Legislature(2003 - 2004)
04/15/2003 09:04 AM Senate FIN
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* first hearing in first committee of referral
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CS FOR SPONSOR SUBSTITUTE FOR SENATE BILL NO. 41(JUD)
"An Act relating to medical care and crimes relating to
medical care, including medical care and crimes relating to
the medical assistance program, catastrophic illness
assistance, and medical assistance for chronic and acute
medical conditions."
This was the first hearing for this bill in the Senate Finance
Committee.
[Note: Due to an audio malfunction a portion of the meeting was not
recorded.]
Co-Chair Green, sponsor, read her testimony into the record as
follows.
Why do we need SB 41?
· The cost of the Medicaid program in Alaska has increased an
average of 20% per year since 1999, growing the program
from $396 million in FY 99 to $936 million in FY 04 (a
total increase of $540 million over 5 years).
· We have limited ability to contain the majority of cost
factors driving these increases, such as the increasing
number of eligible recipients, the increased use of health
services, and the rising costs of prescription drugs and
long-term care.
· There is evidence that waste, fraud and abuse of public
funds used to deliver Medicaid and Medicare services
exists, both in Alaska and throughout the nation.
Estimates of 7% for waste and 10% for abuse are commonly
held perceptions.
· Alaska has no specific laws tailored toward health care
crimes, making it difficult to prosecute dishonest Medicaid
providers and keep them from continuing to abuse the
system.
· The Division of Legislative Audit recently released their
audit on the Division of Medical Assistance Internal
Control Over Medicaid Payments. Two recommendations from
the audit are addressed by this legislation:
o Recommendation No. 7 states: "DMA's director
should provide for a full-time, ongoing service
provider audit function."
o Recommendation No. 12 states: "The legislature
should consider adopting specific criminal
statutes related to Medicaid fraud to enhance the
Medicaid Fraud Control Unit's effectiveness."
According to the audit, 46 other states have some form of
criminal Medicaid fraud statutes.
What does SB 41 Do?
· It requires DHSS to contract for annual independent
financial audits to identify errors, overpayments, and
criminal violations within the Medicaid program.
· These audits complete the communication loop between DHSS
and Law:
o All audits will be provided to the Attorney General
for possible criminal investigation.
o The Attorney General will notify DHSS of any
criminal charges brought against a Medicaid
provider.
o All criminal charges will result in a complete review
of outstanding claims with DHSS.
· It establishes the crime of medical assistance fraud
defined with the culpable mental state of "knowingly and
recklessly". It classifies the level of crime as a felony
or misdemeanor based upon the aggregate value of charges
similar to existing theft statutes.
· It provides a definition of "medical purpose" in relation
to prescribing a controlled substance. The definition
provides a framework within which a prosecuting attorney
can argue whether a practitioner prescribed a drug for a
medical purpose or for another purpose.
· It allows the commissioner to exclude a person convicted of
medical assistance fraud from participation in the medical
assistance program for a period up to 10 years following
their unconditional discharge from sentence served.
Senator Taylor asked if this legislation provides for a "paper
audit" or just a field audit.
Co-Chair Green responded that this requires that at least .75
percent of the total number of providers are audited each year. She
stated this is more than the current number of audits conducted and
also provides a "higher level of investigation". She furthered that
the legislation would require the Department to follow up on audit
findings and also requires communication between the Department of
Law and the Department of Health and Social Services regarding
providers that have been prosecuted and found to be not in
compliance. She informed that in the past, lapses in this
communication have occurred between the two departments. She
stressed that this legislation would stop the Medicaid
participation of those providers found guilty of Medicaid fraud.
Senator Taylor relayed that "a member of the medical community"
indicated to him that an occasional comparison of a provider's
claims to other claims would identify any irregularities that would
warrant a complete audit. Senator Taylor requested assurances that
the Department would conduct these reviews.
Co-Chair Green assured this was her understanding.
STEVE BRANCHFLOWER, Director, Office of Victims' Rights, and former
Director of the Medicaid Fraud Control Unit, Department of Health
and Social Services, testified via teleconference from an off net
site that he was available to answer questions.
RANDALL SCHLAPIA, Unit Manager, Provider Review and Rate Setting,
Division of Medical Assistance, Department of Health and Social
Services testified via teleconference from an offnet location that
he was also available to answer questions.
JACK NIELSON, Executive Director, Medicaid Rate Advisory
Commission, Division of Medical Assistance, Department of Health
and Social Services testified via teleconference from an offnet
location that he was also available to answer questions.
DON KITCHEN, Assistant Attorney General, Medicaid Provider Fraud,
Office of Special Prosecutions and Appeals, Criminal Division,
Department of Law, testified via teleconference from an offnet
location that he was also available to answer questions.
Senator Olson asked the percentage of the audits conducted that
have resulted in questionable or egregious practices.
Mr. Branchflower responded that between July 1998 and December
2002, during his tenure at the Medicaid Fraud Unit, the Division of
Medicaid Assistance contracted with a national accounting firm to
conduct 164 audits at a cost of $477,250. As a result of the
findings of the audits, he informed that $2,741,126 was recovered
and returned to the State. He further told of eight outstanding
cases at the time he left the Unit, with an additional $18 million
identified as overpayments. He concluded that the audits were cost
effective and he therefore encouraged passage of the bill.
Senator Taylor repeated Senator Olson's question of the percentage
of audits resulting in identification of fraud or questionable
practices.
Mr. Branchflower replied that 85 percent of the audits did not find
conduct that would merit criminal prosecution, although in almost
all the cases, some overpayment was identified. He stated that in
some instances, substantial overpayment was identified and because
no criminal wrongdoing was determined, these cases were referred to
the Division of Medical Assistance for the initiation of an
administration recovery, as required under federal regulations. He
was unaware of the status of the administrative recovery cases.
Senator Taylor clarified that approximately 75 to 80 percent of the
audits found some overpayment was made and the remaining 15 percent
warranted an additional criminal investigation.
Mr. Branchflower affirmed.
Senator Olson asked the number of providers charged were appealing
the findings of their audit.
Mr. Branchflower told of two doctors convicted and imprisoned who
are currently appealing their cases.
Senator Olson asked if the sponsor received input on this
legislation from health care providers.
Co-Chair Green answered that she has received "very little" such
input.
Amendment #1: This amendment changes the definition of "claim"
under Sec. 47.05.290. Definitions., in Section 3 of the committee
substitute on page 6 lines 4 - 8. The amended language reads as
follows.
(2) "claim" includes a request for payment for
medical assistance services under applicable state or federal
law or regulations, whether the request is in an electronic
format or paper format, or both;
This amendment also inserts "or medical services", and replaces
"available to a medical assistance recipient" with "that may
qualify for reimbursement under AS 47.07 or AS 47.08" on page 7
lines 6 and 7 in Section 3 of the committee substitute. The amended
language of Sec. 47.05.290. Definitions., reads as follows.
(17) "services or medical services" means a health
care benefit that may qualify for reimbursement under AS 47.07
or AS 47.08, including health care benefits provided,
attempted to be provided, or claimed to have been provided to
another, by a medical assistance provider, or "services" as
defined in AS 11.81.900;
Co-Chair Green moved for adoption.
Co-Chair Wilken objected for an explanation.
ANNE CARPENETI, Assistant Attorney General, Criminal Division,
Department of Law, noted a typographical error in the amendment.
Co-Chair Green offered a motion to amend the amendment to insert
"assistance" following "medical" in Sec. 47.05.290(17) to read as
follows.
(17) "services or medical assistance services" means
a health care benefit that may qualify for reimbursement under
AS 47.07 or AS 47.08, including health care benefits provided,
attempted to be provided, or claimed to have been provided to
another, by a medical assistance provider, or "services" as
defined in AS 11.81.900;
The amendment was AMENDED without objection.
Ms. Carpeneti then spoke to the amendment, noting that the
clarification of a definition of "claim" is preferable in criminal
statute, as the common definition of the word is different than
that applied to a Medicaid claim.
Ms. Carpeneti furthered that the clarification of "services or
medical services" is necessary because other services may qualify
for reimbursement under the law, but are not necessarily available
to a Medicaid eligible recipient. She exampled oxygen bottles.
Co-Chair Wilken clarified the witness supported the amendment
Ms. Carpeneti affirmed.
There was no objection and the amended Amendment #1 was ADOPTED.
Senator Taylor offered a motion to report the committee substitute,
as amended, from Committee with individual recommendations and
accompanying fiscal note.
Without objection CS SS SB 41 (FIN) MOVED from Committee with
fiscal note #1 for $66,500 from the Department of Health and Social
Services.
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