Legislature(2003 - 2004)

04/15/2003 09:04 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
     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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