Legislature(2003 - 2004)
05/16/2003 01:49 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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.