04/14/2015 01:30 PM House FINANCE
| Audio | Topic |
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| Start | |
| HB80 |
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| += | HB 80 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
April 14, 2015
1:31 p.m.
1:31:10 PM
CALL TO ORDER
Co-Chair Thompson called the House Finance Committee
meeting to order at 1:31 p.m.
MEMBERS PRESENT
Representative Steve Thompson, Co-Chair
Representative Dan Saddler, Vice-Chair
Representative Bryce Edgmon
Representative Les Gara
Representative Lynn Gattis
Representative David Guttenberg
Representative Scott Kawasaki
Representative Cathy Munoz
Representative Lance Pruitt
Representative Tammie Wilson
MEMBERS ABSENT
Representative Mark Neuman, Co-Chair
ALSO PRESENT
Kris Curtis, Legislative Auditor, Alaska Division of
Legislative Audit; Sana Efird, Assistant Commissioner,
Department of Health and Social Services; Ron Kreher,
Acting Director, Division of Public Assistance, Department
of Health and Social Services.
PRESENT VIA TELECONFERENCE
Robert Boyle, Superintendent, Ketchikan School District,
Ketchikan; Robin Gray, Superintendent, Yakutat School
District, Yakutat; Margaret Griffith, School Counselor,
Kenai; Erin Neisinger, Self, Kenai; Ladawn Druce, School
Counselor, Kenai; Patrick Mayer, Superintendent, Wrangell
School District, Wrangell; Stan Vanamburg, Noatak Schools,
Noatak; Deena Paramo, Superintendent, Mat-Su Borough School
District, Palmer; Duane Mayes, Director, Senior Benefits
Services, Department of Health and Social Services;
Margaret Brodie, Director, Healthcare Services, Department
of Health and Social Services.
SUMMARY
HB 80 REPEAL COLLEGE/CAREER READINESS ASSESS.
HB 80 was REPORTED out of committee with a "do
pass" recommendation and with one previously
published fiscal impact note: FN1 (EED).
DISCUSSION: STATE OF ALASKA SINGLE AUDIT, RECOMMENDATIONS
FOR THE DEPARTMENT OF HEALTH AND SOCIAL SERVICES
HOUSE BILL NO. 80
"An Act repealing the requirement for secondary
students to take college and career readiness
assessments."
1:31:46 PM
REPRESENTATIVE LYNN GATTIS, SPONSOR, provided a summary of
the legislation. She summarized that HB 80 repealed the
mandate for student college and career readiness
assessments: ACT, SAT, or Work Keys exams in order to
receive a high school diploma. She highlighted that the
repealer restored $525 thousand in funding that could be
better spent by the Department of Education and Early
Development (DEED). The assessments were an "unfunded
mandate" that diverted the school district's time. A
passing grade was not required so was not a conclusive
measure of student readiness. She hoped that the "true
identifier" of readiness was successful completion of the
curriculum the school had chosen. She relayed that the
mandate was adopted in HB 78 (EDUCATION) [Enacted
5/13/2014] during the last legislative session. She asked
for the committee's support.
Co-Chair Thompson OPENED public testimony.
ROBERT BOYLE, SUPERINTENDENT, KETCHIKAN SCHOOL DISTRICT,
KETCHIKAN (via teleconference), spoke in support of the
assessment testing. He maintained that the tests were "a
positive and constructive concept." He elaborated that the
testing offered to juniors and seniors was beneficial. The
district required career readiness tests at the junior
level and administered the ACT/SAT tests to the college
bound students as an avenue to obtain scholarships. He
added that the district gained a "solid database of student
performance" as a result of requiring all juniors to take
the Work Keys assessment. He urged the committee to keep
the program intact.
ROBIN GRAY, SUPERINTENDENT, YAKUTAT SCHOOL DISTRICT,
YAKUTAT (via teleconference), testified in support of the
legislation. She relayed that the requirement was an
unfunded mandate and had an onerous impact on rural
schools. The staff hours it took to administer the test was
burdensome and affected instruction time. She felt that the
tests had value but rural schools lacked adequate funding
to implement the mandate.
MARGARET GRIFFITH, SCHOOL COUNSELOR, KENAI (via
teleconference), testified in favor of the legislation. She
relayed that she administered approximately 15 tests during
the year; the tests were time consuming and took away from
instructional time, counseling services, crisis response,
career and future planning, etc. She was supportive of
SAT/ACT and Work Keys testing provided by the community and
encouraged all of the students to participate. She reported
that waivers were available for students who could not
afford the testing. The district also supported students
with disabilities to take the ACT/SAT tests.
Representative Guttenberg asked whether Ms. Griffith
represented the school district.
Ms. Griffith replied that she was testifying on behalf of
herself.
ERIN NEISINGER, SELF, KENAI (via teleconference), testified
in support of the legislation. She agreed with the previous
testimony. She shared that she was a school counselor. She
communicated that school counselors were often the school's
test coordinators. She referenced a survey administered in
the Kenai Peninsula Borough School District by a counselor
named Sara Moore [submitted as a letter] (copy on file)
that concluded that the level of direct and indirect
services counselors were able to provide to their students
was impacted due to the overabundance of testing. She read
the following from the document:
We found a significant difference between those school
counselors who also are designated as their building
test coordinator and those who are not. A few results
of note:
100% of non-test coordinator counselors frequently or
routinely counsel students regarding academic issues;
only 25% of test coordinator counselors are able to do
so at the same level.
While 40% of non-test coordinator counselors routinely
counsel with students regarding personal and family
concerns; only 13% of test coordinator counselors do
so on a routine basis.
60% of non-test coordinator counselors occasionally /
frequently or routinely conduct classroom lessons
addressing career development and the world of work;
compared to 38% of test coordinator counselors.
And lastly, 80% of non-test coordinator counselors
frequently consult with school staff concerning
student behavior; compared to 13% of test coordinator
counselors.
Ms. Neisinger valued the importance of SAT/ACT and Work
Keys testing but she felt that administering the additional
tests "put a strain on school counselors."
LADAWN DRUCE, SCHOOL COUNSELOR, KENAI (via teleconference),
spoke in favor of HB 80. She reported that school
counselors followed the American School Counseling
Association (ASCA) national model. She shared some
information from the associations "ASCA Mindsets &
Behaviors for Student Success: K-12 College- and Career-
Readiness Standards for Every Student". She informed the
committee that counselors utilized the standards as a guide
to help prepare the students for college and career
readiness. She listed six standards that encouraged the
following mindsets for all students:
Belief in development of whole self, including a healthy balance of
mental, social/emotional and physical well-being.
Self-confidence in ability to succeed.
Sense of belonging in the school environment.
Understanding that postsecondary education and life-long learning
are necessary for long-term career success.
Belief in using abilities to their fullest to achieve high-quality
results and outcomes.
Positive attitude toward work and learning.
Ms. Druce observed that the newly established College and
Career Readiness (CCR) tests took time away from the
students learning and the counselors' time for what they
deemed were appropriate college and career readiness
skills.
1:43:25 PM
PATRICK MAYER, SUPERINTENDENT, WRANGELL SCHOOL DISTRICT,
WRANGELL (via teleconference), spoke in support of the
legislation. He detailed that the district had a great
program for preparing students for postsecondary education
in place. He felt that college bound students took the
ACT/SAT tests regardless of the mandate. He favored
assessments that determined how students measured in terms
of academic growth.
STAN VANAMBURG, NOATAK SCHOOLS, NOATAK (via
teleconference), spoke in support of HB 80. He concurred
with previous testimony that the tests detracted from
instructional time. However, he believed that the SAT/ACT
and Work Keys testing was important especially in rural
areas where access to testing centers was limited. He
emphasized that the state needed to support students'
access to the tests. He discerned that the assessments
helped prepare students "for post high school training and
jobs" and offered "accountability" for the schools in the
areas of career readiness. He concluded that although he
supported the legislation he wanted to ensure students
still maintained access to the tests.
Co-Chair Thompson CLOSED public testimony.
Representative Munoz wondered how students would gain
access to a preparatory course if the tests were
eliminated.
Representative Gattis replied that rural communities were
interested in the issue. She read from a document [included
in members files] titled; "Becoming an SAT test center is
easy" (copy on file) by the College Board:
Becoming an SAT test center is easy.
The two most important requirements for a test center
are proper facilities, and a professional who is
qualified and willing to serve as the test center
supervisor. The SAT Program will provide all the
necessary training, testing material and support
needed to administer the SAT.
Representative Gattis shared that becoming an SAT test
center was possible in rural communities.
Representative Guttenberg understood the concerns. He
wondered how a school would know what it's student's
proficiency were since the test were paid for and
administered privately and the school was not aware of the
scores. He deduced that there was no way of assessing
student's proficiency across the state without knowledge of
the scores. He wondered how to rate education across the
state.
Representative Gattis agreed that when a student paid for
the SAT/ACT test only they had access to the scores. She
relayed that the state administered the Alaska Measures of
Progress (AMP) standardized tests and scores were shared
across districts and linked with districts in the Lower 48.
Representative Guttenberg referenced an email he received
from a superintendent that alluded to removing the opt-out
provision from the original bill. He asked for
clarification.
Representative Gattis responded that she anticipated
introducing a Committee Substitute (CS) that added an opt-
out provision from the AMP tests but reconsidered since
session was almost over and she did not want to bog down HB
80 with an issue over standardized testing. She announced
that another bill was moving through the legislature that
contained the opt-out provision.
Vice-Chair Saddler remarked that tests were important and
valuable and that the SAT/ACT tests qualified a student for
scholarships. He believed that the tests provided and
independent assessment and if a school wanted the
information it could pay for it. He stated that WorkKeys
was a valuable vocational aptitude test. He understood the
concerns about the unfunded mandate and the limited time in
an instructional day, and demands on the staff. He
supported the legislation but encouraged students to take
the tests as a "worthwhile" endeavor.
Co-Chair Thompson REOPENED public testimony.
DEENA PARAMO, SUPERINTENDENT, MAT-SU BOROUGH SCHOOL
DISTRICT, PALMER (via teleconference), testified in support
of the legislation. She believed that the students and
their families should retain the ability to choose the
college readiness or Work Keys tests that best suit their
future needs and that the testing costs were not the school
districts responsibility. She detailed that the testing
companies and school district covered the fees associated
with testing for students who could not afford them. She
shared that the school district in partnership with the
Rasmussen Foundation and the National Math and Science
Initiative paid a student $100. for successful completion
of Advanced Placement (AP) testing. She asserted that
school districts had a vested interest in seeing students
succeed so that removing the revenue should not stop the
district from taking the proper course of action. An
unintended consequence of requiring tests had created a
significant burden on school counselors and diverted a
"disproportionate amount of their duties" to testing rather
than counseling duties. She deemed that schools would
continue to have ample opportunity to "facilitate" the
tests without impacting instructional time with adoption of
HB 80. She elaborated that each test had its own set of
allowable accommodations that included students with IEP's
(Individual Education Program). In a circumstance when the
allowable and acceptable accommodations for each IEP were
not followed the assessment became invalid. She opined that
the Alaska Performance Scholarship (APS) should continue to
require a college or career assessment in order to apply
and accept funds from the state. She believed that if the
state was willing to assist in paying for the testing,
students should share in the responsibility through
academic achievement and allowing themselves to be assessed
on college and career measures. The districts should set a
target and allow the students to demonstrate they can
achieve success in order to have access to the funds for
postsecondary testing instead of simply offering an
entitlement. She reiterated support for the bill and wanted
the districts to maintain "local control" to determine the
assessments and curriculum requirements that led to
successful completion of a high school diploma. She added
that districts received aggregate data on SAT/ACT compared
to other schools districts in the state.
1:58:10 PM
Representative Gara referred to the AMP tests. He reported
that the Department of Education and Early Development
(DEED) contended that if AMP testing was moved to every
four years a penalty would be imposed. He wondered what the
penalty entailed.
Ms. Paramo answered that the penalty was possibly related
to a waiver from the federal No Child Left Behind (NCLB)
provisions. She revealed that the new federal Elementary
and Secondary Education Act (ESEA) would give the state
more accountability and the penalty may be negated at the
federal level. She explained that the penalty could fall
under Title One provisions that were funded entitlements
granted to the state to carry out federal mandates.
Representative Gara opined that the tests were fake
aptitude tests because scores were improved by completion
of preparatory classes. He did not want to put students at
a disadvantage on the SAT/ACT and was supportive of any
preparatory coursework districts offered. He wondered if
eliminating the testing requirements would also halt any
preparatory coursework for students that the district
offered.
Ms. Paramo responded that each district "most likely"
provided preparatory courses that the students were
interested in taking. She asked the committee if prior to
passage of the mandate whether any individuals had
approached the legislature requesting financial help for
SAT/ACT fees. She offered that local districts provided
support for the fees and believed that "the state's
function" was not necessary.
Representative Gara asked whether removing funding for the
assessment tests would cause the districts to eliminate any
preparatory coursework a district may provide.
Ms. Paramo replied in the negative.
Co-Chair Thompson CLOSED public testimony.
Vice-Chair Saddler MOVED to REPORT HB 80 out of committee
with individual recommendations and the accompanying fiscal
note. There being NO OBJECTION, it was so ordered.
HB 80 was REPORTED out of committee with a "do pass"
recommendation and with one previously published fiscal
impact note: FN1 (EED).
2:02:33 PM
AT EASE
2:04:28 PM
RECONVENED
^DISCUSSION: STATE OF ALASKA SINGLE AUDIT, RECOMMENDATIONS
FOR THE DEPARTMENT OF HEALTH AND SOCIAL SERVICES
KRIS CURTIS, LEGISLATIVE AUDITOR, ALASKA DIVISION OF
LEGISLATIVE AUDIT, referred to the audit report provided to
the legislature titled "Summary of: State of Alaska, Single
Audit for the Fiscal Year Ended June 30, 2014" (copy on
file). She reported that the single audit was performed
every year as a requirement for receiving federal funds.
Sixteen out of forty-three of the audits recommendations
were directed to the Department of Health and Social
Services (DHSS). She notified the committee that she was
instructed to focus her discussion on the eight
recommendations related to the Medicaid program.
Ms. Curtis directed attention to page II - 34 of the
document and read the following recommendation
[Recommendation No. 2014-011]:
DPA's (Division of Public Assistance) director should
ensure the social security number (S SN) of Medicaid
benefit applicants is verified prior to providing
benefits.
Ms. Curtis pointed out that DHSS eligibility procedures
included making a copy of the physical social security card
for the case file or verifying the number through the
Internal Revenue Service's (IRS) system prior to providing
benefits. Eligibility technicians failed to verify the
social security number (SSN) from either procedure for two
out of twenty-five Medicaid applicants tested. She relayed
that the department concurred with the recommendation. She
moved to the next recommendation [Recommendation No. 2014-
013] on page II - 37 and read the following:
The Division of Senior and Disabilities Services'
(DSDS) director should continue to improve
documentation procedures and provide oversight to
ensure provider certification files are complete.
Ms. Curtis revealed that the recommendation was repeated
from FY 2011. She read:
The incomplete files did not provide assurance that
providers and employees were properly screened and
adequately trained prior to certification, Although
DSDS management developed procedures to improve
documentation…
Ms. Curtis related that in response to the prior findings,
DSDS instituted measures to remedy the situation but were
not "effective" in FY 2014. The department concurred with
the recommendation. She cited page II - 38 and read the
following recommendation [Recommendation No. 2014-014]:
The Division of Behavioral Health's (DBH) director
should continue to make improvements to ensure out-of-
state residential psychiatric treatment center (RPTC)
providers are paid in accordance with federal and
state requirements and that rates are properly
documented.
In FY 14. Dl- ISS' Office of Rate Review management
developed policies and procedures for documenting rate
setting for RP)'C providers. However, procedures were
not followed as designed indicating that additional
improvements are needed.
Ms. Curtis stated that the recommendation was repeated.
Representative Gattis wondered how, in light of the
proposed expansion, the department "would get it right this
time."
Ms. Curtis replied that the Medicaid program was "extremely
complex" and it was "reasonable" to expect some
inadequacies. Federal audits required that even small
findings must be reported. She conveyed that the
recommendations were more of an "indication" of the need
for improvements rather than an indictment "that the
department was not getting it right." The recommendations
were not necessarily related to expansion.
Representative Gattis felt that repeated recommendations
from 2011 were an indication that the department was "still
not getting it" after they were directed to make
improvements. She understood that Medicaid was complicated.
Ms. Curtis answered that in the following year the auditors
often discovered that "competing priorities" or "competing
resources" prohibited the department from correcting a
recommendation. She agreed that when a recommendation was
not addressed after several years the situation was
worrisome.
Representative Wilson wondered how often the Division of
Legislative Audit revisited the issues identified in the
audit.
Ms. Curtis responded that the particular issues were
revisited annually. She explained that a federal
requirement of the single audit directed DHSS to develop a
"schedule of prior audit findings" that provided the
current status of the recommendations. She stated that even
if the division did not test a finding the following year
the division followed the progress through the department's
schedule of prior audits, which was attached to the current
audit.
Representative Wilson noted that even though the department
concurred with the findings in some cases issues remained
after several years. She wondered whether, at some point
the division required a third-party to institute the
corrections or if the division further examined why the
corrective procedures were not working.
2:12:30 PM
Ms. Curtis replied that the division would continue current
year findings if they were important enough to include in
the audit report. Typically the department addressed the
recommendations in a timely manner. The division would not
recommend a third-party; corrective action was usually
attained by working with the commissioner.
Representative Wilson wondered whether a penalty was issued
for non-compliance.
Ms. Curtis answered that the penalty came from the federal
Centers for Medicare & Medicaid Services (CMS). The state
would be assessed "questioned costs." Some of the findings
and recommendations had questioned costs and the federal
government would decide whether the state would repay the
monies.
Representative Wilson voiced that the state paid the
penalties and not the department.
Ms. Curtis continued with recommendation 2014 on page II-
38. She read:
"However, procedures were not followed as designed
indicating that additional improvements are needed."
Ms. Curtis relayed that DHSS partially concurred with the
recommendation. The department maintained that although
documentation was not sufficient the rates were consistent
with the regulations and did not result in overpayments.
She addressed page II-42, [Recommendation NO. 2014-017]
that stated:
DSDS' director should ensure provider employees
receive timely, complete, and approved background
clearances and that the information supporting the
clearance is properly documented.
Ms. Curtis detailed that the recommendation was repeated
and expressed concern because the finding was related to
public safety. She read further:
In FY 14, 15 of 30 tested Medicaid26provider
certification files were missing complete criminal
history background checks.
According to DSDS management, due to the volume of
providers and lack of staff resources, DSDS staff must
rely on DHSS' Background Check Unit to ensure provider
employees in provisional status are ultimately
approved. By not following up on the status of the
background checks, DSDS staff does not know if
provider employees are ultimately approved to work
with clients. Additionally, DSDS staff does not have
procedures to ensure barred employees do not continue
to work for providers.
Ms. Curtis reported that the department concurred with the
findings. She moved to page II-44 [Recommendation No. 2014-
018] and read:
The Medicaid and Health Care Policy (HCP deputy
commissioner and FMS assistant commissioner should
improve procedures to ensure overpayments to Medicaid
providers are refunded to the federal agency within
the specified time frame.
Ms. Curtis commented that the recommendation was repeated
from FY 2013. She continued to read:
In FY 1 3, an overpayment recovered from a Medicaid
services provider was not refunded to the federal
agency within one year. As a result, the federal
agency overpaid the Slate S73, l81 thousand.
In FY 14, procedures were updated; however, upon
review of the procedures it was noted that they do not
address all types of overpayments or recoveries.
Ms. Curtis related that the division recommended that the
deputy commissioner "continue to make the improvements and
expand the procedures."
Representative Gara communicated that over the years the
committee had asked DHSS to do more with less staff and
funding and focus on providing services to clients.
Therefore, he believed that the types of findings
identified were bound to happen. He asserted that the
department was performing well enough to qualify for bonus
payments from the federal government. If the same test was
applied to every department issues would be discovered. He
pointed out that the Department of Environmental
Conservation (DEC) admitted in public that it could not
meet food safety standards. He did not understand why the
review was taking place. In the midst of budget cuts
agencies clearly lacked enough staff to perform
administrative work.
Co-Chair Thompson believed it was a good way to determine
what deficiencies were occurring in the departments and
part of the process of reform. He suggested that an audit
review should occur in every finance subcommittee for every
department.
Representative Gara understood the rationale and commented
that if the state would not provide adequate resources the
departments would continue to fail.
Ms. Curtis continued on page II-45 with Recommendation
Number 2014 - 019. She read:
DHSS' commissioner should take action to implement
effective controls to ensure Medicaid claims are
processed accurately and timely.
Ms. Curtis provided background information regarding
recommendation no. 19 and informed the committee that it
was one of three recommendations regarding the Alaska
Health Enterprise (AHE) system.
During FY 14. Dl 155 replaced its legacy Medicaid
management information system. The Alaska Health
Enterprise (AHE) system, also known as the Medicaid
claims system, began operating October 1. 2013, and
encountered significant widespread defects. DHSS and
its system development contractor, Xerox were aware
that the AHE system contained 44 defects at the time
of implementation. Rather than delay implementation of
the system until defects were addressed DHSS developed
work around plans to manage the known system defects
and they proceeded with implementation. Once
implemented the known defects climbed to 546. While
some of the defects were addressed during FY 14, at
the end of August 2014 the system still had identified
451 unresolved defects.
Ms. Curtis delineated that as one of the three
recommendations the division made to address the defects
recommendation no. 19 addressed the federal compliance
impacts of the system defects. She read further:
The AHE defects resulted in a material weakness in
internal controls over the Medicaid and CHIP programs'
allowable costs and eligibility compliance
requirements. Due to the complexity of Medicaid
program operations, we were unable to support an
opinion that Medicaid and CHIP expenditures were in
compliance with applicable laws and regulations
without the ability to rely upon the ARE system's
internal controls.
Representative Gattis wondered whether more money would
have cured all of the defects.
Ms. Curtis deferred the question to DHSS.
Representative Gattis was uncertain that money would have
cured the problem. She deduced that the problem was
inherent with the software itself.
Ms. Curtis answered that the audit had not concluded that
any amount of money was the source of the problem.
Vice-Chair Saddler asked for the definition of material
weakness.
Ms. Curtis read the definition of material weakness:
"A deficiency in internal control exists when the
design or operation of the control does not allow
management or its employees in the normal course of
business to detect or correct misstatements. A
material weakness is a deficiency or combination of
deficiencies in internal control such that there is a
reasonable possibility that material misstatement of
the entities financial statements, or in this case,
material noncompliance with the federal law would not
be prevented or detected on a timely basis."
Vice-Chair Saddler surmised that due to the material
weakness not enough information existed to accurately
assess the situation; good or bad.
Ms. Curtis acknowledged that the situation was not good,
but not enough evidence could be obtained to support an
opinion that deficiencies were material. The division
qualified its opinion on federal compliance.
Vice-Chair Saddler wondered how many state programs,
divisions and efforts resulted in material weaknesses.
Ms. Curtis answered that the condition was rare in a
federal program.
Representative Gara maintained that he had never said that
money could have fixed the Xerox problem. He knew of the
commissioners' efforts to try and solve the problem for
many years. He understood that currently claims were being
paid in a timely manner, but that the department was still
working on backlogs. He asked for verification.
Ms. Curtis did not know the current status of the Xerox
problem. She continued on page II-46 and read:
We could not obtain sufficient evidence to determine
the accuracy of the claims processed and conclude if
eligibility requirements were applied correctly
through the interface process.
Ms. Curtis read the areas of non-compliance:
Providers were paid for duplicate claims and were over
and/or under paid due to the inaccurate claim
eligibility and pricing. Identified Medicaid 3°federal
questioned costs for duplicate claims totaled $10,459.
Likely questioned costs are higher for this
deficiency.
• Claims were assigned incorrect funding codes. Four
non-Medicaid recipients were identified and miscoded
to Medicaid resulting in federal questioned costs of
$10,970. Additionally, approximately $1.8 million was
identified in claims that were incorrectly coded to
CHIP. 31 Likely questioned costs are higher for this
deficiency. Program errors related to the Medicare
buy-in program caused incorrect payments to the
federal agency including payments for ineligible
recipients. Questioned costs were indeterminate.
The surveillance and utilization review program 32was
ineffective due to unreliable system data and
inadequate staffing. Staff was reassigned from the
surveillance and utilization review program to help
address system defect errors.
• Program integrity staff was unable to complete
investigations and pursue collections of potential
overpayments from providers due to unreliable system
data.
Ms. Curtis continued and read:
Because of the defects the Al-IF system was not a
fully operational or federally certified Medicaid
system during FY 14. The AT IF system processed
approximately S 1.1 billion in claim expenditures
during FY 14 which resulted in $658.8 million in
federal revenues. AHE expenditures were material to
the Medicaid and CHIP federal programs.
Ms. Curtis continued with the second recommendation
regarding the AHE system that dealt with the financial
impacts to the system. She read from Recommendation 2014-
021 on page II-50:
DHSS' commissioner should work with Xerox to correct
defects in the AHE system.
Because of the complexity of medical claims
processing, we could not determine the extent of
misreporting resulting from system defects. However,
since the defects affected every area of AHE system
operations and the amounts processed through the AHE
system are material to the financial statements, the
combination of the issues above represent a material
weakness in internal control and could result in a
material misstatement to the financial statements. The
FY 14 General Fund and Governmental Activities audit
opinions were qualified in recognition of the material
weakness and a lack of ability to obtain adequate
evidence.
Representative Guttenberg commented that the Xerox
situation had been happening over a number of years. He
wondered if the department had addressed the problem
correctly, at adequate stages as the problems were
identified. He observed that the Xerox system was impaired
but the department suffered the blame. He thought the
problem with the department was insufficient and untimely
responses to the problems as they occurred. He asked for
clarification.
2:30:51 PM
Ms. Curtis answered that the audit had not evaluated the
department's response or system lifecycle development of
the project and noted that it was not an audit objective.
She offered that it was easier to determine decisions that
should have been made in hindsight. She acknowledged that
department staff had worked hard to fix the errors. She
could not judge whether it was a lack of the staff's
ability to resolve the problems.
Representative Guttenberg appreciated that the audit
identified specific problems with the Xerox system and that
the department moved past the initial problems and was
working on "fixing" the system. Looking forward, the audit
did not contain specific measures the department could
take. He voiced that he could only fault the department for
lack of response to problems as they developed but wanted
to hear from the department before he made that conclusion.
Ms. Curtis replied that audits looked backwards not
forwards. She understood that committee members were
interested in looking forward and wanted assurance from the
department that the system was working. She stated that in
FY 2015 the audit will ask DHSS if the system was certified
by CMS, which indicated the system was operational. The
audit would examine whether the system was subject to the
"SSAE16 Report." She defined that SSAE16 stood for
"Statement on Standards of at the Station Agreements" and
was a report on internal controls of the system. The report
was a condition of federal compliance and required for
financial auditing, and part of the Xerox contract. She
communicated that the division would regard the report "as
evidence that the system was working."
Representative Gara cited recommendation 21 on page II-50
that directed the commissioner to work with Xerox to
correct the defects in the AHE system. He suspected that a
company like Xerox had a legal team advising the company
not to admit to any liability. He deemed that the
recommendation would be problematic for DHSS to carry out.
He asked for the division's assessment.
Ms. Curtis responded that she did not have a view on the
issue. She elaborated that audit recommendations were
always addressed to the parties that could institute
change. The department needed assistance from the
contractor in order to address the problems thus, the
recommendation was written to both parties.
Representative Guttenberg wondered about a difference
between Xerox LLC. versus Xerox Corporation.
Ms. Curtis did not know the answer. She continued to
address recommendation 21. She summarized that the division
had to qualify the financial audit opinion due to the
weakness and lack of ability to obtain adequate evidence.
The audit listed issues relating to some of the financial
aspects of system defects on page II 51. She read the
following:
Suspended Claims Backlog: As of the end of August
2014, the AHE system had a significant backlog of
98,736 suspended claims totaling $184 million. It is
not possible to accurately identify the number and
amount of claims suspended due to system defects as
opposed to other non-system related reasons.
Furthermore, it is not possible to determine how many
of these claims will be deemed eligible and the amount
paid until the claims are successfully processed by
the ARE system. Since claims are not determined
eligible and priced until processed by the ARE system,
suspended claims delayed providers from being
compensated for services provided.
• Interface Issues: The AHE system has interface
problems with DHSS' eligibility information system,
pharmacy benefit management system, third party
liability system, and the Department of Commerce
Community and Economic Development's occupational
licensing database. As a result of these issues, risks
exist that eligible members are not receiving services
and ineligible members are inappropriately receiving
services; pharmacy claims are being processed
incorrectly; providers without licenses are receiving
payments; and private insurance reimbursements are not
being collected. While Xerox and DHCS personnel are
performing manual procedures to mitigate system
defects, considering the volume of claims, the manual
procedures are only partially effective in identifying
and correcting all errors.
• Payment Issues: The ARE system has numerous payment
related deficiencies, including paying providers for
duplicate claims, over and underpaying providers due
to miscalculation of claim eligibility and pricing.…
• Funding Source Issues: Claims are assigned funding
sources by the ARE system which, among other things,
are used to determine the percentage of federal
reimbursement for which each claim is eligible. AHE
system defects caused claims to be assigned incorrect
codes which resulted in inaccurate federal
reimbursement.
• C'heck- Write Issues: Claims processed and paid
through the ARE system (check-writes) should be
seamlessly interfaced with the state accounting system
(AKSAS). However during FY 14, the ARE interface files
required manual adjustments to ensure they correctly
interfaced AHE system activity with AKSAS.
Ms. Curtis cited the final finding, Recommendation No.
2014-022 on page II-53 [DHSS' commissioner should ensure
financial activity is properly classified in AKSAS.} that
addressed the audit adjustment that was necessary in order
to properly report the department's advances in the state's
financial statements. She read the following from page II -
53:
[DHSS incorrectly classified $131 million in advance
payments to Medicaid providers as FY 14 General Fund
expenditures.] During FY 14, AHE system defects
prevented some providers from receiving correct and
timely reimbursement for provided services. (See
Recommendation No. 2014-021.) To ensure Medicaid
clients continued receiving services, DHSS management
advanced funds to affected providers. The practice of
advancing general funds without federal reimbursement
caused DHSS to encounter expenditure authorization
problems as the related appropriations were funded, in
large part, by federal receipts. Based on an analysis
by DHSS staff55 that suspended claims supported the $
I31 million in advances, DHSS obtained approval from
the federal oversight agency to draw federal funds.
Federal approval was initially made under the
condition that the suspended claims would be
successfully processed by the end of the federal
fiscal year (FFY) and recorded correctly on the CMS-64
report. Ultimately, this was not possible, and CMS
oversight officials allowed DHSS to retain
approximately $78 million of related federal revenues
and report the advances on the CMS-64 report as
expenditures for the FFY ended September 30, 2014,
with the understanding that DHSS will make adjustments
to correct inaccurate claiming in the future.
Ms. Curtis detailed that accounting rules prohibited the
corrective measures from being reported as expenditures
since expenses had not occurred and revenue was also not
recognized. Therefore, the division made an audit
adjustment in order to properly report the activity in the
state's financial statements. The division was mandated to
include an audit recommendation due to the size of the
audit adjustment.
2:41:24 PM
Representative Gara believed one recommendation was
missing. He acknowledged the hard work by the previous and
current commissioners to correct the problems. He did not
want to blame the department for problems caused by Xerox.
He suggested a recommendation that the contractors would be
fully liable for any damages for all new technology
systems. He asserted that many problems developed with
computer systems purchased by the state for numerous
agencies. He spoke to overall damages the state would have
to pay related to companies that were no longer in
operation and the additional staff hires and staff time
diverted to corrective measures. He thought that an
"ironclad" liability provision was in order and that
contractors should be fully liable for all damages in the
future. He wondered if the division had looked into the
issue.
Ms. Curtis answered in the negative. She noted that the
division examined the contract to understand the
requirements. She offered that the issue raised a larger
issue. She indicated that the division had encountered
similar situations where the corrective action to problems
was to implement a new system and a smooth application
rarely occurred. She advocated that the Legislative Budget
and Audit Committee (LBA) analyze what central controls the
state had in place to ensure that the system procurement
process and development followed industry best practices.
Representative Gattis agreed and assured the division that
in her capacity as Chair of the Department of
Administration finance subcommittee she would examine the
issue throughout the interim.
Representative Guttenberg shared that because of his
experience as a juror he was aware of the necessity
defense. He thought that the department's situation was
warranted because "breaking the law to fix the problem was
agreeable because there was nothing else to do." He related
that the providers were on the verge of "going out of
business" because payments were halted. He wondered if
there was anything in general accounting procedures that
addressed this type of situation. He wondered what
appropriate course of action the state had to deal with
similar audits that identified violations of accounting
practices and when the federal government was not living up
to accepted practices.
Ms. Curtis answered that general accounting practices would
not specifically address the situation but looked at how
the state reported the advances and financial activity it
made. She did not believe federal regulations would address
the issue either. She surmised that the accounting world
would never address "holding parties accountable for
actions that were or were not taken."
Representative Guttenberg wondered whether the state took
appropriate reporting action on its financial statements.
Ms. Curtis replied that the financial statements were
compiled and reported by the Division of Finance, DOA and
included a footnote explaining the activity. She added that
due to the suspended claims and backlog the division
considered the situation a "contingency" for expenses
incurred but not reported.
Representative Gara asked for verification that the audit
applied through November, 2014.
Ms. Curtis answered in the affirmative. She elaborated that
the division's field work lasted through November, 2014 and
the period examined ended August, 2014.
SANA EFIRD, ASSISTANT COMMISSIONER, DEPARTMENT OF HEALTH
AND SOCIAL SERVICES, made a general statement about how
seriously the department took the audit findings. She
relayed that she had been with the department for two
years. She shared that former Commissioner Bill Streur
prioritized the monitoring of federal funds and established
a section called the "Federal Allocation Management Unit."
The unit consisted of three accountants that worked with
the large entitlement programs who were in charge of
financial reporting, coordinated the audit findings and
worked actively with Ms. Efird and all of the divisions on
audit findings. The department viewed audit findings as a
gauge for improvement. She notified the committee that the
department received over 50 percent of the federal money
coming into the state mostly through Medicaid, Title 4E
(foster care and adoption program), and the Temporary
Assistance for Native Families (TANF). However, DHSS dealt
with over 220 other federal programs with requirements that
changed on an annual basis. She detailed that the federal
Office of Budget and Management (OMB) Circular 133 required
the department to actively address the audit findings for
federal programs. She reiterated how seriously DHSS took
audit findings and elaborated that she met with appropriate
division directors and operations managers to address how
improvements could be made.
2:52:27 PM
Representative Guttenberg was concerned about a finding on
page II-42, Recommendation No. 17 related to eligibility
background checks. He felt that the issue was potentially
serious and wondered how the department rectified the
issue.
DUANE MAYES, DIRECTOR, SENIOR BENEFITS SERVICES, DEPARTMENT
OF HEALTH AND SOCIAL SERVICES (via teleconference), replied
that the issue arose three years ago specific to the
background check unit. The division had arduously worked on
"the implementation of strengthened provider background
check and oversight procedures.
MARGARET BRODIE, DIRECTOR, HEALTHCARE SERVICES, DEPARTMENT
OF HEALTH AND SOCIAL SERVICES (via teleconference),
elaborated the DHSS implemented an entirely new background
check program. The database was working "extremely well."
In the past individuals could remain in the system without
a final clearance, but the new system terminated an
individual without final clearance within three months.
Representative Guttenberg wondered whether she was
referring to state or provider employees. He thought three
months "seemed like a long time" if the wrong individual
was in the system.
Ms. Brodie answered that she was referring to provider
employees. She explained that three months was the maximum
amount of time it could take and if fingerprints were
available clearance occurred within one week.
Representative Guttenberg cautioned that the issue was
important enough to monitor.
Representative Munoz spoke to page II - 51 [Recommendation
No. 21] regarding the approximately 100,000 suspended
claims totaling $184 million and the identified risks
concerning the interface issues. She wondered whether the
possible threats to the system that had been identified had
been ruled out, i.e., services to ineligible members and
payment to providers without licenses. She asked the
department to speak to the issue.
Ms. Efird answered that under the direction of Commissioner
Valerie Davidson vast improvements to the Medicaid
Management Information System (MMIS) occurred since the
audit. The department worked with Xerox to implement its
corrective action plan.
Ms. Brodie added that the suspended backlog was based on
billed charges and had included many duplicate claims.
Providers had not received payment and were re-submitting
claims. The dollar amount was much lower than reported.
Currently, the suspended claims had been reduced to less
than 10 percent and the majority were addressed within 30
days of submission. She elaborated that certain claims such
as school based services were supposed to suspend until a
check from the school district was received. She reported
that problems with unlicensed providers had been fixed for
over one year.
Representative Munoz asked the department to address the
eligibility issue concerning individuals possibly
inappropriately receiving services.
Ms. Brodie answered that issues regarding "eligibility
subtype" were corrected.
Representative Munoz asked about the possibility of
incorrectly processed pharmacy claims.
Ms. Brodie replied that the problem had been corrected.
Representative Munoz asked whether private insurance
reimbursements were collected.
Ms. Brodie replied that part of the problem was corrected
and expected to have the problem fully corrected on April
25, 2015.
Representative Gattis wondered what had occurred to move
the corrective actions in the "right direction."
Ms. Efird answered that a number of factors attributed to
the fixes. She referenced Representative Guttenberg's
questions about whether the department respond adequately
and in a timely way. She cited attachments found in Section
4, on page 60 of the full audit that contained the
litigation documents. The documents outlined the steps the
department engaged in prior to litigation. She agreed that
former Commissioner Bill Struer had been working diligently
to fix the problems with Xerox. She discussed that the
department had realized that the claims were incorrectly
processed by the system and were not electronically
adjudicated. The top priority for DHSS was to pay providers
since delivering healthcare was the primary responsibility
of the department. The Division of Healthcare Services
worked diligently and devised a way to pay providers and
keep the healthcare system working. She stressed that like
the previous commissioner, the current commissioner was
also working diligently with Xerox and the providers. The
department was enforcing Xerox's corrective action plan and
holding them to specific deadlines for addressing
corrective actions. The department expended a lot of
resources and attention directed to fixing the problems.
Ms. Efird expressed uncertainty about whether more funding
would have corrected the problem. Perhaps more resources
would have helped the department address some of the
issues. She suggested that the department seriously pursued
corrective measures and that lack of resources was not an
excuse. She shared that in areas with a large turnover of
staff, weaknesses could have occurred. Training was very
important and new hire training emphasized that policies
and procedures must be explicitly followed. She suggested
that at times, new staff missed the point and the
department needed to diligently follow through and ensure
policies and procedures were carried out.
3:04:27 PM
Representative Wilson asked whether a corrective plan was
written for each recommendation.
Ms. Efird asked whether she was referring to Xerox's
corrective plan and requested that Representative Wilson's
clarify the question.
Representative Wilson wanted to know if there was a plan
for Xerox and also for each recommendation. She further
asked whether the department had to submit corrective plans
to the audit division.
Ms. Efird responded in the affirmative. She reported that
DHSS tracked the prior year's summary of audit findings.
Corrective plans were implemented and the department
followed up with the divisions' progress in achieving the
corrective measures.
Representative Wilson requested that the department provide
a copy of the corrective measures recommended in the audit
in order for the committee to follow up next year.
Ms. Efird explained that contained within the audit the
department responded to each of the recommendations, which
included the plan for each of the findings. The department
subsequently met with each division to determine whether
the plan was achieved.
Representative Wilson expected a more formal corrective
process. She requested that Ms. Efird use the background
check issue and provide an example.
Ms. Efird announced that that each response contained the
plan the department followed and that no other formal
"signed" plan existed. She referred to page II-44 of the
audit and directed attention to the agency's response. She
relayed that the department concurred with the
recommendation and provided a plan to strengthen its
processes and what corrective measures occurred in FY 2014.
She read the following, "Early in SFY 2015 procedures were
adopted and implemented for individuals with a barred
status including a file documentation requirement." She
noted that the response continued with the steps that were
implemented in FY 2015. She would meet with the division
director in the future to determine the status of the plan.
The department will subsequently submit the summary of
prior year audit. The current year's summary was included
in Section 3 on page 41 of the full audit, which described
what the department achieved for each finding to date. She
exemplified that on page 341, as part of the summary,
notice that corrective action was taken for a specific
finding and was resolved.
Representative Wilson related from personal experience that
childcare providers were required to have a corrective
action form filled out and signed for even small issues.
She thought the department should be held to the same
standards of accountability.
Representative Gara asked for verification that "the Xerox
debacle diverted a lot of staff time."
Ms. Efird agreed with the statement.
Representative Gara stated that the department was in
litigation with Xerox. He deduced that one of the things
that slowed down the corrective process was that Xerox was
slow to admit its mistakes and was "recalcitrant" in fixing
mistakes they would not admit to.
Ms. Efird deferred the answer to the Commissioner or Ms.
Brodie.
Representative Gara referred to claims that dated back
years due to the broken Xerox system. He wondered if the
department had reached the point where it was confident it
could pay claims going forward.
Ms. Efird replied in the affirmative. She elaborated that
the department had reached out to a number of providers in
order to make sure payments were received and continued to
work closely with providers. She shared statements from
providers stating support for the corrective actions by the
department and shared that she had a number of emails and
letters from providers claiming that the system was
working. She offered that 90 percent of current suspended
claims were less than 60 days old and 65 percent were less
than 30 days old. She expressed confidence that the system
was working well.
3:13:11 PM
Representative Munoz referred to provider testimony that
the system was comparable to the one it had replaced. She
asked whether the goal was to have a new system that was
comparable or more efficient.
Ms. Efird answered that the provider had made the point
that the new system was comparable to the old system with
regards to timely payments. She stressed that the new
system was expected to accomplish much more than the
previous system.
Co-Chair Thompson mentioned that 70,000 new medical billing
codes would come online in July or October of 2015. He
wondered whether plans were being developed to accommodate
the changes and prevent the department from falling behind
again.
Ms. Brodie answered that the department was on track with
the "ICD 10" coding system. She elaborated that with all of
the issues with the Xerox system the department was aware
that it "could not afford to get off track" with
accommodations for the new codes. The department hired a
long-term non-permanent employee to manage the
implementation. She relayed that specific criteria from CMS
was being met and the department "was on target."
Representative Wilson asked who had been hired.
Ms. Brodie replied that the employee was a long-term non-
permanent employee.
Representative Wilson wondered whether the hire was an
expense to the state because Xerox did not accomplish what
was expected.
Ms. Brodie responded in the negative. She believed that the
department would have needed the staff due to the
complexity of the issue.
Representative Guttenberg cited recommendation No. 11 on
page II - 34 that related to SSN verification. He wondered
whether the staff was not trained or supervised well.
RON KREHER, ACTING DIRECTOR, DIVISION OF PUBLIC ASSISTANCE,
DEPARTMENT OF HEALTH AND SOCIAL SERVICES, answered that the
problem could be attributed to a number of issues; staff
turnover was high, a training issue, and given the volume
of cases processed it could have been an oversight on
behalf of an eligibility technician. He communicated that
the oversight was slightly unusual because typically an
application could not pass through other screens because
the SSN was a mandatory field in the eligibility
information system. Often times the documents were viewed
and not copied, but verification was mandatorily documented
in the system. He did not have the detail on the particular
instances mentioned in the findings so he could not
identify the missing step in the process.
Representative Guttenberg verified that the technician
could not move on to the next screen in the application
without verifying the SSN.
Mr. Kreher answered in the affirmative.
Representative Guttenberg surmised that if the test figure
was 2 out of 25 and was multiplied by the number of
beneficiaries the number of mistakes would be
"significant."
Mr. Kreher answered in the affirmative but felt that if a
significant number of SSN's were not verified it would have
resulted in a larger number of incorrect samples.
Co-Chair Thompson addressed the state's IRIS (Integrated
Resource Information System) conversion. He wondered if any
problems were anticipated.
Ms. Brodie could only speak to the Division of Enterprise
Technology Services (DOA). She voiced that, "if IRIS worked
the department would be able to interface with the system."
Vice-Chair Saddler referred to page II-55, Recommendation
No. 2014-023 [DHSS' commissioner should distribute funds in
accordance with state statutes and regulations.] that
related to the appropriation of $1.175 million for suicide
prevention. He asked for the distinction between a
sponsorship and a grant.
Ms. Efird replied that grant funding was appropriated
through the grants line in the budget. She explained the
when utilizing grants, the grantee was providing services
for the department and reports and programmatic updates
were required. The funds identified in the finding were
unrestricted federal dollars earned by the department for
meeting specific criteria related to the children's health
insurance program [SCHIP]. She elaborated that the
unrestricted funding was appropriated to the department
through the contractual line. She cited Attachment 3 in
Section 4 on page 85 of the audit, and referred to AS.
18.05, Administration of Public Health and Related Laws and
relayed that the statute defined the department's role to
promote public health. She elaborated that the funding was
provided to the department to support the mission of the
department. The department had policies and procedures
outlining what was appropriate for sponsorships. The
department used the aforementioned guidelines to distribute
the funding.
3:22:39 PM
Vice-Chair Saddler asked how the department earned money
from the SCHIP program.
Ms. Efird responded that a performance bonus section under
the federal program awarded the funding. She elucidated
that every state had access to bonus funding based on a
lengthy list of criteria.
Vice-Chair Saddler asked how much performance bonus money
the department had received.
Ms. Efird replied that DHSS received approximately $6
million over the past three years and currently had
slightly over $4 million left. She added that the
department had maintained carry forward authority.
Vice-Chair Saddler asked how the department planned to use
the money.
Ms. Efird answered that the department expended the funds
for suicide prevention, homeless outreach, and for internal
use. She explained that the Division of Juvenile Justice
(DJJ) had an incident in Kenai related to inadequate safety
needs. The department wanted to use some of the funding to
respond to the safety needs identified to shore up the
facility.
Vice-Chair Saddler asked if there were restrictions on how
the department could spend the money.
Ms. Efird replied in the negative.
Representative Munoz cited the fact that 44 defects were
identified when the Medicaid claims system was implemented
and climbed to 546 defects. She wondered how many known
defects currently existed in the system.
Ms. Brodie replied that currently just over 90 defects were
identified in the system.
Representative Munoz wondered when the CMS certification
was expected.
Ms. Brodie replied that the department expected to receive
CMS certification in the first quarter of 2016.
Ms. Efird pointed to the department's Attachment 2 in
Section 4 on page 84 of the full audit. She relayed that
the attachment included a letter, dated October 2013 from
Xerox that claimed the system was up and operational.
3:27:45 PM
Representative Munoz requested a list of the known defects.
Representative Pruitt referred to Recommendation No. 23. He
stated that the audit disagreed that the funding was not
appropriated correctly. He asserted that the department had
a "slush fund" and he "hated the concept." He wondered why
DHSS disagreed with the audit finding and why the
legislature should not have the authority to determine how
the bonus money was spent. He was concerned that the
department was skirting the legislative process.
Ms. Efird answered that the legislature had appropriated
the money. She reminded the committee that the funding was
appropriated to the department in the budget's contractual
line through the SCHIP bonus as unrestricted federal
dollars.
Representative Pruitt voiced that he would reconsider the
appropriation next year.
ADJOURNMENT
3:31:08 PM
The meeting was adjourned at 3:31 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 80- Letter of Support-Taryn Luskleet- 3-25-2015.pdf |
HFIN 4/14/2015 1:30:00 PM |
HB 80 |
| HB80 Supporting Documents - ACT SAT Students with Disabilities.pdf |
HFIN 4/14/2015 1:30:00 PM |
HB 80 |
| HB80 Supporting Documents - Letter Gebhart.pdf |
HFIN 4/14/2015 1:30:00 PM |
HB 80 |
| 4-14-15 HB148 to HB190 Compare (Thompson).pdf |
HFIN 4/14/2015 1:30:00 PM |
HB 148 HB 190 |
| DHSS AUDIT.pdf |
HFIN 4/14/2015 1:30:00 PM |