Interim Joint Committee on Health and Welfare


Minutes of the<MeetNo1> 4th Meeting

of the 2004 Interim


<MeetMDY1> September 15, 2004


The<MeetNo2> 4th meeting of the Interim Joint Committee on Health and Welfare was held on<Day> Wednesday,<MeetMDY2> September 15, 2004, at<MeetTime> 1:00 PM, in<Room> Room 129 of the Capitol Annex. Senator Julie Denton, Co-Chair, called the meeting to order at 1:15 PM, and the secretary called the roll.


Present were:


Members:<Members> Senator Julie Denton, Co-Chair; Representative Tom Burch, Co-Chair; Senators Tom Buford, Richard Roeding, Ernesto Scorsone, Katie Stine, Damon Thayer, Elizabeth Tori, and Johnny Ray Turner; Representatives Robert Damron, Bob DeWeese, Mike Harmon, Joni Jenkins, Mary Lou Marzian, Stephen Nunn, Ruth Ann Palumbo, Ancel Smith, Kathy Stein, and Susan Westrom.


Guests:  Dr. John F. Kennedy, Eastern State Home of Kentucky; Fran Thomas, The Altenheim; Teresa Childers, Sandra West, Sandra Digg, and David McKenzie, J.J. Jordan Geriatric Center; Sara Sutton, concerned citizen; Alex Teper, American Association of Retired Persons - ARMS Committee; Shelley Laneve and Barbara Teague, Shemwell Nursing Home; Sister Christina and John Barkett, Taylor Manor; Craig Jennings, Sacred Heart Village; Steve Cox, Rockcastle Health and Rehabilitation; Nathan Goldman, Board of Nursing; Donna G. Brown, Kentucky Association of Health Care Facilities and Kentucky Association of Chiropractics; Cathy Allgood Murphy, American Association of Retired Persons of Kentucky; Terri Leasor, Center for Accessible Living; Janet Justice, Richmond Health and Rehabilitation; Mark Bowman and Robert Carr, Louden & Company; Sandra Bowling and Rhonda Amis, Management Advisors; Ellen Kershaw, Alzheimer's Association; Sylvia Lovely and Thor Morrison; Office of Drug Control Policy; Tonya Chang, American Heart Association; John W. Bizzack, Ph.D., Commissioner, Department of Criminal Justice Training, Justice Cabinet; M. Brock, Purdue; Ken Urlagos, Maysville Nursing and Rehabilitation; Kathy Gannoe, Nursing Home Ombudsman; Marta Montell, Department of Human Support Services; W. Ed Parker, Take Back Kentucky; John Brazel, Kentucky Pharmacy Association; Bill Doll, John Cooper, and Marty White, Kentucky Medical Association; Karen C. Jones, Office of Drug Control Policy/Kentucky ASAP; Sr. Mary Luann Bender, St. Charles Care Center; Joe Okruhlica and Rich Miller, Kentucky Association of Health Care Facilities; Shannon Means, Kentucky Department of Public Advocacy; Kim Tire, Jenifer Cornwell, and Alision Fisher, Woodland Oaks Health Care Facility; Dianne Shuntich, Department for Public Health; Debra Finneran and John McGrath, Masonic Homes of Kentucky; Sheila Schuster, Kentucky Mental Health Coalition; Sean Cutter, Kentucky Association of Private Providers; Shannon Turner, Deputy Commissioner, Department for Medicaid Services; and Kevin Payton, Cabinet for Health and Family Services.


LRC Staff:  Robert Jenkins, CSA, Barbara Baker, Eric Clark, DeeAnn Mansfield, Nadezda Nikolova, Gina Rigsby, Cindy Smith, and Murray Wood.


The first order of business was a report of the Statewide Drug Control Assessment Summit 2004 final report by John W. Bizzack, Ph.D., Summit Facilitator and Commissioner of the Department of Criminal Justice Training, and Sylvia Lovely, Interim Executive Director, Office of Drug Control Policy.  Dr. Bizzack said that in December 2003, Lieutenant Governor Pence, at the direction of Governor Fletcher, named a core group of people to coordinate and further develop a recommended process of effectively assessing issues surrounding substance abuse in Kentucky.  He stated that the core group consisted of Rice Leach, former Commissioner of the Department for Public Health,  Mardi Montgomery, Deputy Secretary of Education, Joe Whittle, Legal Counsel of the Office of the Lieutenant Governor, and himself.  The intent was to: (1)  provide and establish a mechanism to assess Kentucky's substance abuse issues in the broad areas of education, treatment, prevention, and drug law enforcement; (2) identify gaps and replications of services; (3) identify what programs were working; (4) strengthen existing programs; (5) address funding issues; (6) and gather input from state, local, and federal programs, legislators, and the general public.


Dr. Bizzack stated that the process was not to be an empirical study but an assessment.  To assure the methodology proposed would provide necessary data, an evaluation team of research experts from the University of Kentucky, the University of Louisville, and Eastern Kentucky University reviewed the proposal developed by the core group and endorsed the formal structure of the plan.  The evaluation team determined that this assessment plan would provide for the administration with the necessary information upon which to evaluate the issues.  Fifty-one people from all areas of education, prevention, treatment, and law enforcement were appointed by the Lieutenant Governor to serve as summit panel members.  Panel members were broken into subcommittees, and beginning in February, 2004, started a 20-week process of examining the issues, attending statewide public meetings, and conducting 850 interviews.  The summit panel met once a month to review results, and in late June they agreed upon specific recommendations to submit to Governor Fletcher in late June.


Dr. Bizzack said that the final report is not a compilation of mere data about how many people have been arrested, sent to prison, treated, or been exposed to prevention programs, but rather it also offers findings that will provide Kentucky with a mechanism to centralize the focus and offer genuine organizational structure to address a problem that has been addressed aggressively but largely independently.  The recommendations were not a panacea nor intended to be perceived as one.  He said that one theme that became clear was that the state needs to be more balanced in its efforts, and the efforts must be more systemic in nature.  The summit unanimously agreed and recommended that one of the first steps should be to establish an Office of Drug Control Policy (ODCP) to be responsible for overseeing the effort to become more systemic and balanced.  Governor Fletcher appointed Sylvia Lovely as interim executive director of the ODCP.


Ms. Lovely stated that officials say that drug abuse is the most significant threat in their areas.  The Summit reviewed the substance abuse issue, treated it like the epidemic that it threatens to become, and refocused the emphasis on solutions that work.  The Summit recommended that the approach to substance abuse be balanced by adding more treatment and prevention.  She said that the Summit agreed that drug treatment prevention, education, and enforcement can be better integrated and coordinated to create a more effective system for combating substance abuse to make a difference in all communities.  By the end of the year, the ODCP will develop evaluation and compliance standards for drug court programs, state and privately operated treatment centers, education programs that receive state and federal funds, law enforcement task forces funded by the state and the Byrne Grant, and KY-ASAP programs funded with tobacco settlement funds.


Ms. Lovely said that the ODCP will also have a mapping of effective, affordable, and accessible treatment and education programs, a better understanding of the statewide scope of the drug problem, a package of legislative initiatives that would most effectively combat substance abuse, a list of recommendations on funding efficiencies that could be developed from overlapping programs or through complementing programs that have never before worked together, an aggressive plan for pursuing federal funds and grants through public and private agencies, and a long-term funding plan based on needs that are identified.


Senator Denton asked about problems that would occur by expanding prescriptive authority for scheduled drugs.  Ms. Lovely said this would be one of the issues that needs to be addressed.


Senator Scorsone asked if the Summit found that the parole board had paroled prisoners with drug offenses prematurely and whether that was the reasoning behind reducing the number of parole board members from three to two.  Dr. Bizzack stated that the parole board's approach was not to release offenders before they were ready but to examine non-violent offenders and get them help outside of the prison system to alleviate the cost to the state.  Ms. Lovely said that there is a desire not to lock everyone up but find a way to make the system more efficient in finding treatment for the offenders.


A motion to approve the minutes of the August 24, 2004 meeting was made by Senator Buford, seconded by Senator Tori, and approved by voice vote.


Senator Stine, Co-Chair of the Families and Children Subcommittee, reported that the subcommittee had met that morning and heard an update on the Child Abuse Investigation process, an update on the Child Care Subsidy, and an update on the improvements in the First Steps Program by the Cabinet for Health and Family Services.  A motion to accept the report was made by Senator Scorsone, seconded by Senator Buford, and accepted by voice vote.


A motion to approve 201 KAR 20:490 was made by Senator Buford, seconded by Senator Scorsone, and approved by voice vote.


The next order of business was an update on the nursing facility provider tax legislation enacted in House Bill 292 of the 2004 General Assembly.  David McKenzie, J.J. Jordan Geriatric Center located in Louisa, Lawrence County, said that the Center's mission is to provide high quality health care with stable, long-term, reliable, and well-trained staff.  When House Bill 292 was enacted, the Center was able to modify pay scales across the board by raising the maximum pay rates and improved the employee group health insurance plan available to all employees.  Also, additional staff was added to improve quality of life and clinical care.  He said that it has been demonstrated that a stable, long-term staff makes a significant contribution to the quality of patient care and services provided.


Steve Coy, Administrator of Rockcastle Health and Rehabilitation Center, stated that the industry as a whole has had a difficult time recruiting and retaining qualified nursing staff.  He said that implementing the provider tax will provide residents with a familiar face and an established relationship from an empowered caregiver.


Sister Mary Luann Bender, Administrator of the St. Charles Care Center, located in Covington, stated that since the increase in the provider tax was implemented in July, the Center's annual difference between what it costs to care for a Medicaid resident and what Medicaid reimburses the Center will be decreased.



Craig Jennings, Administrator of the Sacred Heart Village in Louisville, said that of the 317 long-term care facilities, 18 facilities would see a decline in revenues because of the increase in the provider tax.  The mission of Sacred Heart and its parent organization, Mercy Health Partners, is to continue the healing mission of Jesus with an emphasis on the poor and underserved, and that is what this legislation helps his facility do.


Senator Scorsone asked if the influx of new monies has dramatically improved staffing.  Mr. McKenzie stated that his Center was already well staffed with very little turnover but he was able to hire additional staff.  Mr. Coy said that his staff had increased over the previous two years in response to the increase in acuity of care of patients.  Sister Bender stated that her center held admissions and decertified beds because it could not adequately provide staff.  Senator Scorsone emphasized that staffing ratios are still a problem in long-term care facilities statewide.


Sister Christina of Taylor Manor Nursing Home, located in Versailles, said that her facility is a not-for-profit, tax-exempt, charitable institution that is 100 percent private pay and chose not to participate in Medicare or Medicaid.  She said that the enormous increase in the amount of taxes hampers charity provided by the facility.  The residents do not have unlimited funds and, therefore, the facility is unable to raise rates to offset the increase in taxes.  She said that she is not opposed to raising more money for Medicaid nursing homes, but at the same time the results for non-Medicaid nursing homes has been disastrous.


Dr. John F. Kennedy, Executive Director of Eastern Star Home of Kentucky, located in Louisville, stated that even if residents exhaust their funds, they still remain in the facility and do not have to pay.  Dr. Kennedy said that the increase in taxes will cause his facility to have to close its doors and patients to receive Medicaid benefits.  He asked that the non-Medicaid nursing homes be exempted by a waiver.


Fran Thomas, Administrator of Altenheim located in Louisville, said that because she is pursuing CCRC status, the facility will not be able to pay the higher provider tax.  She said that the facility has never received Medicare or Medicaid funds in its 100 years.


Shelley Laneve, Director of Nursing at the Shemwell Nursing Home, located in Providence, stated that her nursing home chooses to provide affordable care for those willing to pay and not be dependant on the welfare system.  In over 40 years of service, Shemwell has never billed or received funds from Medicaid or Medicare.   She said that according to the Medicaid provider tax all facilities with less than 60,000 patient days per year pay $10.60 per patient per day.  Those with more than 60,000 patient days pay $6.80 per patient per day.  The law states facilities should not pay over four percent of their gross earnings on the provider tax.  She believes handing this much money to the facilities and not specifying that it should be used to benefit residents and raise the quality of care is not ensuring that the elderly will be better cared for.


Ms. Laneve stated that Shemwell does not want any of the provider tax money and, therefore, wants to be exempt from having to pay the provider tax.  The Kentucky Association of Health Care Facilities (KAHCF) published an issue brief that stated that all facilities who do not participate in the Medicaid program or private pay facilities would be exempted from this additional tax.  Federal regulation 42 CFR 433 was listed as the regulation that would specifically allow for the exclusion of certain providers from the incremental tax assessment.  Evidently, this was not the case.


Ms. Laneve questioned why hospital-based nursing facilities, physicians and pharmacies who were once included in the Medicaid provider tax and who actually participate in the Medicaid program can be exempt yet nursing homes in Shemwell's situation cannot.  She said that the federal regulation is vague and easily manipulated in this type of situation.  She also questioned the constitutionality of a law or tax that is used to be detrimental to a specific group such as non-Medicaid certified nursing homes and facilities.  She stated that problems within the healthcare system would never improve if money is considered more important than human beings.  She urged the legislature to correct something that is wrong.


Senator Buford stated that the federal government had to blanket the entire nursing home industry with the tax or not be able to have a provider tax.  He stated Kentucky could either seek a waiver to exempt nursing homes not participating in Medicaid from the provider tax, cancel the provider tax, or do nothing.  He suggested Kentucky seek a waiver.


Representative Stein asked if the KAHCF had expressed a sentiment to work with private pay facilities and find a solution to the injustice.  Dr. Kennedy said that the provider tax form should include a separate category with an extremely low rate that is truly reflective of the circumstances of charitable providers.


Representative Marzian asked about the number of beds that were available per nursing home.  Sister Christina said her facility had 58,  Ms. Thomas had 63, Ms. Laneve said 22, and Mr. Kennedy said 18.  Representative Marzian questioned where patients would go if a facility had to close.  Representative Marzian made a motion and was seconded by Senator Tori that the Cabinet for Health and Family Services seek a waiver to exempt nursing homes not participating in Medicaid from the provider tax and put payments on hold until an answer is found.  Representative Burch stated that there was not a quorum, therefore, no vote could be taken.


Representative Damron stated that the state's veterans nursing homes had been adversely affected also.  Continuing care retirement centers by statute are prohibited to take Medicaid patients and, therefore, cannot recoup any losses sustained from the provider tax.  He said that he was disappointed that the provider tax legislation was sent from the Senate to the House of Representatives on the last night of the session and legislators were misled that the tax would be a win/win situation.


Senator Tori asked about a provider tax being applied to a facility.  Dr. Kennedy stated that the provider tax had been based on two percent of gross revenues.  Now it is based on non-Medicaid per patient days at a rate of $10.60 per day.  He said that is a rate that non-profit facilities cannot pay.  He said if inclusion is the only way to benefit all Kentuckians, the amount charged should be reflective that the non-profit facilities receive nothing back, whereas, the for-profit facilities receive $3 back for every $1 put in.


Alex Teper, Community Volunteer from the American Association of Retired Persons and Advocates Reforming Medicaid Services Committee, Ellen Kershaw of the Alzheimer's Association, and Terri Leasor of the Center for Accessible Living, spoke in favor of the tax if the additional funding received by providers is directed toward staffing and patient care.


Shannon Turner, Deputy Commissioner of the Department for Medicaid Services, Cabinet for Health and Family Services, stated that the Cabinet is aware that some homes have been adversely affected.  After discussions with the nursing home industry, the Cabinet requested a waiver from the Centers for Medicare and Medicaid Services (CMS) asking that private-pay only facilities be exempted from the provider tax.  However, in discussions with CMS, the Cabinet was informed that this waiver would be considered "hold harmless."  She said that a provider assessment could not be created where only Medicaid providers are impacted because that would not be a uniform tax.  The Cabinet sought a waiver of uniformity and sought to exclude CCRCs and were told that would not be possible.  She said that the Cabinet received a waiver of uniformity that excluded Medicare patient days and exempted hospital-based facilities.  She stated that recently North Carolina had received a waiver of uniformity from CMS and was allowed to exclude CCRCs.  The Cabinet stated it was amicable to seeking a waiver of uniformity to exclude CCRCs in the future and is willing to work with private-pay facilities to find a solution.


Senator Denton asked for a definition of a waiver of uniformity.  Deputy Commissioner Turner said that typically when a provider tax is imposed, federal law dictates that it be imposed uniformly on all providers of a particular service.  A waiver can be submitted but it requires substantial proof and a valid reason to have an entity exempted.  Senator Denton asked why the two percent is computed differently from the four percent tax.  Ms. Turner said that it is a total of six percent, except for hospital-based facilities, of non-Medicare patient days.  Senator Denton asked if there was a discrepancy in the calculations of the two percent versus the four percent, and Deputy Commissioner Turner said they are all calculated the same.  A provider assessment cannot exceed six percent of the total gross revenue for the industry.  Senator Denton asked if the current waiver could put maximums on specific facilities.  Deputy Commissioner Turner stated that not under the current waiver.


Senator Denton asked under the current waiver if the private pay facilities could pay a substantially different rate than Medicaid-participating facilities.  Deputy Commissioner stated this could not happen under the current waiver because it could create a "hold harmless," which would disallow the assessment in total.  Senator Denton asked if a waiver could be submitted or current waiver modified that would allow maximums on each facility not related to the industry as a whole.  Deputy Commissioner Turner stated that no other state had been granted this type of waiver, and only Kentucky, North Carolina, Oklahoma have been granted a waiver of uniformity, Oregon is in the process of being granted.


Senator Denton stated that her concern is that time is of the essence since the assessment tax is retroactive to July 1.  Deputy Commissioner said that the Department has a meeting scheduled with the Revenue Cabinet to explore a stop-gap measure while a solution is being sought.  The goal is to make sure facilities are not closed down and put out of business and also preserve the additional $55 million from the assessment tax.


Senator Stine asked if the waiver could have a provision whereby if a facility paying more than a four percent assessment tax could have the tax reduced.  Deputy Commissioner Turner stated that the Cabinet is exploring solutions.  Senator Stine asked why the waiver of uniformity could not state that Medicaid providers pay two percent but non-Medicaid providers pay a lesser amount.  Deputy Commissioner Turner stated that the Cabinet would have to seek approval from CMS because it would be a category of non-uniformity.


Representative Marzian asked why legislators were not given very much information about the provider tax before it was passed as an amendment to a bill the last day of the regular session.  Deputy Commissioner Turner stated that the nursing facility associations discussed this with the Cabinet, and the Cabinet advised them that this would not be a Cabinet initiative, but if the legislation passed, the Cabinet would seek a waiver.  Mr. Payton said that the information he heard was that there would be winners and losers if this legislation was enacted.  The language was originally drafted to the budget bill, but when it looked like the budget would not be enacted, an amendment was attached to another bill.  Representative Marzian questioned why the Committee was not informed about the impact of the legislation.


Senator Scorsone asked when the Cabinet started communication with CMS to request a waiver.  Deputy Commissioner Turner said that communication with CMS was started in early March and the waiver was formally submitted in March or April.  The waiver was not approved until late May or early June.  Senator Scorsone asked why the Cabinet did not ask the industry to be concerned about quality of care as they received the additional revenue.  Deputy Commissioner said that the legislation stated that the revenue generated from the assessment imposed and federal matching funds would be used to increase reimbursement rates for nursing facilities.  Administrative regulations would, at minimum, (a) provide that the rate increases shall be used to fully phase in those providers whose current rates are less than the Medicaid price-based rates; (b) correct for inflation adjustments for the past two years; and (c) re-base the rates to recognize current wage and benefit levels in the industry.  She said that while that is not a direct staffing ratio, it is to recognize industry standards to try to promote adequate staffing and retention of quality staff and benefit levels to keep people in the industry. 


Senator Scorsone  asked if some of the Medicaid provider tax funds could be earmarked to provide a pool where non-Medicaid facilities could apply to receive funds to offset charity care.  Deputy Commissioner Turner said that she is not aware of anything currently available for nursing home facilities.  Senator Scorsone said that the Cabinet should explore further.


Representative Harmon asked about the per patient per day rate.  Deputy Commissioner Turner stated that is based on the way the waiver is written in order to conform to federal law.  Representative Harmon asked if there is a restriction that would revert back to a percentage of revenue basis.  Deputy Commissioner Turner stated that legislation would have to be enacted and the waiver would have to be changed and approved from CMS.  Representative Harmon asked if a percentage cap could be done for each entity if it was done uniformly across the board.  Deputy Commissioner stated that the federal law states that you cannot exceed six percent of revenue for the entire population, and that is the language of the waiver as well.  Representative Harmon asked how much can be done by statute and how much by legislation.  Deputy Commissioner Turner stated that legislation would be needed be enacted to change the statute.


Senator Buford asked if intergovernmental transfers from the Medical Assistance Revolving Trust Fund (MART) could be made to the general fund.  Deputy Commissioner Turner stated not to her knowledge.  Senator Buford stated that there is conflicting language in the bill on Section 1, paragraph 3.  Deputy Commissioner Turner said that the bill needs clean-up but believes the application is squarely within state and federal law.  Senator Buford stated the bill expands the assessment to eight percent.  Deputy Commissioner Turner said that the federal law states that an assessment cannot be greater than six percent.  In the absence of the collection of the assessment, the Cabinet must adjust rates that were raised in anticipation of the tax.


Representative Damron  asked if the Cabinet will request an exemption for CCRCs, and Deputy Commissioner Turner stated the Cabinet is looking into this change.  Representative Damron asked if the Cabinet would discuss including the veterans nursing homes in the waiver request.


Senator Tori requested that the Cabinet provide a status report on the provider tax at the Committee's next meeting.


There being no further business, a motion to adjourn at 3:30 p.m. was made by Senator Buford, seconded by Senator Tori, and approved by voice vote.