GOLD DOME REPORT

August 5, 2003

            Legislators were seen around the Capitol with many there because they were concerned about Georgia’s Medicaid and SCHIP (the federally required State’s Children’s Health Insurance Program) programs.  Georgia’s SCHIP program is known as PeachCare for Kids.  Two hearings were convened on Tuesday in an effort to hear the status of the Medicaid program and the PeachCare program. 

Legislators were most concerned about keeping the PeachCare program viable.  PeachCare is considered by most states as a leader and example model of the SCHIPs initiatives.  The Budgetary Responsibility Oversight Committee (“BROC”) Subcommittee on Medicaid and the Subcommittee on Medicaid from the House Appropriations’ Committee met to hear more about the issues surrounding getting health insurance for Georgia’s working families who cannot afford traditional insurance and make too much money to qualify for the Medicaid program.

            Budget Conferees, in late April of this year, agreed in HB 122, the FY 2004 State Budget, that there would be no limits placed on enrollment in PeachCare so that the FY 2004 expenditures would not exceed the FY 2004 appropriations provided for PeachCare benefits or administrative costs. Originally, the Governor had proposed making such limits on enrollment.  Also, Conferees agreed increasing PeachCare premiums to $10.00 per month per child over the age of six with a family cap of $20.00 per month.  The increased premiums would have been a cost savings of $900,000 to the Department of Community Health, which oversees this program.

            Governor Perdue instituted his line item veto authority over HB 122 and issued a statement on June 5, 2003, including expenditure controls to be instituted by the Department of Community Health.  While there was language proposed to limit enrollment in the PeachCare program so that the FY 2004 expenditures would not exceed the FY 2004 appropriations provided, the language was rejected by Conferees.  His message stated that “without a limit on enrollment, it would be necessary to appropriate additional funds to the Department to accommodate the projected annualized cost of care for more program participants.”   Further, his message stated that “because the General Assembly failed to appropriate funds considered necessary for the Department to meet its expected financial obligations, I am directing the Department to monitor enrollment and take actions necessary to ensure that expenditures do not exceed the FY 2004 appropriations for PeachCare.”

Budgetary Responsibility Oversight Committee

            In the BROC hearing on Tuesday, Sen. George Hooks and Rep. Tom Buck the co-chairs for this Committee, heard from two experts on the uninsured and their studies generated about Medicaid.  Other Committee members present were Sens. Carol Jackson and Tim Golden and Reps. Nan Orrock and Pat Gardner. Dr. James Cooney from Georgia State University and Dr. Minyard from the Georgia Health Policy Center made presentations to the Committee.

            Sen. Hooks explained that BROC would be concerning itself with an evaluation and review of the Medicaid program (including PeachCare), which would include looking at the program’s performance and financial review.  This would entail a review of contracts which impact the State’s budget. Sen. Hooks mentioned that there had been a 2.9% increase in the Medicaid and PeachCare federal participation rate.  In the coming months, BROC will also hear from the National Conference of State Legislatures and what it has found with other states’ Medicaid programs.

            Dr. Cooney presented “Effective Cost and Care Options? Medicaid’s Long-Term Care Services.”  His study has focused on long-term care patients under the Medicaid program, analyzing costs to treat 35,000 patients.  This study has looked at populations which have been admitted to a Georgia nursing home in calendar year 1999 or have been admitted to or are already served as a client in home and community based services.  The Study looked at both Medicaid and Medicare claims.

His study has seen a pattern evolve with persons who transfer between hospitals and nursing homes.  On average, it costs Georgia $1665 for a nursing home (monthly) and providing services to a similar patient in a home and community-based setting costs $550 (monthly).  This is 33% of the cost in a nursing home. 

Dr. Cooney’s study is trying to assess whether the quality of care is the same in these two settings; thus far, he has found that they are.  However, there are differences in the home and community-based services’ models (he sited the SOURCE program versus the Shepherd care program). 

There are other models such as the Community Care Services Program (“CCSP”) and Independent Care Waiver Program (“ICWP”).   CCSP patients must cost share for their services.  There is concern that this cost-sharing may actually drive some patients to nursing home settings so that nursing homes actually become the default care.  Other long term care programs do not require this cost sharing.  There are also other differences in these models of care.  Shepherd typically provides to young males through pro-active, centralized care.  Both ICWP and Shepherd patients receive more costly care.  There are factors which impact the cost of care in each of these settings: age; location of the patient; race; severity index score; etc.

Dr. Cooney reflected that some questions need to be answered as to these home and community based services.  These include the acceptability of the service options by patients and their families and the accessibility of the services by patients and their families.

There is a draw back that patients in home and community based services tend to utilize emergency rooms more often.

Dr. Cooney concluded that his Study’s numbers were preliminary and that his research would continue.

Dr. Minyard was focused on “showing the money.”  She noted that 1% of the Medicaid enrollees were receiving more than 20% of the Medicaid dollars.  This top 1% consists of 14,610 recipients averaging more than $51,000 per person in terms of cost for a total expenditure of more than $745 million (in calendar year 2001 in terms of paid claims).

Demographically, this 1% is more than likely over 40 years of age; 52% female; 39% black; and 61% disabled. Most also have pulmonary-related diagnoses, such as pneumonia; are on a respirator or ventilator; have some other form of pulmonary disease; or have a tracheostomy.  A number of the top 1% are also low-birth weight babies.  A good number also have experienced heart failure. 

Dr. Minyard suggested that perhaps there should be:

·        Targeted prenatal care to reduce the numbers of low birth weight babies

·        Managed care provided for clients with heart disease

·        Inoculated groups at risk for pneumonia

Dr. Minyard did acknowledge that Georgia needed short-term fixes for its budget issues.  In that effort, Georgia could hope perhaps that Congress adopts a Medicare drug benefit.  Additionally, perhaps Georgia could consider a generic only dispensing of drugs; it could drop retiree coverage in the State Health Benefit Plan (which is mostly covered by Medicare); or it could require that the State Health Benefit Plan enrollees be provided only an HMO option.  She stated that these were probably unrealistic.  Lawmakers would not want constituents left without services or without insurance coverage.  Also, there could be damage to reduce Georgians’ health status.  Further, hospitals, healthcare providers, and related businesses could be impacted.

She cited a number of statistics as to where Georgia’s Medicaid program ranked:

·        49^th in total Medicaid (in comparison to other states’ Medicaid spending per enrollee) (Georgia expends on average $2,606 per person)

·        27^th in terms of accessing the federal matching rate (it gets 63%)

·        13^th in total Medicaid spending

·        8^th in numbers of dual eligible recipients (those who qualify for both Medicare and Medicaid) (Georgia has 186,818 dual eligibles)

Looking at other sixteen states in the Southern Legislative Conference, Georgia ranks as follows:

·        13^th in Medicaid expenditures per capita

·        14^th in nursing facility payments per recipient

·        14^th in physician payments

·        16^th in prescription drug payments

·        5^th in inpatient hospital payments per recipient

·        14^th in inflation adjusted growth (FY 1995-FY 2001)

Dr. Minyard noted some things done by other states to control Medicaid costs:

·        Enact preferred drug lists

·        Increase or expand cost sharing

·        Enact prior authorization

·        Reduce eligibility in Medicaid programs

·        Make reimbursement changes

·        Require Generic only dispensing

Georgia has also enacted revenue maximization and data-driven decision making.  There have been success stories as she noted the Habersham Partnership, Community Health Works, and Access Emanuel programs which have addressed issues for targeted populations’ needs (such as diabetes management, heart patients, uninsured, etc.).  Many of the problems, she related, are because Georgia’s health status varies widely around the state. There have been nineteen rural health networks put in place since 1997.

            Dr. Minyard appeared to caution legislators that balancing the State’s budget with its healthcare programs was probably not sensible.  Only Tennessee had done such and it had no success.  She also mentioned the Department’s new data and information management system.

House Appropriations Committee

            In the afternoon Tuesday, Rep. Jay Shaw conducted a Subcommittee meeting on Medicaid issues, focusing on the PeachCare program.  Several Legislators turned out to hear this discussion including Reps. Gail Buckner; Judy Manning; Ron Stephens; Mickey Channell; Lester Jackson; Larry O’Neal; Alan Powell; Doug Teper; Pat Gardner; Nan Orrock; Ben Harbin; and Sharon Beasley-Teague.  At this meeting, Tim Connell, the newly-appointed director for the Office of Planning and Budget, and Tim Burgess, the newly-appointed

Commissioner for the Department of Community Health, made presentations.

            Rep. Shaw opened the meeting stating that it had been called to determine what was going on with PeachCare as there had been proposed regulations and then a letter was issued by Governor Perdue.  He commended the Governor on requesting a review of the options available and the program generally.  This Subcommittee had been provided certain numbers by the Office of Planning and Budget and the Department of Community Health during their deliberations of the Budget during the 2003 Session.  The numbers have apparently changed dramatically, in part due to the economic downturn.

            Commissioner Burgess noted that PeachCare for Kids was a successful program which basically had outstripped its budget.  In the fall of 2002, the numbers, based on older assumptions, were vastly different than what the Department was seeing currently in terms of enrollment.  Late last year, the numbers predicted for June 2004 were 198,000 but current trends predict that this will more likely be 211,000 enrollees.  By the end of 2005, there could be 226,000 children enrolled in PeachCare.  The $214,000,000 predicted, in terms of costs for claims, was underestimated by $63 million for FY 2004.  Thus, there is a need for more than $17 million in State monies (with an additional $30 million for FY 2005) in order to meet the needs of the program.

            Commissioner Burgess stated that there was no need to discuss the merits of the PeachCare program – it is a priority program.  There were some other options that the Department of Community Health proposed which could be implemented to help with cost savings to meet the appropriations provided by the General Assembly.  However, the options proposed were going to be revisited by Governor Perdue.  Thus, the program is basically on hold as far as making changes are concerned. 

            Options suggested by the Department were basically practices currently used by commercial insurers.  These included:

·        The child would not be covered by PeachCare until the month following their registration for the program

·        Require that persons leaving private-pay insurance would have to wait six months to enroll in PeachCare rather than the current three months

·        Require that failure to pay premiums on time (after the grace period) would cause the enrollee to have a three-month lock out from the program

Commissioner Burgess stated that these changes would be the least disruptive to the program and would allow the Department to bring costs down.  Originally, the Department had thought it would be able to implement these “options” by October 2003.  This would have allowed for the requisite public comment period and Department of Community Health Board approval.

            Rep. Channell, the recognized “father” of Georgia’s PeachCare program asked a number of questions.  His initial round of questions dealt with capping enrollment, as the Governor originally proposed.   Commissioner Burgess stated that if the options worked, based on current behavior of enrollees, then those alone would have driven enrollment to 145,000 children which would have been the maximum number served under the current appropriations.  Rep. Channell also inquired why the Department’s request for more than $6 million for this program had not been included in the Budget, which would have covered up to 194,000 children.  Now, even more dollars were needed to make the program sustainable.

            Commissioner Burgess did agree that there were dollars in PeachCare’s reserve.  These reserves are $25 million.  However, these reserves are to pay incurred claims for FY 2002 and FY 2003.  Apparently, roughly 13% of the claims are not submitted in the current fiscal year.  Reserves for Medicaid are in the hundreds of millions of dollars.

            Subcommittee members got into discussions around whether PeachCare was on a cash or accrual accounting basis.  Rep. Channell argued that it was on a cash basis.

            Rep. O’Neal inquired where the additional revenues were going to be generated to cover this program’s needs.  Commissioner Burgess stated that he did not know.  However, these costs would only rise exponentially.  Rep. O’Neal inquired as to whether the General Assembly could wait until next year, when it convened, to address this issue.   Commissioner Burgess stated that he could only deal with what the Department had been appropriated.  In January, 2004, the problem will only be more severe. 

            Rep. Buckner inquired as to how long providers could file claims with the Department.  Commissioner Burgess stated that it was two years.  She also asked about interest paid on these overdue claims. Interest accrues only after claims are filed and not fully processed.

            Rep. Channell asked if, based on current enrollment projections of 211,000 and 145,000 under the current appropriation, there would be virtually 56,000 children who will not have health insurance coverage through PeachCare who would otherwise be eligible if a cap were imposed.  Commissioner Burgess stated that was correct.

            Turning to another issue, Rep. Channell asked about the Department’s computer system, which is apparently still not operating as projected.  Commissioner Burgess stated that he had met with outgoing Commissioner Gary Redding and was informed of the various problems with the new system being installed by ACS.  The problems are causing a disruption in payments to providers on a timely basis which is one of the most significant problems facing the Department.  The Department has held meetings with ACS, the State’s attorneys, hospitals, nursing homes and the Department’s own staff to come up with a list of enhancements and ways to address this situation.  A “top ten list” of enhancements was created for the computer system, and ACS has agreed to make these changes within 60 days in an effort to get the Department stabilized with adjudicating claims received.  Commissioner Burgess cited some statistics on claims with 553,000 recently received with $48 million being paid.  There are ongoing issues with pending claims and prior year’s claims.  For the providers to survive, the Department instituted the prospective payments in April 2003 so that providers would be paid an amount on what they were historically receiving.  This, however, will cause an accounting nightmare for providers when it comes to reconciling these claims.  In the end, some providers may actually owe the Department monies as it will have made payments in excess of what is actually owed.

            Rep. O’Neal also inquired about when the decision was made to use ACS.  He stated that, as a lawyer, he represented a number of healthcare entities and the system was not broken before – so why the “fix?”  Claims were being submitted to the Department on Thursdays and being paid on Mondays.  Now, claims are languishing.  Commissioner Burgess stated that decisions on purchasing this new system were made prior to his involvement with the Department.  The system would combine all programs into one network for efficiencies rather than using four systems (State Health Benefit Plan, PeachCare, Board of Regents Health Plan, and Medicaid). The new system was also intended to help the Department better defend its policies.  In an effort to address issues, the Department has met with the Attorney General and ACS’s lawyers to see what type of negotiated agreement could be reached on the delay in the program’s implementation.  Rep. Alan Powell has also weighed in on the discussions relating to ACS and submitted a memorandum to this Subcommittee on the issue.

            Legislators discussed the fact that PeachCare was not an entitlement program like Medicaid.  It was structured in that manner.  Rep. Channell raised a number of additional questions such as where is Georgia economically, what are its priorities, and where does PeachCare fit?

            North Carolina tried to freeze enrollment in its children’s healthcare plan between January 2001 and October 2001.  Apparently, its efforts only worsened the situation because of the numbers rose in terms of uninsured.

            Rep. Manning inquired of Commissioner Burgess if there had been a contingency plan in place for emergencies prior to his arrival at the Department.  Commissioner Burgess stated no.  Either an increase in appropriations must be made or controls must be put in place to live with the amount appropriated.

            Rep. Orrock asked whether it was better to pay now or to pay later.  It is typically more expensive to treat children in emergency rooms rather than treat them through their regular medical program covered by PeachCare.  Commissioner Burgess stated that this question was much like what the General Assembly had faced with education – what is the best return for the State’s dollars.

            Tim Connell provided Legislators with the Governor’s letter on this issue.  A number of questions were raised – who suggested the cap on PeachCare enrollment?  Who suggested the policy changes?  Did the Department come up with these ideas or did the Office of Planning and Budget?

            Legislators told Mr. Connell that the Budget Conferees stated that Conferees wanted to increase premiums.  By making the increases, there would not have been the issue of the enrollment problem.  However, Governor Perdue vetoed this language.

            Rep. Channell took issue with the lack of appropriations and limits on enrollment and stated that PeachCare was not unlike problems with the Medicaid program not getting enough monies to cover claims and the Education Department not getting an FTE adjustment.

            Rep. Jackson inquired about revenues expected for FY 2005.  Mr. Connell stated that some fee options were being discussed.  The focus now was to match expenditures with revenues.  There were also inquiries regarding whether the Governor’s projected revenues were going to meet 6.4%.  Mr. Connell stated that the July numbers were not available so he does not know whether revenues were met.  Now, they are adjusting revenue assumptions by 2%. 

            Rep. Orrock argued that spending an additional $17 million would actually bring more federal dollars to Georgia through the match program.  Thus, it would appear that reasonable minds would agree this was so.

            A few persons made public comments on the issue of PeachCare.  These included  Terry McFadden, M.D., a pediatrician on behalf of the American Academy of Pediatrics; Holly Snow on behalf of the Georgia Hospital Association; Bruce Fenner on behalf of educators;  and Linda Lowe on behalf of Families First.  Ms. Lowe’s testimony was perhaps the most telling – she cited that for every Georgia dollar, the State received $2.54 in federal monies.  For every $1.00 Georgia pays in federal income taxes, it receives $.99 where other states receive in excess of a $1.00 (including other southern states such as Alabama, South Carolina, North Carolina, and Virginia).