Legislature(2003 - 2004)
05/16/2003 01:49 PM House FIN
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SENATE BILL NO. 41
An Act relating to medical care and crimes relating to
medical care, including medical care and crimes
relating to the medical assistance program.
SENATOR LYDA GREEN explained that since 1999, the costs of
the Medicaid program have risen throughout the nation at an
average rate of 11 percent per year. Alaska's Medicaid
program has averaged annual increases of 20 percent or more
than $100 million per year, bringing the total projected
program costs for FY04 to just under $1 billion dollars
($695 million in federal funds and $289 million in state
funds).
Factors such as increased participant enrollments, increased
use of health services and the increasing costs of
pharmaceuticals and long-term care are the greatest
contributors to the rise in the Medicaid program costs.
While the State has limited ability to contain the cost
factors, targeting waste and fraud can occur.
Senator Green continued, nationally, the error rate of
overpayments in the Medicare program are about 7 percent, a
number that could be inferred to the Medicaid program. In
addition, the commonly held perception of the amount of
fraud committed against the Medicaid program nationwide is
10 percent. Whether those two numbers are inclusive of one
another or should be compounded, they represent a sizeable
amount of spending, between $70 and $170 million dollars in
Alaska's Medicaid program on activities that could be
questionable.
To preserve the integrity and fiscal viability of Alaska's
Medicaid program, that system must be held to rigorous
controls and frequent scrutiny. Relevant laws must be in
place to prosecute those who commit fraud and abuse related
to medical care. Alaska has no specific health care
criminal theft statutes. Currently, in order to prosecute
those who commit Medicaid fraud, prosecutors must use
criminal statutes related to actions coincidental to the
misconduct. Alaska theft statutes require proving that the
conduct was intentional, a very high standard to meet for a
crime where there is no crime scene or physical evidence.
Consequently, there have been relatively few prosecutions.
SB 41 would provide the legal tools for the fiduciaries of
the Medicaid program to establish program integrity and
maintain maximum fiscal control.
Senator Green added that the legislation would establish the
crime of medical assistance fraud, define elements that
constitute fraud, and classifies the crime committed as
either a felony or a misdemeanor. SB 41 would require
independent financial audits to identify errors,
overpayments, and criminal violations made to, or by,
Medicaid providers and requires administrative action within
90 days of receipt of each audit. The legislation would
complete the loop between the Department of Health and
Social Services and the Department of Law by requiring
copies of all audits to be provided to the Attorney General
and by directing the Attorney General to notify the
Department of Health and Social Services of any charges of
misconduct filed against a Medicaid provider. Such notice
requires the Department to undertake a complete review of
any outstanding claims of that provider. Finally, the bill
would provide that financing of the audits could be made
from the recovery, due to the audits, of misspent funds.
She concluded that it is vital that the State of Alaska
administer its Medicaid program in a manner that ensures
effective, long-term cost containment while providing needed
medical care to its intended recipients. Medicaid providers
must operate honestly, responsibly and in accordance with
the law. Those who do not would be held accountable.
Representative Foster asked who would pay for the audits.
Senator Green advised that they would be paid for from the
amount recovered from the lawsuits. She speculated that
that ratio of the amount recovered would be 8 to 1, citing
an example of physicians in Anchorage involved in such
suits.
DON KITCHEN, (TESTIFIED VIA TELECONFERENCE), ASSISTANT
ATTORNEY GENERAL, DEPARTMENT OF LAW, ANCHORAGE, offered to
answer questions of the Committee. In response to a query
by Representative Stoltze, Mr. Kitchen explained that the
statutes were written to encompass being able to prosecute
both recipients and providers. He noted that his particular
focus was with the providers. Senator Green added that
there had been a "recipient Medicaid" work group in Juneau,
who reviewed the bill. They supported the bill and
suggested that recipients be included. Up until that time,
the recipients had been excluded.
Representative Berkowitz questioned how the cases are
currently being prosecuted. Mr. Kitchen responded that most
often other statutes are used, which can have an element of
specific intent. Trying to prove "specific intent"
sometimes becomes impossible. Without having a witness, the
State has no way to dis-prove the essential defense of when
the provider suggests ignorance. SB 41 would require that
the provider comply with the regulations up front, making
them responsible for the resource.
Representative Berkowitz referenced Section 47.05.230, Page
5, regarding aggregated amounts. Mr. Kitchen explained that
the aggregation of amounts was taken from the sub-statutes
and permits aggregating amounts into a particular charge.
Representative Berkowitz referred to Pages 4 & 5, pointing
out that the amounts for a C felony would be $500 to $5,000
dollars and that an A charge would be less than $500. He
asked if that would continue to be the "breaking point"
between misdemeanors and felonies, questioning the raising
amounts. Mr. Kitchen did not recall the raised numbers.
Representative Hawker asked if the current version of the
bill was acceptable to the Department. Mr. Kitchen
confirmed that the Department of Law was comfortable with
the bill.
Representative Berkowitz MOVED to AMEND Pages 4 & 5, Lines
29 & 2, respectively, raising the amount to $1,000 for a
felony and deleting "$500". Vice Chair Meyer OBJECTED.
Representative Berkowitz discussed the benefits of the
change. Vice-Chair Meyer noted that the levels had been
raised in House Judiciary Committee last year.
Senator Green maintained that value was not the only
qualifying factor. She added that even if the drugs had
very little "street value", that might not be as important
as the use of the drug in the Medicaid program.
In response to a query by Representative Berkowitz, Mr.
Kitchen explained that most cases do not come to the
Department's attention until they are at least between $500
& $1000 dollars and that in other states, the felony
breaking point is $100 dollars. Representative Berkowitz
WITHDREW the MOTION.
Co-Chair Harris MOVED to report CS SS SB 41 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CS SS SB 41 (FIN) was reported out of Committee with a "do
pass" recommendation and with a new fiscal note by the
Department of Health and Social Services.
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