New laws aim for Medicaid reform


LITTLE ROCK — At the same time that the state Department of Human Services is preparing for a massive expansion of health care coverage under the federal Affordable Care Act, the agency is also gearing up to implement new state laws intended to overhaul the existing Medicaid program.

Legislators “pushed the envelope for Medicaid reform this session,” said Sen. David Sanders, R-Little Rock.

Most notable among the reform measures is Act 1499, sponsored by Sanders, which calls for the creation of the office of Medicaid Inspector General within the governor’s office.

The Medicaid inspector general’s office will investigate suspected fraud and abuse in the state Medicaid program, in conjunction with the attorney general’s Medicaid Fraud Control Unit, federal officials, state prosecutors and local, state and federal law enforcement agencies. The office also will seek to recover tax dollars lost to waste, fraud and abuse.

The inspector general will be appointed by the governor and will act independently of DHS, reporting directly to the state’s chief executive. The annual salary for the position for the next fiscal year cannot exceed $150,000.

The inspector’s general’s staff will include a chief counsel, whose starting pay cannot exceed $120,000. The rest of the staff will consist of 33 current DHS employees who will be shifted to the inspector general’s office from DHS’ Program Integrity Unit.

“Then we have to look at where the IG will be housed, whether it’s in our building or another building,” said DHS spokeswoman Amy Webb. “The administrative stuff related to the IG will be funded through DHS, simply because it’s much easier to fund those things through our already-set-up procedures and budget rather than start up a whole new state agency.”

McDaniel and DHS officials support the change.

“Medicaid fraud enforcement has been one of my priorities since taking office,” McDaniel said Tuesday in an email to the Arkansas News Bureau. “To be sure, we need all the help we can get in that regard. We look forward to working with the new inspector general in finding ways to complement each other’s roles and missions.”

Webb said, “A program the size of Medicaid, we think it would benefit from a high-profile, administrative-level look. Our folks work very hard in the area of waste, fraud, abuse, misuse, that sort of thing, but we think this office will strengthen that effort.”

Sanders said DHS’ Program Integrity Unit “is buried within the Medicaid bureaucracy. What this does, it sets it out. It is independent … and there is a high level of reporting to the legislative branch.”

Webb said the savings generated by the office should eclipse the cost of creating two new positions with six-figure salaries.

“The Medicaid program is a $5 billion program, and even if they just found 1 percent additional in fraud, that would definitely pay for itself,” she said.

The law also creates a new criminal offense, health care fraud, which can range from a Class A misdemeanor to a Class A felony, depending on the amount of Medicaid money that a person obtains through fraudulent means.

Other new Medicaid reform laws include:

—Act 1265 by Sen. Jonathan Dismang, R-Beebe, which requires DHS to track the reported incomes of people applying for Medicaid and determine whether they match the federal government’s records of their incomes.

—Act 1336 by Rep. Josh Miller, R-Heber Springs, which requires in-home caregivers who are paid through Medicaid to undergo drug tests and criminal background checks. A caregiver who tests positive for illegal drugs or has been convicted of a felony or “a crime involving moral turpitude or dishonesty” will be ineligible to receive further Medicaid money.

—Act 1436 by Sanders, which requires DHS once a year to a submit a list of all Medicaid providers in the state to the state Department of Finance and Administration. DF&A will then determine if any of the providers have not paid their state income taxes, and if so those providers will lose their contracts with DHS unless they can show good cause for non-payment.

—Act 1352 by Rep. Bruce Westerman, R-Hot Springs, which allows “ambulatory surgery centers” to perform procedures that can be done on an outpatient basis and to be reimbursed through Medicaid at a rate equal to 80 percent of the Medicare reimbursement rate for such procedures.

The reforms passed in the same legislative session in which lawmakers approved the so-called “private option” for extending health care coverage by using federal Medicaid dollars to subsidize private insurance for the state’s working poor.

Meanwhile, the phased-in implementation of Gov. Mike Beebe’s Payment Improvement Initiative is continuing. The initiative calls for health care providers in certain areas of care to be paid for bundled episodes of care instead of being paid for every service provided.

Also, DHS officials recently announced that the agency will contract with consultant Tom Emerick to conduct a review of the state Medicaid program, with an eye toward increasing collaboration between the public and private sectors.

Emerick is a former vice president of global benefit design for Walmart Stores who is credited with reducing the company’s health care costs.

“Think of it as a three-legged stool,” said Sanders, who supported the private option and pushed for the contract with Emerick. “You’ve got one leg, the reform; second leg, the private option; third leg is the long-term structural health care reform that we’re talking about — taking reforms that are happening in private markets right now and then taking those and implementing them at the state level. That’s never been done before.”