Medicaid Managed Care Oversight Advisory Committee (HB 785)


Minutes of the<MeetNo1> 15th Meeting

of the 2001 Interim


<MeetMDY1> October 12, 2001


The<MeetNo2> 15th meeting of the Medicaid Managed Care Oversight Advisory Committee (HB 785) was held on<Day> Friday,<MeetMDY2> October 12, 2001, at<MeetTime> 12:00 PM, in<Room> Room 131 of the Capitol Annex. Senator Daniel Mongiardo, Co-Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Daniel Mongiardo, Co-Chair; Representative Paul Bather, Co-Chair; Senators Julie Denton, Vernie McGaha, Dan Seum, and Johnny Turner; Representatives James Bruce, Jack Coleman, Stephen Nunn, and Dottie Sims.


Guests:  Jan Gould for the Kentucky Retail Federation; Bob Barnett for the American Pharmacy Services Corporation; Ardis Hougn, M.D., for the HIV/AIDS Advisory Council; Sheila Schuster for the Kentucky Association of Regional Programs; Marty White for the Kentucky Medical Association; Denise McCowan, R.N., for the HIV/AIDS Advisory Council; Michael Thompson for the HIV/AIDS Advisory Council; Rita Underwood for the Consultants for Long-Term Care; Marchetta Carmicle for the Cabinet for Families and Children, Department for Community Based Services; Johnna Reeder for the United Way of Northern Kentucky; Sarah Nicholson for the Kentucky Hospital Association; Diane Hugue for SCS/JADAK; Todd Trumbore for Pathways, Inc/ Barry Hamlin for Medic; Leah Tolliver for Omnicare; Mike Mayes for the Kentucky Pharmacists Association; Steve Hill for the Kentucky Pharmacist Association/Drug Management Review Advisory Board; James Millard for Equity Technologies; Mike Vandeveer for Bristol-Myers Squibb; Todd Short for Community Based Services; Robin Stanley for Eli Lilly; Georgina Jones for Eli Lilly; Curtis McManis for Eli Lilly; Scott Brown for Eli Lilly; Tonya Chang for the Governor’s Office; Lynn Chapple for the Department for Medicaid Services; Helane Miller for Abbott Laboratory; David Vance for Cull, Haydon & Vance; Dianna McClure for the Department for Medicaid Services; Gay Dwyer for the Kentucky Retail Federation; Norma France for Impact Plus; Bob Babbage; Bill Doll for the Kentucky Medical Association; Jim Carloss for KSAA; Scott Wegenast for the Catholic Conference; John Brazel for the Kentucky Pharmacists Association; and Diana Bellafronto for the Cabinet for Health Services.


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


The minutes of the September 21, 2001 meeting were approved without objection.


The first item on the agenda was testimony from Medicaid recipients, recipient advocacy groups, and other interested  citizens.  The first group of speakers represented the HIV/AIDS Advocacy Group.


Dr Artis Hougn, Chair of the HIV/AIDS Advisory Group addressed five areas of access and potential quality issues for patients with HIV/AIDS.  These are primary care access for patients, out-patient psychiatric care, substance abuse, dental care, and pain management.


Denise McCowan, HIV Clinical Case Manager at the University of Kentucky, spoke in regard to Medicaid eligibility for HIV/AIDS patients.  She said that it would be cheaper on the Medicaid system if care was started earlier.  It would decrease the amount of emergency room visits and hospitalizations if preventive care was provided to the patients.  The eligibility for Medicaid patients is difficult due to the patient’s disability income.  The state’s percentage of poverty level for Medicaid eligibility is far below that of many states, making it difficult to obtain a Medicaid spend down card.


Michael Thompson, Executive Director of Moveable Feast Lexington, and Vice-Chair of the HIV/AIDS Advisory Council discussed what happens when people fall through the gaps in the Medicaid system.  As a person living with HIV, he has experienced first hand the difficulty with being declared disabled and having to wait two years to receive Medicaid.


In closing, Dr. Claire Pomeroy said the HIV/AIDS Advisory group requests that the committee members be very open to the recommendations that come out of the HIV Advisory Council, and that they work on incorporating those in the Medicaid program in Kentucky.


Next, Diane Hugue, Director of the Seven County Services Jefferson Alcohol and Drug Abuse Center, testified in favor of reimbursing for alcohol and drug treatment for all Medicaid recipients. Kentucky Medicaid does not reimburse for alcohol and drug treatment, except for pregnant women.  She said this is also the recommendation of the House Bill 843 Commission.  Currently in Kentucky, some Medicaid recipients are receiving their alcohol and drug treatment through state general fund dollars and block grant alcohol and drug treatment dollars. However, Medicaid recipients who are not federal or state priority populations are not receiving alcohol and drug treatment.


Next, Norma Frantz, a licensed clinical social worker, who works with children with autism said one-third of the children she has served have received in-patient care for extensive amounts of time.  She said that Impact Plus for autistic children is a cost-saving program.  She thinks stricter criteria for Impact Plus eligibility would be good, and also electronic systems would be beneficial.  She said she wanted to be a voice for the children with autism.


The next item on the agenda was a presentation on architecture for a Medicaid Medical Information System, by Laura Mangoba, Chief Technology Officer at Avatar Systems Development, Inc., and Scott Sanner, Vice-President, Electronic Medical Records for Medic Computer Systems.  Ms. Mangoba provided information regarding the possible architecture for a Kentucky Health Information System (KHIS) which would be a distributed system that allows for secure, real time exchanges of needed information between authorized health care providers. This type of system would create substantial cost savings and enable providers to increase the quality of care.  Huge savings are possible with a return on investment of 660 percent.  The existing information technology system are disconnected silos of information and functionality. A KHIS system addresses innovations in healthcare philosophy in that it is: (1) a multi-institution distributed health care system; (2) patient-centric, not institution or physician-centric; (3) a wide-area, extensible, open architecture clinical access system; (4) a system that allows for ownership of a patient record by the physician, with access available only with patient permission; (5) a system with interoperable components; and (6) a system that allows for longitudinal medical records to be assembled from multiple sources.  Ownership of and access to medical records is a serious issue.  Electronic medical records are accessed directly.  Critical stakeholders can secure and access essential medical records in real time without centralization.  In regard to decision support, data mining for decision support disease management and trend analysis integrates multiple information sources.  The system design needs to have the following components: (1) scalable; (2) portable; (3) interoperable; (4) accessible; (5) secure; (6) reliable; and (7) fault tolerant.  The phased rollout of the system will be by region, by provider type or by functionality.  She reported that the funding sources for the system will be: (1) health care industry partners; (2) technology partners; (3) federal government; (4) private organizations; and (5) fee-based revenues.  The partners could include: (1) physicians; (2) hospitals; (3) clinics; (4) pharmacies; (5) insurance companies and HMOs; and (6) health care organizations.  The benefits of the system would be the following: (1) lifetime medical record becomes possible; (2) HIPAA regulations become manageable; (3) point of care can follow the mobility of patients; and (4) improved epidemiological studies.  In summary, she reported the following: (1) the cost savings potential is large; (2) healthcare quality can improve; (3) technologically feasible, but challenging; (4) healthcare community buy in is essential; (5) outside funding is available; and (6) other communities are implementing similar systems.


Senator McGaha asked what it would cost to implement a system such as this in Kentucky.  Ms. Mangoba said she could not put a dollar figure on that, because it depends on which pieces are implemented.


Representative Nunn said that in talks about the telehealth network, it has been discussed that the cost would be approximately one dollar per patient, per year to keep the patient information.  The infrastructure up front would be $110,000 for the software and programming.  The on-going expense would be $100,000 per year because there has to be a help network established with a 24 hour help line.  The telehealth network is relatively small, with the preliminary estimate being for one hundred sites throughout the state.


Senator Mongiardo asked if there is anything lacking in Kentucky that would hamper getting this system up and running.  Ms. Mangoba said from a technology standpoint, there is not.  It is just a matter of getting the groups to work together.


Next, Scott Sanner, Barry Hamlin, and Christa Miller with Medic Computer Systems testified.  Mr. Sanner said that an automated system would provide: (1) immediate access to records; (2) alerts in regard to allergies, drug interaction,, and follow-up appointments; (3) an avoidance of handwriting records; and (4) provide confidentiality of records.  A system such as this would help to avoid medical errors.  At least 120,000 deaths occur each year from medical errors, many are attributable to illegible handwritten notes.  Electronic medical records offset rising costs.  They would eliminate chart pulls, reduce transcription costs, and  save time.  The health care industry nationwide could save at lest $73 billion annually by adopting electronic data exchange practices.  On one page, electronic medical records would provide a quick glance at patient medications, allergies, problems, procedures, images, immunizations, and chart notes.  Benefits of an electronic medical system would be: (1) legible notes; (2) accessible charts; (3) streamlined workflow; (4) reliable data; (5) reduced chart space; (6) increase in reimbursement; (7) risk management; (8) accurate claims; and (9) high tech images.  He reported that by 2010 many changes will take place, including: (1)most consumers will have an online personal health file that contains medical records, risk profiling results, a family history, lab data, and genetic information; (2) 75 percent of all information exchange between the public and their health care providers will occur on the internet; (3) 70 percent of outpatient care will be provided electronically; and (4) videoconferencing and the internet will be the primary mechanisms used to provide health care to special populations and to some geographic regions.


The next item on the agenda was a presentation regarding rebates, expansion waivers, and funding for Medicaid Information Systems by Gene A. Grasser, Associate Regional Administrator, Division of Medicaid and State Operations, Centers for Medicare and Medicaid Services.  First Mr. Grasser spoke about Medicaid drug rebates.  He reported that in 1991, the best price was not received for rebates on Medicaid drugs.  A provision of the Social Security Act effective January 1, 1991, required manufacturers providing prescriptions to Medicaid to participate in the federal rebate agreement.  It also said that any state without a rebate agreement could not receive matching funds for prescription drugs.  It also eliminated formularies.  In 1993, the Veteran’s Care Health Act added the formularies back.  Currently, all 50 states and the District of Columbia cover prescription drugs in Medicaid.  In the drug rebate program, there are 520 drug manufacturers and 55,000 drugs covered by the program.  The rebate is a percentage of the best price offered by the manufacturer.


Next, Mr. Grasser spoke about a waiver of the provisions of Title IXX of the Social Security Act, or Title XXI, the State Health Insurance Program.  This waiver is called the Health Insurance Flexibility and Accountability Demonstration Initiative (HIFA).  The primary goal of the HIFA initiative is to encourage new comprehensive state approaches that will increase the number of individuals with health insurance coverage within the current amount of money being spent on Medicaid and SCHIP.  The administration puts particular emphasis on broad statewide approaches to maximize private health insurance options and target Medicaid and SCHIP resources to populations below 200 percent of the federal poverty level.  Within these parameters, flexibility is provided to the states to determine how this money will be spent.  The demonstration must be statewide, and the state must seek to develop a coordinated, private/public health insurance coverage option for low income uninsured.  The goal is to get people into coverage.  Within this document there are three types of eligibles: (1) mandatory populations that states must cover under the law; (2) optional populations that Kentucky could or could not cover under current law; and (3) expansion populations which cannot be covered under the present Medicaid rules.  Another key issue is that Medicaid and SCHIP expenditures are not intended to supplant employee contributions to employee health coverage.  Medicaid and SCHIP coverage is not intended to replace insurance coverage that individuals purchase.


The third item he discussed was the funding of information systems.  A key component of Medicaid is the processing of claims.  In the last ten years this data processing has expanded greatly and now many of the state Medicaid Management Information Systems have decision support systems and drug utilization review.  In many cases counter data for managed care organizations is processed to see if people are getting services.  Another key ingredient is that it incorporates the information from the state eligibility system.


Senator Mongiardo asked if Mr. Grasser thinks this change of information systems would be looked upon favorably by Washington.  Mr. Grasser said the internet portal is coming, but beyond that he could not comment.


Senator Mongiardo asked Mr. Grasser’s opinion about the information presented at the meeting.  Mr. Grasser said it is far reaching, innovative, and a step beyond current law and regulation.


The next item on the agenda was a focus on State Medicaid Programs and the Oregon Health Plan, by Joel Young, Director, Office of Policy, Planning and Performance Measurement, Department of Human Services, Health Services, for the State of Oregon.  Mr. Young said the total Oregon Health Plan budget is about $3 billion dollars, including CHIP and Medicaid.  The Oregon Health Plan also consists of mental health services, but that figure is not included.  Both Kentucky and Oregon have had a vision for moving toward a type of universal access system.  He believes it is obtainable in both states to some degree.  Both states have explored opportunities to increase coverage and to look at containing costs.  Both states need to focus on expanding access, while also addressing cost issues.  The Oregon Health Plan began in 1994 with the basic concept of expanding health coverage, and established a basis benefit package through a very deliberative process, controlling costs, and ensuring quality.  Their early vision was to have a Medicaid expansion and create a prioritized list of services.  They also incorporated Medicaid Managed Care as a means of coordinating care managing costs.  They also envisioned an employer mandate.  Their delivery system has been managed care, now mainly Medicaid only plans.  They have a primary care case management program.  There are more people now on fee-for-service, due to the disruption in their managed care delivery system.  He said Oregon has had a high risk pool for people with pre-existing conditions which has been partially funded through an assessment of carriers and through a premium share on the participants part involving state subsidies.  The cost to the member is about 125 percent of the average premium cost.  Oregon has been able to maintain coverage policy through a prioritization and resource allocation process.  He reported that in Oregon there will be two benefit packages on the Medicaid side.  There will be a plus package, which is the existing Oregon Health Plan benefit package.  There will also be the standard package, which takes about 90,000 people and moves them to using the standard benefit package. 


Representative Coleman asked if Oregon was broken up into regions similar to Kentucky’s regions.  Mr. Young said they had five different capitation rate areas, based on different types of delivery systems geographically unified in some way.


Representative Bather asked how many people utilize the alcohol and drug mental health services.  Mr. Grasser could not give an exact number, but said it is significant.


Representative Bather asked how prior authorization is done.  Mr. Grasser said a part of that system is computerized.  They also have a drug utilization review system and contracts with the College of Pharmacy who play a significant role in the prior authorization process.


The last item on the agenda was a presentation on the Pharmacists’ Perspectives of the Medicaid Drug Program, by Jan Gould of the Kentucky Retail Federation, Mike Mayes of the Kentucky Pharmacists Association, Bob Barnett of the American Pharmacy Services Corporation of the Kentucky, and Steve Hill for the Kentucky Pharmacist Association/Drug Management Review Advisory Board.  Mr. Gould reported that pharmaceutical costs grew by 24.6 percent in FY 2000 and 31 percent in FY 2001.  FY 2000 expenditures on pharmaceutical increased by $83,630,967 from $347.7 million to $433.4 million.  The reasons for the growth in costs are attributable to (1) new recipients account for 31 percent; (2) increased utilization accounts for seven percent; and (3) price increase by drug manufacturers and changes in drug “mix” account for 62 percent.  During FY 2000, Medicaid added 24,483 new recipients to the program. New recipients added $26,409,322 to pharmaceutical costs for the period, which is a 31 percent increase.  Without the new recipients, Medicaid drug costs still increased 17 percent, still below the national average.  In regard to utilization, increased utilization accounted for $6,120,680 in increased costs.  Increased utilization is a nationwide trend.  Between 1992 and 1998 utilization increased nationally by 37 percent.  The policy options to address costs are to reduce the rate of growth in eligibles and reduce utilization.  The ultimate goal is to maximize appropriate utilization by offering the right drug at the right dose for the right duration for the right diagnosis at the best cost.  He reported that pharmacies have little control of the cost of a prescription, and the net profit of the pharmacy is about 2 percent.  In conclusion he said that pharmacies and pharmacists in Kentucky, while not the problem, are willing to contribute to the search for a solution to the problem.


Senator Denton said she is concerned if whether the cheapest drug will ultimately cost more money in that it has a low efficacy.  Mr. Hill said that will be addressed by the quality of the panel of the P&T Committee.


Bob Barnett discussed the issue of pharmacy benefits managers (PBM).  He said PBMs are not the magic bullet to solve problems.  Historically, PBMs have served as administrative arms to process claims.  Recently, PBMs have put themselves into areas of policy making and health care practice.  He said that is an inappropriate role for a PBM, but they do provide some benefits and cost savings, but at significant recurring cost.  He said that the Department for Medicaid Services, the Cabinet, the Executive Branch, and the General Assembly, not third party PBMs should be the policy setting bodies for matters such as setting reimbursement levels, establishing a pharmacy and therapeutics committee, developing formularies, prior authorization lists, and disease management programs.  He emphasized that a PBM, if chosen by Kentucky, should have no ownership or financial ties to a drug manufacturer or other entity that could pose a conflict of interest real or appearances thereof.


Mike Mays, Director of the Kentucky Pharmacists Association, said the pharmacists in Kentucky are ready to help solve the serious Medicaid dilemma.  The prescription drug side of the Medicaid equation has risen drastically, and is a serious problem.  These increases are not due to the action of pharmacists.  Pharmacists are not the problem.  They do not write prescriptions, only fill them.  Little money is spent in Kentucky until a provider writes an order.  Providers need to work together to help solve the Medicaid problem.


The meeting was adjourned at 4:30 P.M.