money in the budget for administration.


††††††††††† In response to a question from Representative Steele regarding controlled substances being available by mail order, Mr. Friedlander said that everything will be in compliance with the law. Ms. Jurek said that they could look this up and provide an answer.


††††††††††† In response to a question from Senator McGaha, Mr. Wise said that he did not know if any of the respondents to the RFP were nonprofit.


††††††††††† In response to a question from Senator McGaha, Mr. Wise said that to be a provider in a provider network, the provider must sign with an MCO. All providers must go through the cabinetís credentialing process.†


††††††††††† In response to a question from Senator McGaha, Mr. Wise said that the requirement in the RFP was that in order to be a responsive bid, applicants had to submit bids under three areas, namely a statewide bid, a bid for all regions excluding the Passport area, and individual bids for eight regions.†


††††††††††† In response to a question from Senator McGaha, Mr. Wise said that applicants could not exempt some areas or services in their proposal.

††††††††††† Senator McGaha asked for cabinet officials to name one service that could be provided through managed care on July 1, 2011.


††††††††††† Mr. Wise said that this would not be known until contracts are signed and negotiations completed.


††††††††††† In response to a question from Senator McGaha, Mr. Wise said that the cabinet will still enroll recipients. MCOs do not have any part in the eligibility determination process.


††††††††††† Senator McGaha noted that the state auditor had concerns about how much money Passport may have saved.


††††††††††† In response to a question from Senator McGaha, Mr. Wise said that current cost levels are available for all regions.† Passport is different from the model under the new RFP. Passport is the only Medicaid MCO in its region. Under the new model, the goal is to have three or more MCOs per region so that there will be competition and they can be compared to each other. It is a federal requirement that all rates be actuarially certified. An external organization will determine what the target should be.


††††††††††† Senator Stine, citing a news article quoting cabinet Secretary Miller, said that it seemed that it had been claimed that services would begin July 1, 2011. She asked if this is accurate.


††††††††††† Mr. Wise said that the plan is to have the contracts in place by July 1.


††††††††††† Mr. Denham summarized the document provided to the committee on recovery amounts.


††††††††††† Senator Seum asked whether settlement means getting a check and what the difference is between a settlement and a recovery.


††††††††††† Mr. Denham said that he had been using the terms interchangeably. Usually the company must send a check within 30 days of settlement. If it is a jury award, the company could appeal.


††††††††††† In response to questions from Senator Seum, Mr. Denham said that the Attorney Generalís Office distributes settlement funds to the appropriate people. The state Medicaid dollars go to the Cabinet for Health and Family Services; the portion for administrative costs goes to the Office of the Attorney General (OAG). For the global cases, generally the agreements are broken down into Medicaid recoveries; this is the single dollar damages amount that would be making Medicaid whole of which all goes to Medicaid.† If there are additional recoveries, the OAG gets 20 percent of those additional recoveries.†


††††††††††† In response to a question from Senator Seum, Ms. Jurek said that by statute, settlement funds are considered claims and recovery dollars. They receive the funds; they remit the federal share to the federal government; the state share is retained and becomes part of the Cabinetís claims and recovery account, which appears in their budget request as restricted funds. Once funds are recovered, they come in as a restricted fund and become part of the cabinetís budget request. None of this money reverts back to the general fund; it goes back to the program by law.


††††††††††† Senator Seum asked how much of the $182 million in total recoveries went to the cabinet.


††††††††††† Ms. Jurek said that the dollar figures could be provided to the committee.


††††††††††† In response to a question from Senator McGaha, Mr. Denham said that the Medicaid fraud unit is funded, in part, by the federal government and federal law prevents the unit from investigating recipient fraud and abuse cases. The grant is very specific about the unitís jurisdiction to investigate and prosecute fraud cases.


††††††††††† Senator McGaha said that local prosecutors do not always take the cases that the Inspector General has investigated.


††††††††††† Senator Stine asked Program Review staff to address the concerns in the report about the Office of Inspector General and AOG.


††††††††††† Mr. Knowles said that staffís impression was that there had been difficulties in the past between the Office of Inspector General (OIG) and OAG, but now they are coordinating. State law requires OIG to notify the Medical Fraud Control Unit (MFCU) of hotline complains regarding recipient fraud and abuse but federal rules prohibit the MFCU from investigating these cases.


††††††††††† In response to a question from Senator Stine, Mr. Denham said that the OIG follows up on recipient fraud and they can refer cases to local prosecutors.


††††††††††† Mr. Denham said that the attorney generalís office coordinates with OIG and the Department of Medicaid Services integrity unit; investigators from each office speak to each other regularly.


††††††††††† Senator Stine asked how many recipient fraud cases are pursued and what the outcomes are.


††††††††††† Mr. Friedlander said he will provide this information.†


††††††††††† Senator Pendleton said that he did not know if members of the committee were aware that they cannot individually ask staff what questions are being asked in an investigation and whether every group is being asked the same questions.† He stated that this was not the policy when he was chair, and he did not know when this had changed.† He stated his belief that the General Assembly needs to look at this to ensure that everyone is treated fairly, and that the same questions are being asked of everyone in a group that is being investigated.


††††††††††† Senator Higdon thanked Sen. Pendleton. He said that members would be receiving a memo to submit additional requests and study subjects for Program Review.


The meeting was adjourned at 12:35 p.m.