Pennsylvania lost its bid to keep $15.1 million of more than $20 million the federal government claims it overpaid to the state’s Department of Public Welfare.

U.S. District Judge Donetta Ambrose ruled Wednesday the state has to give the money back to the federal government. A decision is still pending in a separate case involving $5.6 million.

The U.S. Department of Health and Human Services said the state miscalculated the reimbursement it was due for providing family planning programs under Medicaid in 25 counties from 2000 to 2004.

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Without a massive dose of federal aid, the cost of medical assistance services threatens to snap an already stretched state budget.

The $16 billion medical assistance, or Medicaid, program provides comprehensive health services to 2.1 million Pennsylvanians, including low-income families, the elderly, disabled and the chronically ill. Medical assistance is a joint federal-state program, with Washington usually picking up half the tab.

State officials predict the medical assistance case-load will increase 3 percent next year, as more people lose jobs and health insurance due to the national recession and the state’s aging population. Meanwhile, health care costs for the program are expected to increase by $189 million.

“Even as we climb out of a recession, we are anticipating more demand,” Department of Public Welfare Acting Secretary Harriet Dichter told the Senate Appropriations Committee last week.

Ms. Dichter plans to lobby Washington to win congressional approval for $1 billion in aid to buttress the medical assistance program. The aid would come through two streams: $848 million in additional federal matching dollars and $102 million to extend a Medicaid drug rebate program. The rebate extension is tied up in the health care system overhaul awaiting a reconciliation vote between the U.S. House and Senate.

If Congress doesn’t give the green light, the medical assistance spending borne by the state taxpayer-supported General Fund would jump from $4.3 billion to $5.3 billion, according to a House Appropriations Committee analysis.

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First up was a discussion of the state’s Pay-For-Performance (P4P) initiative, enacted in 2005.  P4P changed Medical Assistance reimbursement practices to physicians and health care facilities to determine reimbursement rates based on their patient outcomes, rather than the quantity of patients they saw.  The goal has been to incentivize physicians and hospitals to keep patients healthy, rather than move patients through as quickly as possible.

There’s been talk of dismantlying P4P– but at the meeting, this was not brought up directly.

Kevin Casey, the Deputy Secretary of the Office of Developmental Programs, spoke about about issues in dealing with mentally retarded adults, whose parents can no longer take care of them.  He discussed the lack of any real, current solutions to the issue. 

Peter Adams, Deputy Commissioner for the state Children’s Health Insurance Program (CHIP), then spoke about the proposed CHIPRA State Plan Amendment, explaining the reasoning behind the proposed changes.

The Deputy Secretary of Medical Assistance, Mike Nardone, then spoke about the overall state of the DPW.  He said that Gov. Rendell’s proposed personal income tax increase is needed for the DPW. 

Joan Erney, Dep. Sec. of the Office of Mental Health and Substance Abuse Services, said that SB 850’s cuts to mental health programs would be devastating to the dept’s programs.

Reports The Patriot-News:

The cuts ranged from $100,000 to smaller agencies up to $212 million for the Department of Education. The bulk of the $500 million would come from the departments of Education, Public Welfare and Community and Economic Developments.

He said some of the cuts he is proposing were difficult to suggest, especially when they involved initiatives he started, such as the Classrooms for the Future technology program for schools. One thing his suggested list of cuts did spare was any cuts in funding earmarked in his February budget proposal for basic education funding for school districts and early education.
Along with the cuts, Rendell said he is proposing postponing the phase-out of the capital stock and franchise tax for three years. He also said his proposed half-percentage point increase in the state’s 3.07 personal income tax to 3.57 and the other targeted taxes he proposed in February are required to bring his balance into budget.

“The idea here is to get something that works, that’s fair, that’s balanced and shares the pain and shares the pain through cuts,” he said. “We feel the pain of people out there … so we tried to share the pain as equitably as we could through the cuts, revenue enhancements and the like.”

Secretary of Public Welfare Estelle B. Richman today responded to critics of the Smart Pharmacy initiative, saying the plan would save taxpayers $146 million annually while preserving consumer benefits and simplifying the pharmacy initiative for providers.

“The savings from the Smart Pharmacy initiative are real, not speculative,” said Secretary Richman. “This is not a drill. Pennsylvania is facing a budget shortfall now and the savings from Smart Pharmacy will help us maintain Medical Assistance services for every low-income, disabled Pennsylvania who relies on the initiative, rather than drain the system as some have suggested.”

Richman went on to say that 21 other states have implemented initiatives like Smart Pharmacy, resulting in great savings for their taxpayers. The department currently pays for pharmacy services for over 800,000 individuals enrolled in the Medical Assistance Fee-for-Service initiative, with proven positive results.

“Consumers will not be affected by the implementation of Smart Pharmacy,” said Richman. “The initiative will provide the same access to prescription drug coverage for the same consumers, while allowing managed care organizations to receive the most up-to-date pharmacy information.”

Currently drug purchases are split between seven Medical Assistance managed care organizations, which by federal law are not eligible to receive rebates available to states. Becoming the single purchaser of medications for the Medical Assistance program will allow Pennsylvania to receive discounts that are seven times greater than those available to the managed care companies, saving taxpayers $146 million annually.

“The bottom line is that this initiative will save the commonwealth and taxpayers much needed dollars,” said Secretary Richman. “With a budget as difficult as we are seeing this year, we can no longer afford to leave such a significant savings on the table.”

Baer writes:

YOUR LEGISLATURE is about to get another chance – the fourth in four years – to approve a piece of health-care reform that could save taxpayers $146 million a year.

Seems simple, especially as lawmakers face a $2 billion-plus budget deficit. But it steps on the toes of drug companies and health insurers, both big donors of campaign cash.

So, does the Legislature in economic hard times side with saving taxpayers or continue coddling its often-generous benefactors?

Here’s the deal.

The Department of Public Welfare wants to directly buy prescription drugs for 1.2 million Pennsylvanians receiving medical assistance, more than half the medical-assistance population, 371,000 of them in Philly.

If the department buys meds for these folks, nothing changes for them, not the doctors, not the drugs, but the state gets federal rebates that dramatically cut its costs, hence the $146 million saved per year.

The idea isn’t new. Twenty states do it and four more are moving that way.

In each of the last three years our Legislature killed the proposal.

When I ask Welfare Secretary Estelle Richman why, she says, “I wish I could answer that one.”

I take her to mean she knows the answer and wishes she could say it.

That’s because the sale of meds in question ($500 million-plus) is in the hands of managed-care groups such as the Blues, and drug companies – hands that know how to take, and give.

…

So what will the Legislature do this year?

A spokesman for House Democrats says, “We’re weighing all of our options.”

A spokesman for Senate Republicans says the issue “hasn’t been fully ventilated to date.”

Check out Baer’s entire column.

Department of Aging Senate Appropriations Hearing

March 4, 2009

John Michael Hall, Acting Secretary of Aging 

Lottery funds allotted to senior citizens:

Senate (question): Can you assure that the lottery revenue will continue to support senior citizens?

Hall (reply): The legislation that Governor Rendell is bringing does not disturb the status quo and agenda with the priority being senior citizens.

Senate (question): With the opening of casinos and online gambling and gaming becoming more prevalent, what impact will this have on the programs that depend on lottery revenue? In Pittsburgh and Lehigh Valley, where there are casinos, they have already experienced a drop in revenue.

Hall (response): Overall, statewide it has had little effect.

Senate: This is something that we should take into consideration now, before we are looking at an empty well. We should start looking now at the possibility of other water sources.

Personal Care and Assisted Living:

Concerns of the Senate:

1.        The new assisted living program will not offer as much as seniors deserve and will fall short as personal care has.

2.       The quality of the physical living spaces within the new assisted living facilities, “heard the spaces are the size of a prison cell and many are not even handicap accessible.”

Hall (response):

1.        We are setting a new model for care. The statute that this body passed mandated that standards and guidelines must remain above those set in personal care.

2.      We are trying to balance concerns about the share cost of developing these apartments and if Medicaid can even afford these rates and locating resources to fund them. It is our goal that these apartments are as close to living at home as possible with personal bathrooms, locks on doors and in allowed cases, kitchens.

Long-term Care Insurance:

Hall: Citizens should start planning and making arrangements now. Long-term care insurance is a great solution for seniors, but it has had problems with market penetration so we would like to be able to provide more confidence and stability so seniors can feel security with that investment.  

Stimulus Money for Technology:

Hall: We will be utilizing roughly $4 million for technology. Technology in the coming years will have to be able to “talk” to our older technology and some of the money will be spent to ensure “translation” between the new and old. We are still working to decide where the majority of those funds will be allocated. Home based care technology is becoming a necessity in home care and we will be looking into that.

Home Care-givers:

Senate (question): This shift for home and community based care is going to require other systems in place to support those programs. The new staff employed to care for the increasing number of senior need proper training; we want to ensure they are qualified.

Hall (response): This country struggles with a shortage of nurses and direct care workers and this hinders the amount of confidence people put in a program expected to care for their loved ones. We are looking into new standards and training for those care givers so that seniors can be properly cared for. This is a high priority for us.

The Department of Aging and Long-term Living:

Much of the hearing was spent discussing the possibility of merging Department of Public Welfare and the Department of Aging to create the Department of Aging and Long-term Living. The following is in addition to what was discussed at the February 23rd House Hearing with the Department of Aging on this proposal.

Hall: With regard to the merger, the Administration on Aging (AOA) and the Center for Medicaid Services (CMS) both welcome the direction we are headed.

Senate (question): For departments that have always had single advocacy, what will this mean now for the dual advocacy and how are you going to facilitate this smooth transition?

Hall (response): The Act 70, older Americans Act advocates the interest of older Americans that we’ve worked to uphold. That act has been added to the legislation for this merger with very little change. The needs and services for Adults with Disabilities and Seniors are becoming increasingly similar.

Senate (question): Between the two of these departments, there are four different bureaus and two agencies, this is going to take work. In reality, how is this actually going to help “real” people.

Hall (response): Because the needs and uses of these departments are becoming so similar, we will be able to offer a less confusing, more coherent service with one location to go to for all answers.

We also hope that this will strengthen the infrastructure for home and community based care.

Providers, home health services and all of those working within this industry are frustrated with the lack of accountability and trying to decipher which and whose rules to follow.

 States who have successfully accomplished this have gone the furthest experienced the most progress within their care services.

The state wastes millions of dollars every year on erroneous Medicaid payments for residents who are no longer eligible for the benefits, according to a state audit released yesterday.

The report by Auditor General Jack Wagner’s office found that the Department of Public Welfare, through its county assistance offices, failed to properly determine eligibility for more than 1,600 Medicaid applicants between January 2005 and March 2008, resulting in $3.3 million in improper payments.

And Wagner pointed out yesterday that the cases reviewed by his office represented only a small sample of the overall Medicaid caseload handled by the Public Welfare Department – and that the state has likely lost millions of dollars more.

“If you begin to look at the total body of Medicare payments . . . that dollar volume could be substantial,” Wagner said at a news conference yesterday. “We’re sure there could be savings in the area of tens of millions of dollars a year.”

The audit comes as the Rendell administration is facing an ever-widening budget gap and is contemplating employee layoffs.

Get more details at the Inquirer.