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Health and Family Services Cabinet
Medicaid Announces Actions to Reduce Expenditures, Minimize Impact on Recipients and Providers

Press Release Date:  Friday, July 02, 2010  
Contact Information:  Vikki Franklin or Gwenda Bond, (502) 564-6786, ext. 3429 and 3325  

The Kentucky Department for Medicaid Services (DMS) announced changes today to the Medicaid program that will save approximately $87 million in state and federal funds (almost $26 million in state General Funds alone), while minimizing the impact on recipients and providers and increasing efforts to curb waste, fraud and abuse.

“We have worked extremely hard to balance maximizing cost containment options with maintaining services to the growing Medicaid population,” said Medicaid Commissioner Elizabeth Johnson. “These common sense changes serve to enhance the integrity of the program, support quality practice by participating providers and continue to provide appropriate and quality care for recipients.”

Changes include:

· Implementing a new policy of reimbursing for prescriptions only if written by enrolled, active Medicaid providers. This will enhance program integrity by reducing drug-seeking and drug diversion behavior among Medicaid recipients. It will save money by reducing some members’ ability to “doctor shop” for unnecessary drugs or abused substances. The change will also result in improved patient care, as well as savings, by reducing the opportunity for duplicative or contraindicated medications being prescribed to a member. The program will be phased in to allow members and providers an opportunity to assure necessary maintenance and behavioral medications are continued without any gaps in availability.

· Enacting various pharmacy changes, including covering only the generic version, rather than the brand name, of over-the-counter medications that are on a specified list and are prescribed by a provider. Medicaid currently covers all prescribed over-the-counter medications. Also, members will be required to use 90 percent of their medication, rather than 80 percent, before they are allowed to obtain a refill of their prescription. This will discourage “stockpiling” of medications and reduce waste and opportunities for illegal medication selling, while still guaranteeing access to necessary medications for Medicaid recipients.
· Expanding the “lock in” program with members who are identified as having high costs relative to their medical condition. The program will be enhanced to refine the identification of members and limit them to one designated primary care provider, one pharmacy and one controlled substance provider (if different from the primary care provider) and one hospital for treatment of non-emergency conditions. The change is designed to reduce the unnecessary use of medical services, treatments, emergency rooms and, in conjunction with the pharmacy changes, the abuse of controlled substances.

· Moving the provision of diabetic supplies, such as glucose monitors and test strips, exclusively to pharmacies, to allow Medicaid to maximize any available manufacturer rebates. The majority of Medicaid recipients obtain their diabetic supplies through pharmacies, so they will experience no change. Those who do purchase the supplies through Durable Medical Equipment (DME) companies typically purchase them from out-of-state companies, so this policy change will help keep Medicaid dollars in Kentucky.

· Partnering with the Department of Revenue to increase collaboration in collecting outstanding debts owed by providers. After DMS exhausts all other means of collection, the Department of Revenue will be informed of the outstanding debt and will locate the provider and begin the collection process through a tax interception program.

· Enhancing the Health Insurance Premium Payment (HIPP) program. HIPP permits Medicaid to pay the premium of a Medicaid recipient who has access to an employer-sponsored health insurance plan. This program allows DMS and its recipients to participate in the health insurance market and offer recipients a better opportunity to coordinate their benefits with their families. A mechanism will be created to identify eligible recipients and provide for marketing and education about the benefits of enrolling in the HIPP program. The enhanced program will make participation more attractive by providing “wraparound coverage” that can give recipients access to services not otherwise covered through an employer-sponsored plan.

· Complying with recently enacted federal health care reform legislation that will require all state Medicaid programs to alter their reimbursements for certain preventable events. The reform will reduce payments for services that relate to hospital-acquired conditions (HACs) and some conditions on a list of Serious Reportable Events (called “Never Events”). The change implemented by DMS will be similar to the existing Medicare policy. This change is intended to provide hospitals with clear financial incentives to reduce HACs and Never Events.

· Enhancing Surveillance and Utilization Review Subsystem (SURS) and program integrity through the use of incentives for contracted third parties to work with DMS to more aggressively identify provider fraud and abuse. After conducting a review of current efforts, DMS determined that improvements could be made in identifying fraud and abuse and recovery of state funds. A request for proposals has been issued and is currently in process. DMS will contract with a vendor that will seek recoveries through innovative approaches, using the latest in computer modeling, based on the successful experience of other states.

· Shifting from DMS paying the state General Fund share for preventive health services provided through local health departments to the Department for Public Health putting up the state match. This change is designed to ensure these vital services can continue to expand.

     DMS has and will continue to implement other programmatic changes, such as pharmacy audits and enforcement of maximum allowable service limitations. Many of the changes will be implemented immediately, with others following shortly thereafter.

     The enacted Medicaid budget presumes program savings/reductions of $544 million ($106 million in state funds). These measures represent the first phase of addressing the shortfall. The $544 million in program savings is unrelated to the failure of Congress to extend the enhanced FMAP through June 30, 2011. Should the enhanced FMAP not be extended, additional program reductions would be necessary absent increased General Fund revenue or reductions to other areas of state government.

     Approximately 800,000 Kentuckians are enrolled in the Medicaid program, which has a budget of around $6 billion state and federal dollars for state Fiscal Year 2011.



Last Updated 7/2/2010