Legislature(2007 - 2008)BUTROVICH 205

03/05/2008 01:30 PM Senate HEALTH, EDUCATION & SOCIAL SERVICES


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01:34:13 PM Start
01:37:12 PM Medicaid Behavior Health Presentation
02:41:13 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Medicaid Behavior Health Presentation by TELECONFERENCED
Mary Thorton, BSRN, MBA
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
SENATE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE                                                               
                         March 5, 2008                                                                                          
                           1:34 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Bettye Davis, Chair                                                                                                     
Senator Joe Thomas, Vice Chair                                                                                                  
Senator John Cowdery                                                                                                            
Senator Kim Elton                                                                                                               
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Fred Dyson                                                                                                              
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Representative Sharon Cissna                                                                                                    
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                              
Medicaid Behavior Health Presentation                                                                                           
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous committee action to be considered                                                                                   
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
WALTER MAJORIS, President                                                                                                       
Alaska Behavioral Health Association                                                                                            
Anchorage, AK                                                                                                                   
POSITION STATEMENT: Introduced Mary Thornton and commented on                                                                 
the new Medicaid rules.                                                                                                         
                                                                                                                                
MARY THORNTON, BSRN, MBA, President and founder                                                                                 
Mary Thornton & Associates, Inc. (MTA)                                                                                          
Boston, MA                                                                                                                      
POSITION STATEMENT: Gave a presentation on changes to the                                                                     
federal Medicaid program.                                                                                                       
                                                                                                                                
JERRY FULLER, Project Director                                                                                                  
Health Care Services, Medicaid Division                                                                                         
Department of Health and Social Services (DHSS)                                                                                 
Juneau, AK                                                                                                                      
POSITION  STATEMENT:  Explained  how  DHSS is  preparing  for  the                                                            
Medicaid rule changes.                                                                                                          
                                                                                                                                
MELISSA STONE, Director                                                                                                         
Division of Behavioral Health                                                                                                   
Department of Health and Social Services                                                                                        
Anchorage, AK                                                                                                                   
POSITION STATEMENT:  Commented on the  impact of the  new Medicaid                                                            
rules.                                                                                                                          
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR  BETTYE  DAVIS  called  the  Senate  Health,  Education  and                                                            
Social Services  Standing  Committee meeting  to order at  1:34:13                                                            
PM. Present  at the  call to order  were Senators Elton,  Cowdery,                                                            
Thomas and Davis.                                                                                                               
^Medicaid Behavior Health Presentation                                                                                          
                                                                                                                                
             Medicaid Behavior Health Presentation                                                                            
                                                                                                                              
CHAIR DAVIS announced the Medicaid Behavior Health Presentation.                                                                
                                                                                                                                
WALTER MAJORIS,  President, Alaska  Behavioral Health  Association                                                              
in  combination   with  the  Alaska  Associations   of  Homes  for                                                              
Children, introduced  Mary Thornton, a leading expert  in terms of                                                              
behavioral health as it relates to the federal Medicaid program.                                                                
                                                                                                                                
Chair Davis recognized Representative Sharon Cissna.                                                                            
                                                                                                                                
1:37:12 PM                                                                                                                    
MARY THORNTON, BSRN,  MBA, President and founder,  Mary Thornton &                                                              
Associates,  Inc. (MTA),  thanked  Chair Davis  and the  committee                                                              
for the opportunity  to speak to them about what  was happening at                                                              
the federal  level  with Medicaid,  and some  of the changes  that                                                              
were  anticipated. She  reminded the  members that  Medicaid  is a                                                              
shared  cost  so  there  are  two  opinions,  the  state  and  the                                                              
federal, on  the quality  and content of  services. She  said that                                                              
the  states' and  the federal  government's opinions  on what  are                                                              
covered  and  high  quality services  for  behavioral  health  had                                                              
diverged recently.  The federal government's focus was  so much on                                                              
cost  savings  that,  for  the  first  time,  the  total  cost  of                                                              
Medicaid crossed  Medicare. As a  result, the center  for Medicaid                                                              
and  Medicare Services  and  its  enforcement and  oversight  arms                                                              
were going in  with much narrower definitions of  services than in                                                              
the past and, after  spending quite a bit of time  trying to steer                                                              
behavioral health  into the areas  of wellness and  recovery, were                                                              
really emphasizing a medical model.                                                                                             
                                                                                                                                
The  federal  frustrations   "boiled  over"  after   a  number  of                                                              
government accounting  office audits  of Medicaid risks  including                                                              
fraud, abuse, and  improper payments. They felt  the fraud efforts                                                              
were  uneven at  the state  level  and were  frustrated that  they                                                              
couldn't  have more  oversight there.  It seemed  that the  states                                                              
were deciding  how much emphasis  to put on program  integrity and                                                              
in most  cases, investment in the  investigative arm at  the state                                                              
level was inadequate.                                                                                                           
                                                                                                                                
They  were also  frustrated about  the  fact that  the rules  were                                                              
different on a  state-by-state basis. They had a  hard time trying                                                              
to  figure out  whether or  not differences  in practice  patterns                                                              
and costs had real  meaning in terms of quality  or just reflected                                                              
differences  in how the  states were  managing program  integrity.                                                              
They  felt that  what was  happening at  the state  level was  the                                                              
"Medicaiding" of  services, that  is, states were  taking services                                                              
that had  formerly  been paid for  by state  grants, changing  the                                                              
definition of services  slightly, and then pushing  them under the                                                              
Medicaid  umbrella. This  resulted in  a significant  rise in  the                                                              
cost of behavioral health services.                                                                                             
                                                                                                                                
MS.  THORNTON  presented  five  areas of  change  in  the  federal                                                              
government's way of  doing things that she believed  would have an                                                              
impact on behavioral health. The first was new auditors.                                                                        
                                                                                                                                
1:40:28 PM                                                                                                                    
New   auditors:  The   Payment  Error   Rate  Measurement   (PERM)                                                            
initiative, the  Deficit Reduction  Act (DRA), the  Recovery Audit                                                              
Contractors  (RAC),  and  all  of these  sorts  of  federal  audit                                                              
functions are  quite new. As a  result of DRA, they  have received                                                              
hundreds  of  millions  of  dollars  to  produce  savings  in  the                                                              
federal  Medicaid  program  through  audits  and  other  oversight                                                              
activities. The  whole landscape  is really changing  around audit                                                              
functions.                                                                                                                      
                                                                                                                                
Alaska will  undergo its' PERM  audit in  the next year;  the PERM                                                              
audit is  designed to  develop an overall  federal error  rate for                                                              
the Medicaid  programs. Error  rates greater  than 2.5  percent in                                                              
any  one state  will be  sent to  congress  as a  kind of  "report                                                              
card"  on the  state's  ability  to manage  the  integrity of  the                                                              
Medicaid program.  PERM monitors will  be in 17 states  at a time;                                                              
it will  be a  rolling audit, with  a new  cycle starting  every 3                                                              
years.                                                                                                                          
                                                                                                                                
They  have also  developed  a  Medicaid integrity  program,  which                                                              
will  have private  contractors  hired by  the federal  government                                                              
looking at  what is going on at  the state level and  going around                                                              
the state  directly to providers.  This is something  new. Usually                                                              
the  audits  coming  out  of  Centers   for  Medicare  &  Medicaid                                                              
Services (CMS)  look at the  state's management of  providers; the                                                              
auditors have not generally audited providers directly.                                                                         
                                                                                                                                
1:42:37 PM                                                                                                                    
On the  state side, the federal  government is pushing  the states                                                              
to adopt  a False  Claims Act  similar to  the federal  Act, which                                                              
has  a lower  level  of intent  and "whistle  blower"  provisions,                                                              
including a  provision that whistle  blowers will collect  a piece                                                              
of  whatever is  recovered by  the federal  government. This  will                                                              
provide the Medicaid  fraud control units with access  to civil as                                                              
well as criminal complaints.                                                                                                    
                                                                                                                                
The  return  on investment  is  expected  to  be quite  high.  The                                                              
federal  government stated  that  they generally  get a  25 to  30                                                              
percent return  on investment.  Total investments  as a  result of                                                              
the DRA  have been  in excess  of $200  million per year,  focused                                                              
just on Medicaid integrity.                                                                                                     
                                                                                                                                
1:43:51 PM                                                                                                                    
MS. THORNTON identified the second area of change as new rules.                                                                 
                                                                                                                                
New  rules: The  New York  Times  published an  article about  the                                                            
Governor's Association  meeting being "up in arms"  about new rule                                                              
changes  proposed by  CMS,  which they  believe  will represent  a                                                              
significant cost  shift away from the federal  government and back                                                              
to the states.                                                                                                                  
                                                                                                                                
The federal  government did  pass a  new rehabilitation  rule that                                                              
will shift hundreds  of millions of dollars away  from the federal                                                              
government's  Medicaid  costs  into  state  funded  child  welfare                                                              
programs. The  new rehab rules will  reduce the kinds  of services                                                              
that can  be provided to the  seriously and persistently  mentally                                                              
ill, especially  adults.  The governors obtained  a moratorium  on                                                              
the rule  until the end  of July 2008, but  do not know  what will                                                              
happen after that time.                                                                                                         
                                                                                                                                
1:45:02 PM                                                                                                                    
Case  management  rule:  The  federal government  pays  a  lot  in                                                              
matching  funds  for targeted  case  management and  is  concerned                                                              
about   the  types   of  services   being   provided  under   case                                                              
management.  This   would  not  just  affect   behavioral  health;                                                              
targeted  case  management  groups   include  the  developmentally                                                              
disabled,  pregnant   women,  the  elderly  and   others  will  be                                                              
affected.                                                                                                                       
                                                                                                                                
Finally,  in  terms  of  new  rules,  SAMSA  issued  a  number  of                                                              
evidence-based practices  with the assumption that  Medicaid would                                                              
cover  the cost  of those  services. Unfortunately,  CMS came  out                                                              
with  an encyclical  on  the  evidence-based practices  in  mental                                                              
health and  really restricted the  kinds of services  within those                                                              
practices that Medicaid will cover.                                                                                             
                                                                                                                                
MS. THORNTON  said these rule changes  will have a huge  impact on                                                              
the way  services can  be provided in  behavioral health.  You can                                                              
see the  expected outcome from the  rehab rule alone  was supposed                                                              
to  be over  $2  billion from  2008-2012,  and  those savings  are                                                              
going  to come  primarily from  children's services,  with a  cost                                                              
shift  into  foster  care  and  residential  costs  that  are  the                                                              
responsibility  of  the  state   and  away  from  the  costs  that                                                              
Medicaid  has  paid to  date.  In  particular,  in terms  of  non-                                                              
covered  services, they  are  targeting therapeutic  foster  care;                                                              
regular  foster  care  services;  child  caring  institutions  and                                                              
other kinds of rehabilitative activities.                                                                                       
                                                                                                                                
1:47:07 PM                                                                                                                    
In some states  that have been  under pressure from CMS,  they are                                                              
seeing the  "de-linking" of  services from  one another  in rehab.                                                              
The savings  are expected to be  about $800 million a  year on the                                                              
case  management   side,  although   the  governors   have  really                                                              
disputed that  figure. They say  the federal government's  savings                                                              
will  be  a  great  deal  higher,  that  they  underestimated  the                                                              
additional  costs the  states will  have to cover.  Many of  these                                                              
savings will come  from shutting down certain kinds  of children's                                                              
services.  One  of  the  things  that  the  Case  Management  Rule                                                              
emphasizes  is that  the case managers  are there  simply  to link                                                              
people  to  services,  not  to provide  direct  support.  The  new                                                              
definition  is  quite  restrictive;  there  are  only  about  four                                                              
different things  people can  do. In  Massachusetts the  state was                                                              
told that it  has to repay $87  million of $104 million  it billed                                                              
in  Case Management  Services  because  it did  not  meet the  new                                                              
definition; so  to suggest that the  savings are going  to be only                                                              
$800 million  when Massachusetts  alone is going  to come  up with                                                              
1/8 of that really underestimates the impact on the states.                                                                     
                                                                                                                                
1:48:48 PM                                                                                                                    
The  evidence-based  practices,  in terms  of  behavioral  health,                                                              
have really impacted  the states' ability to target  families as a                                                              
treatment  entity.  Medicaid  and  Medicare  both  work  from  the                                                              
position that  the services are  provided to an  identified client                                                              
and they must  be exclusively directed to that  identified client.                                                              
So some  of the intensive home-based  services and other  kinds of                                                              
service delivery  systems that have  proven to be a  best practice                                                              
are  going to  be  impacted  by the  inability  of  a provider  to                                                              
target a family.                                                                                                                
                                                                                                                                
Another thing  that is  important in  terms of the  evidence-based                                                              
practices,  Ms. Thornton  said,  is that,  for many  in the  adult                                                              
systems, the  targeted recovery outcome  is to get  the individual                                                              
back to work.  Medicaid is saying  it will not fund  any supported                                                              
employment  activities  to help  individuals  get  and keep  jobs.                                                              
This   is  often   really   problematic   in  behavioral   health,                                                              
especially   with  the   seriously  mentally   ill,  because   the                                                              
vocational rehabilitation  dollars are  very limited in  scope and                                                              
don't provide  the long-term  support that  many individuals  need                                                              
to keep a job.                                                                                                                  
                                                                                                                                
MS.  THORNTON  advised  that  the  third area  of  change  is  the                                                              
recreation  of SILOs.  [Creating Silos:  Separating Medicaid  from                                                              
child  welfare,  juvenile  justice   and  education  systems  with                                                              
increased   pressure   on  these   other   systems   to  pay   for                                                              
services that have been historically paid by Medicaid.]                                                                         
                                                                                                                                
1:50:21 PM                                                                                                                    
1) Payment Issues:  Medicaid  does  not  want  to  be part  of  an                                                              
integrated system;  it wants to be  able to see its  own services.                                                              
She cited New  Mexico as an example, where a  wonderful children's                                                              
integrated  delivery  system  was  developed whereby  all  of  the                                                              
buckets of  money went into  one place and  were doled out  as the                                                              
child needed them.  Medicaid pulled out of the  integration at the                                                              
last minute and  required that it be a braided  system so Medicaid                                                              
could see  exactly how its dollars  were being spent. This  is one                                                              
area in which the federal government has created a SILO.                                                                        
                                                                                                                                
In the case  management rule, for example, the  federal government                                                              
expects  the   Title  IV-E  [Child   Welfare  federal   and  state                                                              
mandates] money  that  Alaska gets  to  pay for  all  of the  case                                                              
management   services   for  children   in   protective   custody.                                                              
Historically,  case workers  have had  very high  caseloads,  so a                                                              
mental health worker  from the mental health system  would come in                                                              
to  provide case  management  and  coordination services  for  the                                                              
seriously  emotionally disturbed  or the  seriously mentally  ill.                                                              
Under  the new  rule,  that will  no longer  be  possible, so  the                                                              
state's  foster  care  and  child welfare  dollars  will  need  to                                                              
increase to cover the gap.                                                                                                      
                                                                                                                                
A  second area  is public  parole  and probation.  They said  that                                                              
public parole and  probation and the Criminal Justice  System have                                                              
their own dollars  for health care and Medicaid cannot  be used to                                                              
supplement  those.  In  Georgia,  they literally  took  apart  the                                                              
entire  children's   residential  system  because   it  was  being                                                              
partially paid  for by the  Juvenile Justice System  and partially                                                              
paid  for  by  Medicaid.  The  federal   government  said  that  a                                                              
resident,  whether  or  not  the  child  volunteered  to  go  into                                                              
residential services,  was considered  to be incarcerated  and was                                                              
not eligible for any Medicaid at all.                                                                                           
                                                                                                                                
1:52:59 PM                                                                                                                    
A third  area is  public guardianship.  In many cases,  especially                                                              
with  the adult  mentally  ill,  behavioral health  providers  are                                                              
needed  to help  people make  decisions about  their health  care.                                                              
Medicaid is saying  that they will not pay for  those services any                                                              
more. With  special education,  Medicaid  did allow certain  types                                                              
of case  management  activities that  were ordered  as part  of an                                                              
Individualized  Education Program  (IEP) to  remain in place,  but                                                              
they put  strict limits on those.  They can't include any  kind of                                                              
administrative work  unless the IEP orders a  service coordinator,                                                              
or   the  individual   family   services   plan   orders  a   case                                                              
coordinator.                                                                                                                    
                                                                                                                                
The ties  that Alaska  built with  Juvenile Justice in  behavioral                                                              
health  really reduced  costs  and  produced other  benefits  that                                                              
will be lost if those links cannot remain.                                                                                      
                                                                                                                                
4) Reasserting  old  rules:  The  federal   government  is  really                                                              
focusing  on  the  issue  of family  treatment,  saying  that  the                                                              
family  is not  an entity  as  far as  Medicaid  is concerned  and                                                              
providers  must   treat  individuals  only.  It   has  denied  any                                                              
training that  teaches people how  to be parents, saying  that the                                                              
cost of  general parenting training  is the responsibility  of the                                                              
public health or child welfare systems.                                                                                         
                                                                                                                                
1:55:33 PM                                                                                                                    
On the  medical necessity  side of things,  Medicaid is  trying to                                                              
implement  new  rules  that  will   make  it  more  difficult  for                                                              
providers  to  engage  clients in  services  because  there  isn't                                                              
enough time  for the client  and the provider  to get to  know one                                                              
another  enough  to  work together  on  treatment  decisions.  For                                                              
example, in Texas  they have a recovery goals system  like the one                                                              
Medicaid  is now  trying  to sponsor.  What  happens  is that  the                                                              
client meets  someone for the first  time, they do  an assessment,                                                              
and tell  the client,  based on that  assessment, what  the course                                                              
of treatment should  be. Clients have proven to  be disinclined to                                                              
follow  the recommendation  of  a perfect  stranger,  so they  are                                                              
having a very difficult time getting people into services.                                                                      
                                                                                                                                
The final  issue with regard to  reasserting new rules  relates to                                                              
Institutions of Mental  Diseases (IMD). The rules say  that an IMD                                                              
is  any  kind of  institution  with  more  than  16 beds  that  is                                                              
primarily  engaged in providing  diagnosis,  treatment or  care of                                                              
individuals  with  mental  diseases,  including  substance  abuse.                                                              
They go  on to say  that if  a facility is  an IMD, Medicaid  will                                                              
not pay  financial participation for  any person between  the ages                                                              
of 21 and 65,  and will pay for inpatient services  only for those                                                              
who  are 21  and  under. Children  are  not covered  for  medical,                                                              
dental  or any  services  other  than inpatient  psychiatric  when                                                              
they are in the IMD.                                                                                                            
                                                                                                                                
Medicaid has  also said it  will only pay  per diems  for services                                                              
that  are actually  level  five  services,  the highest  level  of                                                              
psychiatric  treatment.  Because of  that,  states  are trying  to                                                              
figure out  what to do with  the residential service  programs. As                                                              
soon as they  bring treatment into the residence,  Medicaid starts                                                              
to question  whether it is an IMD  and the children are  no longer                                                              
covered for  medical and  dental services, resulting  in a  tug of                                                              
war around payment.                                                                                                             
                                                                                                                                
What you  have in  many states  including Alaska,  is some  fairly                                                              
substantial  campuses  that were  built  when the  providers  were                                                              
providing  only  child  care  services,   so  they  were  for  the                                                              
protection and  safety of  children. At some  point in  time, some                                                              
states realized  that these children had serious  emotional issues                                                              
or mental  illness as a result  of the abuse they  had experienced                                                              
so they  brought treatment  into the  facilities. Now  Medicaid is                                                              
saying  if there  are more  than 16 beds  they will  cover only  a                                                              
limited benefit  and then  only if there  are certain  medical and                                                              
other staff  on board,  making the  services much more  expensive.                                                              
The  residential  rate setting  is  becoming problematic  in  many                                                              
states  as they  try and  figure  out how  to provide  residential                                                              
services  that are  treatment oriented  and  meaningful but  don't                                                              
require   a  level   five  status   in  order   to  get   Medicaid                                                              
reimbursement.                                                                                                                  
                                                                                                                                
There have  been a number of audits  in New York and  Virginia. In                                                              
one  case a  New York  audit went  to the  appellate court,  which                                                              
upheld federal Medicaid's  position on IMDs, that  the psych under                                                              
21 benefit really was only for inpatient services.                                                                              
                                                                                                                                
Prior  to this  meeting, Ms.  Thornton  met with  providers to  go                                                              
through  a set of  guidelines developed  by the  state of  Georgia                                                              
after it  had its children's  residential programs taken  apart by                                                              
CMS.  They have  provided  advice to  organizations  about how  to                                                              
divide campuses  into distinct parts,  with distinct  licenses and                                                              
treatment populations  to prevent the government  from lumping all                                                              
of the beds together and making them IMDs.                                                                                      
                                                                                                                                
Finally, there is the issue of "unbundling".                                                                                    
                                                                                                                                
Medicaid is saying  that it no longer wants to pay  for per diems,                                                              
monthly rates  or any  kind of case  rates. It  wants to  see each                                                              
and  every  service  it is  providing.  In  behavioral  health  in                                                              
Alaska, you have  a service called Behavioral  Residential Service                                                              
(BRS)  This is  a  per diem  that  providers  earn in  residential                                                              
facilities that  allows them to bill multiple  services throughout                                                              
the  day on  one claim.  Medicaid wants  those services  unbundled                                                              
and  documented individually.  This  increases the  administrative                                                              
costs significantly  without having any  impact on the  quality of                                                              
care.                                                                                                                           
                                                                                                                                
2:02:14 PM                                                                                                                    
In the  State of  Alaska, in  behavioral health  as well  as other                                                              
areas where  the bundling of services  occurs, these will  have to                                                              
be unbundled  in the future.  The way that  is worded in  the Case                                                              
Management Rule  is "A state cannot  employ a methodology  or rate                                                              
that  results  in payment  for  a  bundle of  services".  Medicaid                                                              
suggests  that a  15 minute  unit  of service  is appropriate,  so                                                              
they want  even 7 day  a week, 24 hour  per day services  laid out                                                              
in 15 minute increments, which creates huge problems.                                                                           
                                                                                                                                
What needs  to be done?  The awareness at  the state level  of the                                                              
potential  impact is  incredibly  important. This  is  no time  to                                                              
wait for  things to happen.  The legislature, provider  community,                                                              
and consumers  need  to work together  to look  at these  programs                                                              
and services.  There needs to be  a lot of support  for providers;                                                              
new provider manuals  that take the new information  into account;                                                              
technical assistance  for providers as  they work through  the new                                                              
rules  and  other  changes.  It will  be  terribly  expensive  for                                                              
providers to work  through this on their own; there  needs to be a                                                              
state-wide effort  to make sure it  works. There also needs  to be                                                              
continued  legislative  advocacy,  advising  congress  that  these                                                              
rule changes will be devastating to the states.                                                                                 
                                                                                                                                
CHAIR DAVIS asked  Ms. Thornton whether there was  anyone from the                                                              
division  [of  health  care  services]  present  at  her  meetings                                                              
yesterday.                                                                                                                      
                                                                                                                                
MS.  THORNTON replied  that there  were  representatives from  the                                                              
division attending the meetings both yesterday and today.                                                                       
                                                                                                                                
CHAIR  DAVIS asked  when  Alaska would  have  to start  unbundling                                                              
services.                                                                                                                       
                                                                                                                                
MS. THORNTON  advised that the  interim Case Management  Rule that                                                              
requires  unbundling went  into effect  March 4,  2008, but  there                                                              
was  a lot  of work  going on  at the  federal level  to create  a                                                              
moratorium on implementation  of that rule until 2009.  It is tied                                                              
up in  a law that  President Bush already  said he would  veto, so                                                              
no one really knows what the outcome will be.                                                                                   
                                                                                                                                
CHAIR  DAVIS ventured  that Alaska  was out of  compliance  if the                                                              
moratorium did not go into effect.                                                                                              
                                                                                                                                
MS. THORNTON agreed,  but thought states would be  given some time                                                              
to change  their state  plans before  any punitive measures  would                                                              
be taken.                                                                                                                       
                                                                                                                                
MS.  THORNTON  added  that,  because this  was  introduced  as  an                                                              
interim  final  rule,  there  was no  time  for  public  feedback;                                                              
people didn't expect  that the Case Management  Rule would include                                                              
so many  extraneous measures, such  as unbundling  and de-linking.                                                              
It was  expected to  deal only  with the  definition of  services,                                                              
because that seemed to be their focus.                                                                                          
                                                                                                                                
MS. THORNTON said  the PERM auditors would just be  looking at the                                                              
Medicaid error rate  and would be in Alaska within  the next year.                                                              
In addition  to that there  would be the  Office of  the Inspector                                                              
General auditors and the new Medicaid integrity auditors.                                                                       
                                                                                                                                
CHAIR DAVIS asked  if the burden to pay those  auditors would fall                                                              
on the state or the federal government.                                                                                         
                                                                                                                                
2:07:34 PM                                                                                                                    
MS. THORNTON advised  that the federal government  would be paying                                                              
for  the auditors,  but they  expect to  get it  back through  the                                                              
results of the audits.                                                                                                          
                                                                                                                                
CHAIR DAVIS  speculated that  these rules  might be revamped  with                                                              
the change in administration.                                                                                                   
                                                                                                                                
MS.  THORNTON  clarified  that the  case  management  portion  was                                                              
already in  law, but they  could make the  rules less  onerous for                                                              
the states. She  was not sure how fast the rules  could be changed                                                              
once they have gone into effect.                                                                                                
                                                                                                                                
SENATOR THOMAS  said that,  while he is  sure many people  here in                                                              
the state  would suggest  things be  done differently,  it doesn't                                                              
appear that  the goal was  just to revamp  and improve  the system                                                              
or make it more  efficient. He wondered what the  process was that                                                              
resulted  in these  rules and  whether they  considered any  input                                                              
from people in the states.                                                                                                      
                                                                                                                                
MS. THORNTON  said that  based on  how the  rules turned  out, she                                                              
didn't  think they  were taking  advice from  anyone who  actually                                                              
operates  in the  behavioral health  arena, because  some of  what                                                              
they  have  suggested  is  almost  operationally  impossible.  She                                                              
added that  the audits are often  the only information  states get                                                              
from the federal  government about what they like  and dislike, so                                                              
most  providers  are watching  the  audits  to determine  what  is                                                              
acceptable.                                                                                                                     
                                                                                                                                
Rule changes  are usually  a response  to unexpectedly  high error                                                              
rates.  What  probably  happened   is  that  the  costs  of  rehab                                                              
services in  mental health  were higher  than expected  around the                                                              
country,  so they sent  in auditors  who came  back with  some bad                                                              
findings, which resulted in the rule changes.                                                                                   
                                                                                                                                
CHAIR  DAVIS asked  Ms.  Thornton whether  the  providers she  met                                                              
with yesterday talked to her about their state audits.                                                                          
                                                                                                                                
MS.  THORNTON  confirmed  that  they  did  discuss  that  and  the                                                              
providers  wondered    whether  they could  rely  on  these  audit                                                              
findings  in the  face of  a federal  audit; was  the state  audit                                                              
rigorous  enough that  they could  feel comfortable  that if  they                                                              
met the  requirements of  the state, they  would come  out alright                                                              
on a  federal audit. She  said that she  couldn't respond  to that                                                              
because she  had not seen  any of the  audits that had  been done,                                                              
but noted  that  Alaska is  on the cutting  edge  in that it  does                                                              
extrapolated audits.  Meaning that Alaska does random  samples and                                                              
extrapolates  the  results  across the  entire  population,  which                                                              
seems to be the direction many states are moving toward.                                                                        
                                                                                                                                
CHAIR DAVIS asked  Mr. Majoris what prompted him  to bring experts                                                              
in to train his workers.                                                                                                        
                                                                                                                                
2:14:14 PM                                                                                                                    
WALTER MAJORIS,  President, Alaska Behavioral  Health Association,                                                              
explained  that  he was  most  worried  about the  audits  because                                                              
there  are  so  many  and  because  he  thinks  the  goal  is  big                                                              
paybacks, without regard  for the quality of service.  He was also                                                              
very concerned  about the reinterpretation  of old rules.  He gave                                                              
an example based  on his own organization, Juneau  Youth Services.                                                              
Under IMD, if  a facility offers mental health  or substance abuse                                                              
services  in a  residential  or  institutional setting  with  more                                                              
than  16  beds,  it is  not  reimbursable  for  federal  Medicaid.                                                              
Partly because of  that rule, all of JYS facilities  are less than                                                              
16 beds  but, as  an agency  they have  54 beds.  CMS has  been in                                                              
contact with  Alaska about  this already. On  any day,  they could                                                              
deny all  federal participation  based on the  fact that  we have,                                                              
in total,  more than  16 beds.  That would  represent millions  of                                                              
dollars just from his agency.                                                                                                   
                                                                                                                                
SENATOR   ELTON  admitted   that  her   testimony  was   extremely                                                              
disturbing. He  asked who they  could look  to for a  good program                                                              
or model to review how to deal with the coming tsunami.                                                                         
                                                                                                                                
MS. THORNTON did  not believe there were any models  at that time.                                                              
She  acceded that  all of  the states  were trying  to figure  out                                                              
what to do in  the face of this, but suggested  they could talk to                                                              
Jim  Sheehan, Medicaid  Inspector  General for  the  state of  New                                                              
York and  a well known health  prosecutor. Mr. Sheehan  moved from                                                              
a  federal position  to a  state  job and  might be  able to  help                                                              
providers begin  to find their way  through this. She  pointed out                                                              
however,  that what  would also  help was  just what  they did  in                                                              
their  meetings earlier  in the  day;  create a  list of  priority                                                              
items and address them one at a time.                                                                                           
                                                                                                                                
SENATOR ELTON said  he anticipated, with all of  these new audits,                                                              
especially the bounty hunters...                                                                                                
                                                                                                                                
MS.  THORNTON interjected  that  what the  federal government  had                                                              
done  with   the  RAC   auditors  was   quite  disturbing!   These                                                              
contractors come  out of the Tax  Relief and Welfare Act  and have                                                              
access  to software  that can filter  huge amounts  of data.  They                                                              
take  the publicly  available  data on  the  Medicaid program  and                                                              
look  for aberrant  practice  patterns.  For example,  they  might                                                              
find  that in  West  Virginia  it only  costs  $500  per year  for                                                              
services but  in Alaska it costs  $10,000, then start  looking for                                                              
an  explanation  for  the discrepancy.  She  called  them  "bounty                                                              
hunters"  because they  can  request that  the  provider make  pay                                                              
backs. The  provider can appeal, but  even if he appeals  and wins                                                              
the RAC auditors  get to keep the percentage they  earned, so they                                                              
have  no incentive  to  ensure that  they have  a  good case.  She                                                              
pointed out that  they work with Medicare only at  this point, not                                                              
Medicaid.                                                                                                                       
                                                                                                                                
SENATOR ELTON  continued that  he assumed,  with the RAC  Auditors                                                              
and all the  others, the administrative costs for  the association                                                              
would skyrocket as they go through audit after audit.                                                                           
                                                                                                                                
2:21:55 PM                                                                                                                    
MR.  MAJORIS  was   also  concerned  about  that   and  about  the                                                              
difference  between  the  state  audits and  federal  audits.  His                                                              
agency submitted  11,000 pieces of  paper associated with  the two                                                              
Meyers &  Stoffer state audits they  went through, and  scored 100                                                              
percent. In  talking to Ms. Thornton  however, he learned  that if                                                              
the  federal  government  finds   differently,  it  will  make  no                                                              
difference  whether   they  complied  with  all   of  the  state's                                                              
regulations and requirements.                                                                                                   
                                                                                                                                
MS.  THORNTON confirmed  that administrative  costs  are going  up                                                              
for organizations as a result of these changes.                                                                                 
                                                                                                                                
CHAIR DAVIS  proposed that  the committee  meet with the  Medicaid                                                              
division  after session  to  find out  where  they are  on all  of                                                              
this. She  thought they had hired  a contractor to help  them with                                                              
some of these problems.                                                                                                         
                                                                                                                                
2:25:03 PM                                                                                                                    
JERRY  FULLER Project  Director,  Health Care  Services,  Medicaid                                                              
Division, Department  of Health  and Social Services  (DHSS), said                                                              
this has  been on  their radar for  a couple  of years.  They have                                                              
submitted  state plan  amendments  around rehabilitative  services                                                              
in the  past, only to  hit a brick wall  with CMS; we  pulled back                                                              
the  state  plans rather  than  reconfigure  our system  based  on                                                              
state plan  amendments rather  than regulations.   In  addition to                                                              
the targeted  case management  and rehabilitation services,  there                                                              
are  another  five  regulations   that  will  also  have  negative                                                              
impacts.  The Department's  focus has been  working with  Alaska's                                                              
delegation to  put the kibosh  on these regulations.  The National                                                              
Governors' Association  sent a letter  to Secretary Levitt  and to                                                              
Congress  advising them  that this  is too  much. When  moratorium                                                              
language  for  the  Targeted  Case Management  was  added  to  the                                                              
Indian Healthcare  Reauthorization bill,  the Senate voted  for it                                                              
unanimously; so there is some momentum back East to stop this.                                                                  
                                                                                                                                
MR. FULLER  said that  the [United  States] House Subcommittee  on                                                              
Government  Reform and Oversight  recently  published a survey  of                                                              
all  of  the  Medicaid  programs  in the  country.  CMS  in  their                                                              
testimony  to Congress  said  that  these seven  regulations  were                                                              
expected  to   save  the  federal  government   approximately  $15                                                              
billion, so  the committee  surveyed all of  the states to  get an                                                              
estimates from  the state  Medicaid directors.  Once it  was added                                                              
up,  the  total  was  closer  to  $50  billion  from  the  states'                                                              
perspective. Whatever  the figure, it  is all a cost shift  to the                                                              
state General  Fund, at a time  when Congress is talking  about an                                                              
economic  slow-down and  economic  stimulus packages  to help  the                                                              
states out.                                                                                                                     
                                                                                                                                
He continued that  Congress would have to pass a  bill before June                                                              
  th                                                                                                                            
30   [2008]  to deal  with  Medicare and  the  fact that  Medicare                                                              
reimbursement  would  drop  10   percent  if  they  did  not  act.                                                              
Congress  could  use that  as  a vehicle  to  add  language for  a                                                              
moratorium on the  Medicaid rules, so the Department  was focusing                                                              
on that.                                                                                                                        
                                                                                                                                
MS. THORNTON  added that  she wanted  to be  very clear  about the                                                              
fact  that the  rule  changes were  only one  of  five big  things                                                              
going  on  at the  Medicaid  level.  The  fact  that there  was  a                                                              
moratorium  on   the  Case  Management  and   Rehabilitation  Rule                                                              
probably would  not diminish the risk  to providers by  much.  She                                                              
conceded that  the Alaska  Department was really  "on top  of" the                                                              
situation compared to other states.                                                                                             
                                                                                                                                
2:30:32 PM                                                                                                                    
SENATOR  ELTON asked  Mr.  Fuller whether,  given  what's at  risk                                                              
just  on the  component  they'd  been discussing,  he  had a  team                                                              
working with  other states to  coordinate a message,  or attorneys                                                              
reviewing the  interpretations of  old and new  rules. If  not, he                                                              
asked  if he needed  to assemble  a team  of people  and how  much                                                              
that  would cost.  He was  concerned  that, if  they waited,  they                                                              
might not have time to deal with it.                                                                                            
                                                                                                                                
MR. FULLER  reassured him that he  had two or three people  in the                                                              
department focused  on this  issue and that  they were  in contact                                                              
with many  other states  to get  feedback regarding their  audits.                                                              
He said  he was personally  working with the National  Association                                                              
of State  Medicaid Directors and  American Public  Health Services                                                              
Association and NGA  [NGA Center for Best Practices]  to get it on                                                              
the  agenda  for  the  upcoming  meeting so  they  can  develop  a                                                              
cohesive  approach   to  approach  the  next   administration.  In                                                              
addition, he  said a lawsuit was  filed on Monday [March  3, 2008]                                                              
by four  states seeking  an injunction  against implementation  of                                                              
the targeted  case management regulations  by the  federal Centers                                                              
for Medicaid and  Medicare Services. That suit was  organized by a                                                              
Washington DC law firm, Covington & Burling.                                                                                    
                                                                                                                                
SENATOR ELTON  asked for copy of  the lawsuit and  some indication                                                              
of the arguments  they were using.  He commented that a  number of                                                              
the  legislators  on  the  committee   belonged  to  the  National                                                              
Conference of  State Legislatures (NCSL)  and that there  might be                                                              
avenues for them to supplement the department's efforts.                                                                        
                                                                                                                                
2:34:25 PM                                                                                                                    
MR. FULLER  said he would  provide them with whatever  information                                                              
they would like.                                                                                                                
                                                                                                                                
2:35:07 PM                                                                                                                    
MELISSA   STONE,   Director,  Division   of   Behavioral   Health,                                                              
Department  of Health and  Social Services,  said she  appreciated                                                              
the providers  coming together  and bringing  Ms. Thornton  to the                                                              
state. She  believed it was important  to continue to  support the                                                              
existing system  while looking  to the  future, but was  certainly                                                              
concerned about the  magnitude of the problem facing  them. In the                                                              
short-term,  she felt the  challenge was  garnering the  resources                                                              
to protect  their systems  and to prepare  for these  changes. She                                                              
admonished them  not to loose sight  of the people they  serve and                                                              
the  quality of  those  services  in their  efforts  to deal  with                                                              
funding.                                                                                                                        
                                                                                                                                
CHAIR  DAVIS asked  Ms.  Stone  if there  were  any  money in  the                                                              
current budget to help them.                                                                                                    
                                                                                                                                
MS. STONE replied  that there was no money in the  2009 budget for                                                              
admin  services,  but  there  was  money  allocated  for  Medicaid                                                              
rates, which would help providers.                                                                                              
                                                                                                                                
SENATOR  ELTON  thanked  Ms.  Stone  for  reminding  them  of  the                                                              
clients who would  be affected. He thought it might  be helpful to                                                              
bring someone  in to do  an assessment  of how many  clients would                                                              
fall out  of the system  and what  the cost of  that to  the state                                                              
would be in the future.                                                                                                         
                                                                                                                                
There  being no  further business  to come  before the  committee,                                                              
Chair Davis adjourned the meeting at 2:41:13 PM.                                                                              
                                                                                                                                
                                                                                                                                

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