Legislature(2003 - 2004)
04/14/2003 01:01 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SSSB 41-MEDICAL CARE: CRIMES,COSTS,AUDITS CHAIR SEEKINS announced SB 41 to be up for consideration. SENATOR LYDA GREEN, sponsor of SB 41, said the cost of the Medicaid program has risen at an average rate of 11 percent per year since 1999. Alaska's Medicaid Program has averaged annual increases of 20 percent, which is more than $100 million per year and brings the total projected FY 04 program costs to just under $1 billion in federal and state funds. Factors such as increased enrollments, increased use of health services and the increasing cost of pharmaceuticals and long term care are the greatest contributors to the rise in Medicaid Program costs. The state has limited ability to contain those costs, but they can help the program integrity by targeting waste and fraud. Nationally, the error rate of overpayments in the Medicare Program is seven percent. There is also the commonly held perception that fraud committed against the Medicaid Program nationwide amounts to ten percent. Whether those numbers are inclusive or not, it accounts for spending of $70 to $170 million. She asked for rigorous controls and frequent scrutiny. She said that 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. You must prove the conduct was intentional, which is a very high standard to meet for a crime where there is no crime scene or physical evidence. Consequently, there have been few prosecutions. SB 41 provides the legal tools for the fiduciaries of the Medicaid Program to establish program integrity and maintain maximum fiscal control. It establishes a crime of medical assistance fraud; defines the elements that constitute the fraud; and classifies the crime committed as either a felony or misdemeanor. It requires independent financial audits to identify errors, overpayments and criminal violations made to or by Medicaid providers and requires administrative action within 90 days of each audit. It completes the loop between the Department of Health and Social Services (DHSS) and the Department of Law (DOL) by requiring copies of all audits to be provided to the attorney general and directing him or her to notify DHESS 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, SB 41 provides that financing of the audits may be made from the recovery due to the audits of misspent funds. SENATOR GREEN said that recommendation 12 from the Division of Legislative Audit states, "The Legislature should consider adopting a specific criminal statute related to Medicaid fraud to enhance the Medicaid Fraud Control Unit's effectiveness." Recommendation 7 of the same audit states, "DMA's director should provide for a full-time on-going service provider audit function." It's vital that the State of Alaska administer its Medicaid Program in a manner that insures effective long-term cost containment while providing needed medical care to its intended recipients. She said they must operate honestly, responsibly and in accordance with the law. SENATOR OGAN asked why there "shall" be annual audits instead of "may". SENATOR THERRIAULT motioned to adopt CSSSSB 41, version \S. SENATOR ELLIS objected for an explanation of the CS. MS. TRACI CARPENTER, staff to Senator Green, explained that version S has the same elements as version Q, but changes the title, defines medical purpose in section 1 to provide a prosecutor the tools to use in court and adds a definition of practitioner, which is already in statute. SENATOR ELLIS asked why it's necessary to define medical purpose. MR. DON KITCHEN, Assistant Attorney General and director of Medicaid Fraud in Alaska, answered that he did not write that section, but he understands that it was written during a court trial when the jury needed a definition. He thought Mr. Branchflower was the author. MR. STEVE BRANCHFLOWER, Director, Office of Victims' Rights, explained that there is no definition of medical purpose in statute right now and when someone writes a prescription there is a requirement that it be based on the existence of medical necessity. Absent the medical necessity, the person that prescribes is subject to criminal prosecution. If it is found that the doctor lacks the requisite medical necessity, he or she can be prosecuted under our drug laws. The problem he had when he prosecuted doctors for violating drug laws is that the defense would always assert that there was a medical purpose and much of the trial would be spent on "a battle of the experts" trying to define it. 1:45 p.m. SENATOR ELLIS said he is concerned with over-prescribing drugs in Alaska and asked if anything else in the CS helps with this problem. MR. BRANCHFLOWER explained that the language on page 3 is probably the most important part of the statute dealing with prescription fraud from a theft standpoint. Previously he was commenting on cases where practitioners are prosecuted for violations of the drug laws of the state, but it's also possible to prosecute the same practitioners for a theft related offense. That would be two counts. TAPE 03-21, SIDE B MR. BRANCHFLOWER said the medical necessity definition is key as well as the medical assistance fraud section. Alaska is the only state that has no criminal statutes specific to the prosecution of health care practitioners. SENATOR ELLIS asked if other states had done other things that could fit within this legislation in terms of prescription pads and tracking that could help with what he believes is a fairly significant ongoing criminal activity. MR. BRANCHFLOWER said it is a problem and this bill is a very good start. There are employees within the Division of Medical Assistance who could assist prosecutors in identifying prescribing practitioners and it would be a matter of permitting the investigators to sit during Drug Utilization Review Subsystem (DURS) meetings, which he thought the audit suggested doing. SENATOR ELLIS removed his objection and the CS was adopted. SENATOR OGAN reiterated his question about using "shall" and not "may" for annually contracting independent audits. SENATOR GREEN replied the audit function is incredibly important and has to be repeated although it is cumbersome. The "shall" language means it is required and they will continue and there will be follow up. SENATOR OGAN asked why there is a fiscal note since the recovery is indicated to be more than the cost of the program. He also questioned whether it would go into the general fund. SENATOR GREEN replied the language in the bill says that enough money could be appropriated to do the next year's audit. She thought it would be better than a wash. SENATOR ELLIS asked if there was anything in the bill that went beyond the effort to contain medical fraud, because his reading of section 4 on page 7 gives him pause. He wanted to know what she wanted to accomplish with that section by using the word "seek" rather than "receive." SENATOR GREEN replied the department couldn't be held to be responsible for an individual to receive a service they have not sought. SENATOR ELLIS asked if that was a problem in the past. MR. JACK NEILSON, Assistant Attorney General, said that language means that the recipient is supposed to seek only the medical care they need under the Medicaid Program. Some recipients might want a free trip to Seattle or something like that. SENATOR ELLIS said he feels the intent language is pretty subjective. He asked what would happen to a person who was dying of cancer and was looking for other drugs or something beyond chemotherapy. Would they be more likely to be accused or convicted of Medicaid fraud if they were more aggressive in their concern about their personal care? MR. NEILSON replied, "Most certainly not." SENATOR OGAN asked if this language targeted people who used the emergency room to get Tylenol. MR. NEILSON said this could be used in that instance. SENATOR OGAN asked if this was aimed at providers mostly. MR. NEILSON replied his understanding is that the Legislature felt recipients should be clear about what medical assistance they are seeking. SENATOR ELLIS asked if the fiscal note anticipated any increase in Medicaid fraud investigators. SENATOR GREEN replied they would contract with an outside attorney to do part of the legwork. SENATOR ELLIS said he feels they will find a lot of new cases and if there aren't new investigators he questioned whether they wouldn't fall behind. SENATOR GREEN said she didn't really know since the division was in the middle of reorganization. Many of the audits would be paper audits, which would require backup and substantiation of services, etc. MR. BRANCHFLOWER added the Medicaid Fraud Control Unit currently has three investigator positions and two of those are filled. The third position is funded, but it is vacant. The unit has 75 percent federal funding and a 25 percent state match. So, the increased leads these audits are expected to find will result in the filling of the third position. SENATOR THERRIAULT motioned to pass CSSSSB 41(JUD), version \S, from committee with individual recommendations. Senator Ellis objected to establish that the language in the purpose section is not intended and wouldn't lessen someone's ability if they meet the federal and state requirements to participate in the Medicaid plan and that they are just trying to establish that people should seek appropriate care. SENATOR GREEN said that was correct. SENATOR ELLIS asked if the medical groups in the state expressed support of the bill. SENATOR GREEN said she received very little response. SENATOR ELLIS said he was a little concerned about that as he would hate to see this effort undercut at some point, because they weren't aware of this. SENATOR ELLIS removed his objection and CSSSSB 41(JUD) moved from committee.