Legislature(2003 - 2004)

04/14/2003 01:01 PM JUD

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

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