Legislature(2003 - 2004)
04/15/2003 09:04 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.