Kentucky Medicaid cuts its budget

Program steps up use of generic drugs, fraud investigations

bmusgrave@herald-leader.comJuly 3, 2010 

FRANKFORT — State health officials announced changes to the Medicaid program on Friday in an effort to cut more than $26 million in state money from the underfunded program.

Officials warned that more cuts are likely to come to the state-federal health insurance program for the poor and disabled. Currently, 800,000 Kentuckians depend on the $6 billion program for health insurance.

"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," said state Medicaid Commissioner Elizabeth Johnson.

Some of the changes to the program include:

■ Paying only generic drugs rather than brand names for many over-the-counter medications, such as aspirin.

■ Only paying for prescriptions written by doctors participating in the Medicaid program. Officials believe the change will cut costs and decrease "doctor shopping" among drug addicts.

■ Working with the state Department of Revenue to go after scofflaws who do not pay bills.

■ Stepping up investigations of Medicaid fraud by medical providers.

■ Reducing payment for certain conditions, such as those acquired because someone was in a hospital. The change — included in federal regulations — is designed to provide financial incentives for hospitals and providers to reduce hospital infections and other problems.

The health insurance program is funded with a combination of state and federal dollars. The cuts are supposed to save $87 million in federal and state funds, but Medicaid officials warned Friday that the cuts are probably just the beginning of more changes to the program.

The two-year state budget passed in May requires the Medicaid program to save $544 million, including $106 million in state funds.

In addition, the state portion of the shortfall could climb an extra $238 million if Congress doesn't extend a portion of the economic stimulus package.

Under the stimulus plan, the federal government has picked up more of the tab for Medicaid in recent months — about 80 percent. The state currently pays about 20 percent.

The increased federal match is scheduled to expire at the end of 2010, but Kentucky lawmakers banked on Congress passing legislation to continue the payments for an extra six months.

So far, Congress has declined to extend the increased match to the Medicaid program.

Still, many providers said the changes announced Friday appear to be a good way of cutting waste, fraud and abuse without slashing services or cutting payments to providers.

"They ought to be congratulated for decreasing costs without cutting services," said Steve Shannon, executive director of the Kentucky Association of Regional Mental Health and Mental Retardation Programs, a non-profit that represents the state's mental health centers.

Some of the changes will begin immediately. Others, such as the change from brand names to generic, will take at least eight weeks to implement, said Vikki Franklin, a spokeswoman for the Cabinet for Health and Family Services, which includes Medicaid.

Rep. Jimmie Lee, D-Elizabethtown, and chairman of a legislative subcommittee that oversees Medicaid funding, said many of the changes had been discussed or were supposed to be implemented previously. However, they were not because of various problems or glitches with software.

Lee said he hopes this time the agency will be able to make a real dent in the number of fraudulent Medicaid claims that cost providers and the state millions of dollars.

For example, some divorced parents have their children in the Medicaid program and won't tell providers that the non-custodial parent has private insurance and could pay for those claims. Private insurance often requires co-pays of $20 or more while Medicaid's co-pay is typically $3 or less.

The cabinet is considering hiring a vendor that could detect if a Medicaid participant could be covered by a private insurance company, Lee said.

"Some of (the cost-savings) are no-brainers," Lee said of the initiatives. "But they're going to have to show us that they've come up with these efficiencies. We have all of these programs and what we need to know is the outcomes."

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