Medicaid Oversight and Advisory Committee (HB 90)



<MeetMDY1> September 12, 2005


The<MeetNo2> Medicaid Oversight and Advisory Committee (HB 90) meeting was held on<Day> Monday,<MeetMDY2> September 12, 2005, at<MeetTime> 1:00 PM, in<Room> Room 131 of the Capitol Annex. Representative Rick Rand, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Richard "Dick" Roeding, Co-Chair; Representative Rick Rand, Co-Chair; Senators Walter Blevins, and Julie Denton; Representatives James Bruce, Jimmie Lee, and Stephen Nunn.


Guests:  Katie Brown and Patti Silvers, Department for Community Based Services; Carol Carr and Phyllis McAllister, Kentucky Can; Jim Kimbrough, Protection and Advocacy; Prentice Harvey, Norton Healthcare; Jan Gould, Kentucky Retail Federation; and Sarah Nicholson, Kentucky Hospital Association.


LRC Staff:  Barbara Baker, Eric Clark, Tyler Campbell, and Cindy Smith.


The minutes of the July 11, 2005 meeting were approved without objection.


The first item on the agenda was a presentation on Medicare Part D by Roger Perez, Acting Regional Administrator, Centers for Medicaid and Medicare Services, Atlanta Regional Office, and Jill Bell, Vice President of Public Affairs, Passport Health Plan.  He said that CMS establishes policies for paying health care providers, conducts research and assesses quality.  In FY 2006 CMS will spend over $500 billion in providing health care to our nation’s seniors, people with disabilities and families with low incomes.  He said that the Medicare program is the national health insurance program for people age 65 or older regardless of income and some persons with disabilities. Medicare provides hospital, doctor and other medical care to approximately 43 million Americans.  He also said that Medicaid is a program that pays for medical assistance for certain individuals and families with low incomes and resources.  This program is jointly funded by the Federal and State governments to assist States in providing medical and long-term care assistance to people who meet certain eligibility criteria.  Medicaid is the largest source of funding for medical and health-related services for people with limited income. It provides coverage to roughly 46 million Americans.


Next, Mr. Perez spoke about the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA). On December 8, 2003, President Bush signed into law this historic legislation.  MMA transformed the Medicare program by significantly expanding private health plan options, establishing preventative benefits such as a “Welcome to Medicare” physical and most significantly adding an outpatient prescription drug benefit that offers comprehensive affordable prescription drug coverage to 43 million seniors.  This sweeping legislation has a significant impact on states.  Overall states will realize significant savings under the reforms made by the MMA.  CMS estimates that states will save $73 billion from CY 2006 to CY 2010.  These savings are achieved by: (1)Medicare replacing Rx coverage for Full Benefit Dual Eligible (FBDE) beneficiaries that would otherwise be paid by Medicaid; (2) Providing savings to State Pharmaceutical Assistance Programs (SPAP) & Pharmacy Plus where Medicare displaces a portion of spending; (3) Reducing costs to states providing Rx coverage to retirees by way of the Retiree Subsidy.  CMS estimates that MMA will cost states $65 billion from CY 2006 to CY 2010.  These costs include the phased-down contribution, where states pay a declining portion of the prescription drug costs for dual eligible beneficiaries, administrative costs associated with determining eligibility, technology updates, and the cost associated with increased enrollment.  The net result is a savings to states of $8 billion over 5 years.


Mr. Perez briefly overviewed the Medicare prescription drug benefit. Beginning January 1, 2006, approximately 43 million Medicare beneficiaries will be eligible to enroll in a new subsidized prescription drug benefit that helps lower out-of-pocket prescription drug costs to seniors. For instance, under the standard drug benefit people 65 and older, whose incomes are at or above 150% FPL ($14,355 for an individual or $19,245 for couple) Medicare will cover 75% of drug expenses up to $2,250 after a $250 deductible.  There is a monthly premium of approximately $35.85.  In addition, the Medicare prescription drug benefit will provide catastrophic coverage by paying 95% of any additional pharmaceutical expenses for individuals whose out-of-pocket spending reaches $3,600 in a year.


He said that the MMA provides extra help for prescription drugs to low income individuals. Three groups of people who are eligible for low-income assistance are:  (1) full-benefit dual eligibles with incomes at or below 100% of Federal Poverty Limit (FPL) ($9,570 for an individual and $12,830 for a couple). These beneficiaries can enroll in a plan that has no monthly premium, no deductible, and $1-$3 co-payments per prescription; (2) full-benefit dual eligibles above 100% of FPL; people whose states pay for their Medicare premiums, deductibles, or cost-sharing (Qualified Medicare Beneficiaries (QMB), Specified Low-Income Medicare Beneficiaries (SLMB), and Qualifying Individuals); people who receive Supplemental Security Income (SSI); and people with income below 135% FPL and assets that do not exceed $6,000/person and $9,000/couple.  These beneficiaries can enroll in a plan that has no monthly premium, no deductible, and a $2-$5 co-payment per prescription; (3) people with incomes below 150% FPL ($14,355 for an individual or $19,245 for a couple) and assets of less than $10,000 for an individual and $20,000 for a couple.  These individuals can enroll in a plan that has reduced premiums, $50 deductible, and reduced cost-sharing.  Institutionalized full-benefit dual eligibles can enroll in a plan that has no premiums, no deductibles, and no cost-sharing.


Next, Mr. Perez provided information related to dual eligibles.  He said a beneficiary who is “dually eligible” is someone who receives both Medicare and Medicaid.  A beneficiary who is “a full-benefit dual eligible” is someone receiving Medicare and the full array of Medicaid services.  A full-benefit dual eligible beneficiary typically gets his or her prescription drug costs paid for through the Medicaid program along with other Medicaid-covered services.  A full-benefit dual eligible does not include people who only get pharmacy benefits paid by Medicaid or people for whom Medicaid pays Medicare premiums, deductibles or cost-sharing e.g. Qualified Medicare Beneficiaries (QMB-only), Specified Low-Income Medicare Beneficiaries (SLMB-only), or Qualifying Individuals (QIs).


Beginning January 1, 2006, full-benefit dual eligible beneficiaries will have their prescription drugs paid for by Medicare rather than Medicaid. As a result, states will no longer be able to claim Medicaid matching funds for the prescription drugs that states provide to full-benefit dual eligible beneficiaries (except if states decide to provide coverage of drugs excluded by the MMA).


There has been a great deal of concern about the transitioning of dual eligibles from Medicaid to Medicare. CMS recognizes the enormity of the transition and is working diligently to ensure the process for transitioning beneficiaries is quick and efficient.  He noted that no full-benefit dual-eligible beneficiary will go without coverage during the transition.  This is critically important, especially for beneficiaries with chronic conditions who take a number of prescriptions.  In addition CMS will pay particular attention to formulary designs of the new drug plans to ensure they are not discriminatory and they meet the needs of all beneficiaries.  CMS will ensure formularies recognize the special needs of those with mental illness, HIV/AIDS and those who live in nursing homes.  The number of full-benefit dual eligibles also plays a factor in the “state contribution.”


Beginning January 1, 2006, states will pay a declining portion of the drug costs to dual eligibles by making a monthly contribution to the Federal government known as the state “phased-down” contribution.  This contribution will help defray the cost of providing drug coverage to full-benefit dual eligibles. The contribution amount is 90% of the per capital prescription drug expenditures for dual eligible beneficiaries in FY 2003. The percentage of the contribution is “phased-down” to 75% by 2014.  The formula for the “phased-down” contribution contains an annual inflation factor which is the percent increase in per capita prescription drug spending nationwide.  CMS is currently working with states to ensure that the FY 2003 baseline data is accurate.


States, as employers, may opt to apply for the Medicare retiree drug subsidy on behalf of retired state employees. States offering retiree prescription drug coverage to former state government employees are expected to achieve substantial savings as a result of the retiree subsidy.  The subsidy pays 28% of a retiree’s drug cost between $250 and $5000 in 2006 and participating sponsors will receive an average subsidy of $668 per capita retiree.  In order to qualify for the subsidy, the state retiree system must show that its coverage is as good as or better than the Medicare prescription drug benefit.  Kentucky's retiree system may apply for the subsidy only in regards to retirees eligible for but not enrolled in the Medicare prescription drug benefit.  If  Kentucky's retiree system determines that the retiree subsidy is not feasible, the MMA provides other options to plan sponsors of retiree drug coverage.  States would benefit from substantial cost savings under these options.  He urged the committee to work with your state retirement system to explore options that include becoming a Prescription Drug Plan (PDP), contracting with a PDP, or having your state retiree drug benefit wrap-around the Medicare drug benefit.


MMA requires that, in addition to the Social Security Administration (SSA), states must establish their own eligibility determination process for the low-income subsidy.  CMS is working hard to reduce the burden this will have on states by encouraging beneficiaries to apply through the SSA.  They are also providing guidance to states that encourages them to use the SSA eligibility determination process.  If an individual insists on having his/her eligibility for the low income subsidy program determined by the state, the costs associated with the application will be matched by the federal government.  As a part of the state determination process, states are also required to screen applicants to see if they are eligible for Medicare Savings Program  States can receive matching funds for the administrative and program costs.  States are required to submit monthly data to CMS on dual eligible beneficiaries.  CMS will use this data to determine the low income subsidy, auto-enrollment of dual eligibles and state “phased-down” contribution. Again, states are able to receive administrative matching funds.


CMS has been working closely with individual state Medicaid agencies to address their concerns and to ensure a smooth transition to the Medicare prescription drug benefit. In addition, CMS is engaging in communications with the National Governor’s Association (NGA), the National Conference on State Legislatures (NCSL), and the Council on State Government (CSG).  CMS is aware that educating and reaching out to beneficiaries about the new drug benefit is critical to the success of the program.  CMS is working with a broad array of partners to educate beneficiaries, their caregivers and others who can help them make decisions about the new Medicare prescription drug benefit. SSA, other federal agencies, states, employers, unions, national and community-based organizations are all participating in this effort.


Representative Rand asked about the number of Kentucky individuals eligible for Medicare Part D.  He also asked what percentage of the population is over 150 percent of the federal poverty guidelines.  Mr. Perez said he didn't have that information with him, but he would send it to the committee.


Senator Roeding asked about state employee retirement and Kentucky drug benefits.  Mr. Perez urged that individuals stay within their existing plan if the benefits are the same or better as CMS.


Representative Burch asked at what point low income individuals start paying.  He said he didn't think the program would always work like this and asked where the $73 million is being saved.  Mr. Perez said the program is designed to provide access for those without drug access.  Representative Burch said he wants figures to see how individuals benefit.


Representative Nunn asked about the $300 million in Kentucky.  Commissioner Turner said that the $300 million is for the clawback in 2006.  There is $150 million in FY 06 and $150 million in SFY 07.  Kentucky takes a net loss on the clawback and pays back more than it saves.


Representative Nunn asked how much the net loss is and how many dual eligibles there are.  Commissioner Turner said the net loss is $45 million in 06 and the first part of 2007.  She also reported there are about 100,000 dual eligibles.


Senator Denton asked if CMS was going to reconcile Medicaid funds spent by states for services provided to Hurricane Katrina victims.  She encouraged the federal government to help states with funds spent on Hurricane victims.  Mr. Perez stated he would take that message to Washington.


Next, Jill Bell from Passport and Robert Slayton, Executive Vice President of University Health Care testified.  Mr. Slayton said that University Health Care was started in response to a state request.  It was a new venture that wasn't taken lightly.  He said that Perform RX has been created and was tied with care management and disease management.  He said the Medicaid special needs plan has been submitted and signed and they should have a contract soon.


Ms. Bell discussed the members eligible to participate.  She said there are approximately 12,000 members each year.  Passport will not expand the product beyond the Medicaid population.  Fifty-five percent are disabled, and 45 percent are aged.  Eighty-two percent live in Jefferson, Breckinridge, Grayson, Hardin, Marion, and Nelson counties.  In regard to dual eligible demographics, she reported that between 45 and 55 percent are female.  She also reported that a huge percentage of their members are in Jefferson County (almost 7,000).  Regarding members eligible to participate, 88 percent of Medicare claims are paid for members with the following primary diagnose: arthritis, ESRD, cancer, COPD, back pain, coronary artery disease, diabetes, and hypertension.  A large majority have behavioral health co-morbidities.


Next, Ms. Bell presented time line information.  She said that the Medicaid Modernization Act Public Information Campaign started on May 1, 2005.  The opt out  mailing will arrive in members' homes toward the end of September, 2005.  The Opt out/Eligibility Verification/Enrollment Acknowledgement packet will be mailed on October 1, 2005.  Member ID cards will be mailed December 1-10, 2005 and new member kits will be available December 22-31, 2005.  January 1, 2006 is the Passport Health Plan Medicare Advantage Special Needs Plan effective date.


The next item on the agenda was an update on Medicaid: Demographics, and 1115 proposed plans by Shannon Turner, Commissioner, Department for Medicaid Services, Cabinet for Health and Family Services.  She said the purpose of the KyHealth Choices 1115 Waiver proposal is to transform the Kentucky Medicaid program by improving the health status of those Kentuckians enrolled in the program, ensure a continuum of care, guaranteeing individual choice, and ensure the solvency of Kentucky Medicaid for future generations of Kentuckians.  She said the KyHealth Choices 1115 waiver will focus on two major goals determined by the administration and other key stakeholders throughout the state.  Goal #1 is to stretch resources to most appropriately meet the needs of members.  To accomplish this goal, KyHealth Choices will implement the following objectives: (1) tailor services to meet individual needs by developing various benefit packages designed to address the different populations covered by the Medicaid program and to establish meaningful benefits based on best practice standards; (2) ensure that Medicaid is the payor of last resort by establishing an "opt out" option for Medicaid members who have access to private insurance coverage and to create a financial incentive for them to choose that option; (3) reduce the number of people without insurance by offering an in-patient and out-patient benefit to low-income Kentuckians who are currently uninsured; (4) leverage the commercial market; (5) strengthen the Health Insurance Purchasing Program that determines whether it is  more cost effective to assist individuals with access to private coverage in purchasing that coverage and using Medicaid to wrap-around those services; (5) integrate care delivery; and (6) establish provider education and accountability.


She reported that Goal #2 is to encourage Medicaid members to be personally responsible for their own health care.  To accomplish this goal, KyHealth Choices will implement the following objectives: (1) design disease and care management programs to improve the health of individuals with specific chronic conditions; (2) establish Get Healthy Accounts where individuals may earn money or purchase credit by participating in certain healthy practices as identified by the Commonwealth;  (3) assure education and choice counseling to all Medicaid members in an effort to assist them in making the best choice of benefit package; and (4) structure benefit packages to assure a continuum of care to maximize the use of services provided in an individual's home.


Senator Blevins commented that Medicaid should continue dental benefits currently available in KCHIP. He noted that a higher administrative rate results in decreased services to children.


Commissioner Turner indicated that access is a problem in Fayette County.  If the bid to provide KCHIP through private insurance is not lower than current costs, it will not be bid out.


Representative Bruce asked about fraud in Medicaid.  Commissioner Turner said that Program Integrity went to the Office of Inspector General with the MMIS contract.  They implemented a fraud check system.


Representative Nunn asked about smoking cessation.  Commissioner Turner said it is much like substance abuse and they would like to expand it in the future.  She said that public health has to do smoking cessation programs.


Senator Blevins moved that the committee send a letter to Congressional Delegation requesting that the Kentucky "phased down" contribution for dual eligibles be reduced since the formula results in a loss for Kentucky.  The motion was unanimously approved.


The meeting was adjourned at 2:51 p.m.