Legislature(2003 - 2004)

05/16/2003 01:49 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                                                                   
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                                                                   
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                                                                   
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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