The14th meeting of the Program Review and Investigations Committee was held on Thursday, November 8, 2001, at 10:00 AM, in Room 131 of the Capitol Annex. Senator Katie Stine, Chair, called the meeting to order, and the secretary called the roll.
Members:Senator Katie Stine, Chair; Senators Charlie Borders, Brett Guthrie, Ernie Harris, Paul Herron Jr, Vernie McGaha, Dan Seum, and Ed Worley; Representatives Adrian Arnold, Sheldon Baugh, Dwight Butler, Charlie Hoffman, Ruth Ann Palumbo, and Dottie Sims.
Guests: Secretary Marcia Morgan, Cabinet for Health Services and Eric Freelander, Director of Commission for Children with Special Health Care Needs.
LRC Staff: Ginny Wilson, Ph.D., Committee Staff Administrator, Lowell Atchley, Judy Fritz, Greg Hager, Ph.D., Tom Hewlett, Alice Hobson, Joseph Hood, Margaret Hurst, CPA, Dan Jacovitch, Cindy Upton, CPA, and Susan Spoonamore, Committee Assistant.
Minutes of the October 11, 2001 meeting were approved by voice vote upon motion made by Sen. Worley and seconded by Rep. Baugh.
Margaret Hurst of the Program Review staff, summarized the report prepared by the accounting firm of Berger & Ross, who had been retained by the Auditor of Public Accounts to perform an audit on the Kentucky Early Intervention System (KEIS). The report recommended that all 15 Point of Entry sites standardize their filing systems. After an evaluation of the internal and system controls over the financial reporting relating to Centralized Billing and Information System (CBIS), the report also recommended that event numbers be entered on all bills, bills be filed in the IFSP files, and the files be kept in chronological order. Even though control procedures had been implemented, the report noted that KEIS and CBIS had not quantitatively analyzed the data regarding Medicaid denials on a systematic basis, and that KEIS and CBIS had not identified areas in which to improve collection of Medicaid billings. Ms. Hurst stated that the report also recommended that KEIS officials instruct staff who are in charge of paying claims to rely solely on the “approved provider list” established by KEIS. Reliance on the approved provider list would alleviate the possibility of an invoice being submitted for payment to a fictitious vendor. The report also noted that, in FY 2002, KEIS would be moved from the Department for Mental Health and Mental Retardation Services to the Commission for Children with Special Health Care Needs, and that the program’s projected budget deficit for FY 2002 was $3.8 million.
Sen. Stine asked what the motivation was for merging KEIS with the Commission for Children with Special Health Care Needs. Eric Freelander, Executive Director of the Commission for Children with Special Health Care Needs, stated that better control of the budget was a major reason, along with an improvement in coordination of services. The Commission provides services to children ranging from 0 to 21 years of age, and the First Steps program only serves the special health care needs of children from 0 to 3 years of age; therefore the merger seemed like a natural fit.
Rep. Sims asked how long it took for a provider to be paid for services. Mr. Freelander stated that, once a completed bill was submitted, it should take no longer than thirty days.
Mr. Freelander also stated that the Commission was still looking at a projected budget deficit of $3.8 million for FY 2002. He explained that the most equitable distribution would be for the Department of Mental Health and Mental Retardation to take on approximately $500,000 of the deficit and the Commission would be responsible for managing the remainder. He also stated that the Commission was looking at rate adjustments, and at adopting some of the recommendations of the earlier Program Review report. In the near future, the Commission would begin looking at program design changes, additional fiscal management controls, and how the program was administered in the field.
Rep. Sims asked what was meant by implementing procedures to resolve the number of Medicaid denials. Mr. Freelander responded that, in his opinion, each Medicaid denial should be reviewed at each cycle since conflicts could arise dealing with federal laws regarding dual eligibility -- where a child has insurance and Medicaid. He also stated that CBIS did a good job with the billing, but there were areas that needed to be clarified. It was the intent of the Commission to merge the two billing systems.
Sen. McGaha asked for more specific information regarding rate adjustments.
Mr. Freelander stated that a study had been commissioned to find out how much it costs to deliver the services versus what the First Steps program was actually paying for the services. He said the preliminary data gathered so far showed the cost of services a little less than current rates, but it was much too early to make a determination.
Sen. Stine asked if merging of the two programs would avoid duplication of services. Mr. Freelander stated that some of the population of First Steps did need mental health services, and some needed developmental/medical services, such as physical therapy and occupational therapy. He said the division of resources for addressing the shortfall was based on time of program management rather than the percent of the program that would specifically relate to mental retardation.
Ginny Wilson, Ph.D., Committee Staff Administrator for Program Review and Investigations, presented a report entitled: Impact Plus: Design of Medicaid-Funded Program for Children with Severe Emotional Disturbance Results in Rapidly Growing Expenditures and Difficult Policy Choices (a copy of the report can be found in the LRC library file). Dr. Wilson explained to the Committee that the Impact Plus program was a program that provided community-based behavioral health services to Medicaid-eligible children with severe emotional disturbance. She said the reported goal in creating the program was to pay for new community-based services with expected savings from reductions in expensive institutional care for the children served. Program Review staff reviewed the program to ascertain why program expenditures had grown so rapidly, and whether program managers were conducting effective utilization management. Dr. Wilson summarized the major Conclusions as set forth below (for a complete listing of the conclusions and recommendations, please refer to the report which can be found in the LRC Library file).
Dr. Wilson stated that, beginning with program inception in January of 1998 through the present, Impact Plus had received funding allotments totaling $58.4 million dollars. She reported that in Calendar Year 2000, claims were paid for 4,229 children at a total cost of $24 million and an average cost of $5,719 per child. She said that staff concluded that one of the major reasons for the rapid increased costs was broad eligibility criteria coupled with the federal requirement that Medicaid services be delivered as an entitlement to the population defined to be eligible, and that no effective utilization control procedures were in place at the beginning of the program. Dr. Wilson stated that once utilizational controls were established, another related major issue had been persistent provider complaints that slow service authorization decisions reduced children’s access to care, and represented a significant financial burden for private providers. She also stated that Impact Plus did not sufficiently coordinate its services with other state and local agencies who delivered behavioral health services to Medicaid-eligible children with similar behavioral health problems. Although it was originally intended that the Impact Plus program would be funded with the savings it would generate from reducing institutional care, Dr. Wilson said that evidence indicated that substantial net new dollars were expended to pay for the new services delivered to a new population. She said that the overall conclusion was that early program design flaws had created a situation in which policy makers would have to face the difficult decision of continuing to fund the new services for an unanticipated population who had expressed a strong desire for the services, or whether to reduce the program scope to relieve pressure on a Medicaid budget that was already facing serious deficits.
Rep. Baugh asked if the reason for the rapid increase in costs was due to medical expenditures, or was there a larger number of children eligible, or was the budget simply under-estimated. Dr. Wilson stated that all three contributed to the rapid increase in costs. She said Impact Plus provided new services for new children who had not previously received that level of service from Medicaid in the past.
Rep. Baugh stated that if tightening the restrictions denied some children in getting the help they needed, that would not be fair to the families involved. He also said that it appeared that the General Assembly was either naive, misinformed or mislead when the Impact Plus program was created and now members of the General Assembly were going to be put in a difficult position.
Dr. Wilson stated, that when information on the Impact Plus program was presented to the General Assembly, it was reported that the program would be budget neutral. She noted that, instead, the program offered new services to a new population and that it had become a very costly program. Dr. Wilson agreed that it was going to be a difficult issue for all policy makers.
Sen. Borders stated that, after prior authorization requirements were imposed, it appeared that the costs initially decreased then began to increase again. He asked if staff noticed any numbers in February which indicated that costs were continuing to rise. Dr. Wilson stated that, in her opinion, although there was no data yet to support it, that the initial drop would be somewhat offset as providers learned how to follow the new rules.
Sen. Borders asked if the report was saying if Medicaid was an entitlement, then it means if there is a need, then it must be served. Dr. Wilson stated that if a set of services was defined and eligibility was defined, then anyone who was eligible and needed the services would have to be provided the services.
Sen. Seum asked if the state was duty bound to continue the program because of receiving federal dollars. Dr. Wilson replied that the state was not duty bound to continue the program as it was an optional program.
Sen. Harris asked if institutional care was defined as full time, and if children through the age of 18 were eligible for Impact Plus services. He noted that the 1,500 children in institutional care equaled 2.5% of the total number of 600,000 school kids in Kentucky. Dr. Wilson stated that there were close to 1,500 children who were either in long term residential care and/or short term residential care, and that children through the age of 21 were eligible for services.
Sen. Seum asked how a person who was 20 years old could end up in the program if Impact Plus was created for children and for early intervention. Dr. Wilson stated that the program was created for children with a different kind of intervention that would replace institutional care. She noted that the primary population of children who received services were between the ages of 8 and 14, and that after age 17, only a small number of children remained in the program.
Sen. Seum asked, if intervening services had been provided at an earlier age, would it have saved money as the child got older. Dr. Wilson stated that was an excellent point which could incorporate some very real policy decisions. She said the General Assembly would have to decide whether or not to spend money on children with severe emotional problems, which would be very expensive even if they were in an institutional or community setting, or to deliver lower cost services to children who would have a greater hope of truly improving their behavioral health.
Sen. Harris asked if the children being served under Impact Plus program at the present time were the children of adults who should have been served by the program years ago. He also asked if the program would have made a difference if it had been in effect 25 years ago. Secretary Marcia Morgan, Cabinet for Families and Children, stated that Impact Plus was designed to help make a difference in a specific group of children, and if this program had been created 25 years ago, it would have made a difference.
Rep. Hoffman asked if the Community Mental Health Centers could deliver the same type services that are delivered by Impact Plus, and could that be a viable option for the General Assembly to consider. Dr. Wilson stated that the Community Mental Health Centers were not major providers of Impact Plus services. She said that, based on comments from parents, private providers and agency staff, Program Review staff recommended that Impact Plus services not be restricted solely to the Community Mental Health Centers because the ability of the Centers to respond to the needs of this population of children varied across the state.
Rep. Palumbo stated that she had heard from parents who told her that their families could not function without the services of Impact Plus.
In response to the Committee’s report, Secretary Morgan stated that the report and its recommendations would be instrumental in helping the Cabinet for Health Services redesign the Impact Plus program. She said that Program Review staff’s analysis of the program was very accurate -- the Impact Plus program was flawed from its inception. She stated that the program was modeled on a General Fund program that was not an entitlement program. At the time, it was thought that the program would roll into the behavioral managed care plans, which was a way to provide wrap-around-services and increase provider capacity for the event of behavioral managed care. She also stated that, in terms of programs that are sold on the basis that they are budget neutral, there are no such animals unless it can be demonstrated in writing with good solid business practices behind it. She stated that, for the Calendar Year 2001, the number of children participating would double and expenditures would reach $31 million dollars. Obviously, the Medicaid program could not tolerate that figure. The Cabinet planned to look at the eligibility requirements for services in an effort to restrict the definition to the children most at risk of institutionalization. She also stated that the non-uniform rate structure had led to wide variance and dissatisfaction in the provider community, and it had also cost the program additional dollars that should not have been expended. She stated the Cabinet must work harder in coordinating the Impact Plus program with the other programs impacted, such as the Department of Education, the Cabinet for Families and Children, and Juvenile Justice since they all have similar missions in taking care of the children. In addition, Secretary Morgan stated that, not only did the Cabinet have to advocate on behalf of the children, but the Cabinet also had to be good stewards of public dollars. The Cabinet would have to work smarter to figure out if there were any additional General Fund dollars to be found and leverage additional Medicaid federal fund participation. She stated that the Medicaid Steering Committee, and the Cabinet for Health Services (CHS) were committed to redesigning Impact Plus to enhance program effectiveness, efficiency and accountability. The Cabinet’s goal was to have this complete in early 2002. Secretary Morgan also said she had instructed staff at CHS to report directly to her in the redesign of Impact Plus so she could have full control over administrating the program in the Department of Mental Health and Mental Retardation services, and funding the program in the Department for Medicaid Services. The Cabinet wanted to retain the provider pool, since it would be helpful in developing community based services, giving the program an alternative to residential services. She stated that, due to the lack of utilization review and quality control, the program had run wide open until June of last year. Because the program delivered high quality services to a great number of children, the Cabinet had to take an incremental approach in slowing down the rising costs. She said that the Impact Plus program was a very complex system for very complex children. Secretary Morgan strongly recommended that the 843 Commission look at the behavioral mental health delivery health systems over the next two years, and report to the General Assembly. The highest growth area in the Medicaid budget were services associated with behavioral health issues. Secretary Morgan explained that the Cabinet would experience a 2% reduction of General Fund dollars and because of the federal match of 70%, the Cabinet would lose $50 million dollars in buying power. In her concluding comments, Secretary Morgan stated that the Cabinet was looking at every program to see how to better manage, and determine who should be served with the available dollars. Redesigning the Impact Plus program would require a real system change in that program managers would have to determine how much money would be available, how many children would need the services, and the number of children who would have to be served by law. The available money from all the departments would have to be pooled together in order to have an integrated delivery service system for the population of children that are in need of services. She also stated that the Cabinet estimated a $28 million dollar budget for this year, but until the program was redesigned, it would be impossible to give an accurate figure. She stated that Impact Plus had touched some children that it was not anticipated to serve, such as autistic children. She said that even though Impact Plus was designed for children with severe emotional disturbances, managers of the Medicaid program would have to look at a way to meet the needs of autistic children, but they should not be met within this program. She also stated that the Behavioral Health Division was looking diligently at how the program could be redesigned, and the Department of Mental Health/Mental Retardation would continue to coordinate with the partners, and the providers out in the community. The Cabinet realized that some of the changes would not be well received, and therefore, there would be repercussions, but they had to be made.
Sen. Stine delayed the vote on adopting the Impact Plus study until the December 13th meeting of Program Review.
Meeting adjourned at 12:30 p.m.