Minutes of the Seventh Meeting


September 21, 2000


The seventh meeting of the Medicaid Managed Care Oversight Advisory Committee was held on Thursday, September 21, 2000 at 10:00 AM, in Room 131 of the Capitol Annex.  Representative Jack Coleman called the meeting to order, and the secretary called the roll.


Present were:


Members:  Senators Vernie McGaha, and Julie Rose; Representatives Jim Bruce, Jack Coleman, and Dottie Sims.


Guests:  Carol Ormay for the Kentucky Hospital Association; Sharon Stumbo for  the Department for Public Health; Terry McBrayer for McBrayer, McGinnis, Leslie & Kirkland; Linda Sims for Lincoln Trail District Health Department; John Gray for the Certificate of Need Office; Marybeth Crouch for Doral Dental; Jan Gould for the Kentucky Retail Federation; Mike Porter for the Kentucky Dental Association; Kathy Mefford for the Three Rivers District Health Department; Bob Frost for the Christian County Health Department; Cathy Allgood Murphy for the Center for Accessible Living; Bill Wagner and Alex Smith for the Family Health Center; Sean Cutter for MERCK and McBrayer, McGinnis, Leslie & Kirkland; Marian Hayden for Cull & Hayden; John McCarthy for Ameri-Health and McBrayer, McGinnis, Leslie & Kirkland; Anne Joseph for the Kentucky Task Force on Hunger; Laura Early for Protection and Advocacy; and Karen Thomas Lentz for Johnson & Johnson.


LRC Staff:  Barbara Baker, Robert Jenkins, Perry Nutt, Murray Wood and Cindy Smith.


            The agenda for the meeting was an update on the current status of Kentucky's managed care program by Jimmy Helton, Secretary of the Cabinet for Health Services, Ann Marks, Deputy Secretary of the Cabinet for Health Services, and Phil Kremer, Director of the Division of Physical Health in the Department for Medicaid Services.  The Cabinet presented a power point presentation on future plans regarding Medicaid managed care; program descriptions of KenPac Enhanced; provider incentives for participation in KenPac Enhanced; report of efforts to increase access to providers; and transition of members from Region 5 to KenPac.


Secretary Helton said last November it was decided to step away from the 1115 partnership waiver as a means for providing managed care in the Medicaid program.  After several years of effort, the Cabinet for Health Services had only managed to develop two partnership programs: one in Region 3 around Louisville, and one in Region 5 around Lexington.  The new approach to managing the Medicaid program was to develop managed care programs as authorized under the Balanced Budge Act of 1997.  That meant they would seek managed care company participation on a competitive basis, and they would have to offer a choice of providers to Medicaid recipients.  They wanted to keep the two partnership programs in place to work along side the new model.  They knew this would require approval by the Health Care Financing Administration.  The Region 5 program was voluntarily terminated on June 30, 2000 due to financial difficulties.  The partnership in Region 3 is still doing well.  On August 11, a meeting was conducted in Washington with HCFA to discuss keeping Region 3 under its original waiver.  Not knowing what level of interest the commercial managed care companies would have in the Medicaid business, they decided to begin working on enhancing the KenPac program with the objective being to have good statewide coverage, and to create incentives for the participating physicians to help manage patient care and improve the overall health status of Medicaid recipients.  In summary, the intent was to keep the existing 1115 partnership waiver program in place as Region 3, while contracting with commercial managed care companies.  This would satisfy the BBA requirement for competition. He also noted that the Cabinet wanted to enhance the KenPac program, which would give them better management of the program and provide recipient choice within KenPac, and between KenPac and managed care companies.  Secretary Helton described a series of events that were directed at establishing Medicaid managed care through commercial organizations.  A request for information was issued on December 16, 1999, with the purpose being to get an idea of the level of interest among commercial organizations.  A vendor's forum was held on February 16, 2000 in order to receive verbal input from the health care industry.  Additional input was received from consumers and providers from a meeting held on April 2, 2000.  On June 15, 2000, a request for proposals was released for managed care services.  On June 29, 2000, a bidder's conference was held to receive questions from interested parties about the request for proposal.  On August 28, 2000, the date the proposals were due, only three proposals were received.  One proposal was received after the cutoff time, and therefore not considered.  The other proposals were reviewed and determined to not be responsive to the RFP requirements.  All three proposals were rejected.  Meetings have been scheduled with the larger managed care organizations to discuss why they were not interested in the business.  At this point, the Cabinet does not plan to pursue a pharmacy management services contract because current statutes limit the management of name brand drugs.  Senate Bill 351, passed in the 1998 session prevented prior authorization of a new drug for the first twelve months after the drug is on the market.  House Bill 608 passed during the 2000 session requires the removal of drugs from the prior authorization list when an equivalent drug comes on the market.  These bills make the drug formulary an ineffective management tool.  Secretary Helton asked what can be done with the management of drugs through KenPac doctors?  Physicians will be provided financial incentives to prescribe lower cost generic drugs, rather than higher cost brand name drugs when, in their medical judgment, it is appropriate.  Case management services will be a component of the KenPac model.


Representative Coleman asked who the three organizations were that submitted bids.  Secretary Helton said two of them were Ameri-health Mercy and the Phoenix Group.  He did not remember the name of the group that submitted the bid past the deadline.


Representative Bruce asked if anything would be changing in his region, Region 1, until managed care is available.  Secretary Helton said things would be staying the same unless managed care is implemented in the region.


Representative Coleman asked if Health Care Financing Administration was okay with still having Region 3.  Secretary Helton said that was his impression when he left the meeting.  They did not get a firm commitment, but committed to provide them with information that would help make a case.  There is a connection with the University of Louisville, which is a major stakeholder in the Region 3 operation.  Secretary Shalala has a private meeting scheduled with the University of Louisville to talk about the issue.


Representative Coleman asked about prescription drug management and if that is in addition to managed care.  Secretary Helton said they want information on who would be interested in doing the pharmacy management services for them.  The initial plan was to see how the managed care contract came out.  That wasn't successful, so now they will look at pharmacy management.  The basic concept will probably not work here because of the legislation on the books that ties up the formulary.


Representative Coleman asked if the rebate programs are still in existence.  Secretary Helton said the rebate program is very active, and is available in every region except Region 3.


Senator Rose asked if Regions 3 and 5 ever operated under Senate Bill 351.  Secretary Helton said they were exempted from all rules on drug usage. 


Senator Rose asked if there is anything in Senate Bill 351 that would compel them to apply SB 351 to any managed care entity that would take over.  Secretary Helton said he didn't think so.  The only thing that 351 requires is that any MCO must have the same items on its formulary that they have, but it doesn't restrict them from having some prior authorizations that they don't have.


Senator Rose asked if the same thing is true of House Bill 608, that they are not compelled to use it under a managed care system.  Secretary Helton said that is correct.


Senator Rose asked when House Bill 608 would be implemented and the current status of the regulation.  Secretary Helton said the regulation is on his desk to be signed and the implementation date in the law is October 1, and the Cabinet will be ready at that time.


Senator Rose asked how long it will take to implement pharmacy management.  Secretary Helton said he doesn't think they are going to pursue that option.


Next, Ann Marks spoke about the KenPac program.  She said it is a primary care, case management program that began in 1985 in Kentucky.  At that time it was one of the first statewide models established in the country, and was often used as a model for other states.  As with many healthcare programs, the KenPac program is in transition.  Staff from the Secretary's office are working with Medicaid and their staff to help improve KenPac, with the common goal being the improvement of service delivery and achievement of better health outcomes for Medicaid recipients.  The KenPac program will be implemented in three phases, which will take at least a year.  Phase I began in July, 2000, Phase II will begin in October of 2000, and Phase III will begin in July 2001.


Ms. Marks clarified that the KenPac recipients will continue to have direct access to the OB/Routine Newborn Care services and will also have direct access to preventive services within the local health departments.  This includes EPSDT services.  Within the KenPac program, the prudent lay person definition of an emergency will be recognized, which is the language from the BBA of 1997.  The programs with the peer review organization will be maintained.  Children within the KenPac program will continue to have access to the Commission for Children with Special Health Care Needs, based on their acuity and need for specialized case management services.


Senator Rose asked where they are in regard to their budget.  Secretary Helton said they have just closed out the last fiscal year and are in the process of running the actual expenses through the budget model that was constructed for them by Price, Waterhouse, Coopers.  Some information should be coming out of that fairly soon.  Last year, they fell short and had to look for an additional $270 million to get through the year.  The base they use to project the budget going into the biennium was understated.  They expect the budget to be short of what they need, but they will know within the next few weeks where they stand.


Senator Rose referred to a chart of actual expenditures beginning with the 1989-90 budget for Medicaid all the way through the 1999-2000 budget.  There are several categories that were significantly increased over the trend of spending in those areas.  She has some concern that the trend in some areas seemed to be disregarded in the budgetary process for what was budgeted for the 1999-2000 budget.  She asked for an analysis for each entry in regard to how they came up with the numbers of what they requested for the 1999 budget.  Secretary Helton said they would be happy to do that.


Representative Coleman asked how Unisys is doing.  Secretary Helton said they are performing well after getting off to a bad start.


Representative Coleman asked if the SURS program is still in existence in regard to utilization control.  Secretary Helton said the SURS unit is still in existence and they are pulling data from Unisys reports.


The meeting was adjourned at 11:30 a.m.