Highlight on Alaska: FTC, DOJ back Alaska Senate’s move to eliminate certificates of need

Citing “considerable competitive concerns” raised by certificate of need (CON) laws, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) issued a joint statement in support of Alaska Senate Bill 62 (SB 62), which would repeal Alaska’s CON program effective July 1, 2019. CON programs generally require firms to demonstrate an unmet need for services to the state before being permitted to enter the health care market, for example, by building a new hospital. Sen. David Wilson (R-Wasilla), who submitted the bill, applauded the statement, noting, “As government officials, we should not lose sight of a basic truth that competition improves the quality and lowers the costs of services; it’s what drives innovation and ultimately leads to the delivery of better healthcare.”

CON laws were enacted to reduce costs and improve access to care, based on the assumption that the existence of too many health care facilities in the same area could lead to inflated pricing for services. However, the FTC and DOJ opined that the laws create barriers to entry and expansion, allow entities to abuse the process to delay or halt competitors’ entry or expansion, and deny consumers effective remedies from anticompetitive mergers.

Alaska’s program requires parties wishing to spend at least $1.5 million on health care facility construction, alter an existing facility’s bed capacity, or add a category of health services provided to an existing facility to secure a CON after demonstrating that the quality, availability, or accessibility of existing health care resources is less than necessary “to maintain the good health of citizens of [the] state.” Specifically, it requires parties to submit an application with a fee ranging from $2,500 to $75,000.  The Department of Health and Social Services holds a public meeting and solicits comments and then submits a recommendation to the Commissioner of Health and Social Services, who makes the ultimate decision. Members of the public substantially impacted by the CON may initiate administrative proceedings and eventually seek judicial review.

The agencies stated that the existing state law raises both the monetary and time-based costs of entry and expansion, eliminates or reduces competitive pressure that normally incentivizes firms “to innovate, improve existing services, introduce new ones, or moderate prices,” and, in the event of denials, prohibits entry or expansion.  Furthermore, the law allows incumbent firms to drag out the CON application process by filing challenges or comments in order to delay competitors’ entry into the market. It also provides a platform that allows firms to form anticompetitive agreements–for example, two firms could agree to file CON applications for separate services to avoid a lengthy application process and potential challenges from one another. Finally, the existing law could impede antitrust remedies. As an example, the joint statement cited to the case of FTC v. Phoebe Putney.  Although the Supreme Court eventually ruled that an anticompetitive merger was subject to antitrust scrutiny, the entities involved had already merged and the applicable state’s CON laws made divestiture “virtually impossible.”

 

Highlight on Pennsylvania: Better Medicaid spending through technology

Pennsylvania lawmakers introduced legislation attempting to reduce spending and improve patient care within the state’s Medicaid program. Under the proposed legislation, Senate Bill 600, the state would adopt new technology to monitor and identify areas of unnecessary or wasteful health care services and procedures. The state would have 90 days within enactment of the bill to pick a technology company and implement the monitoring. Lawmakers noted that by providing more information, patients and providers, alike, could make better health care decisions. Consequently, this would reduce Medicaid spending. Pennsylvania is one of the highest spenders per Medicaid enrollee in the U.S., with one out of every four dollars in the state’s annual budget accounted for by Medicaid.

The lawmakers have started to review tech companies with prior experience in collecting and monitoring patients to improve care, notably companies that have worked with Alaska’s Medicaid program. The tech company involved  reduced misdiagnosis rates, improved outpatient care, cut waste, and reduced Medicaid expenditures in Alaska by over 14 percent. According to Pennsylvania lawmakers, a similar program could generate between $2 billion and $4 billion in annual savings.

In fiscal year 2015-16, the federal government spent about $15.3 billion on Medicaid in Pennsylvania, while the state spent about $10.6 billion, bringing the total to $25.9 billion; the state’s Department of Health and Human Services budget over the past few years has increased by about $500 million annually. The influx of approximately 700,000 new patients into the Medicaid system is a 20 percent increase and has cost an additional $4.6 billion. State lawmakers are concerned that the push for health care reform by the federal government will result in a cut in the federal portion of Medicaid to the state.

 

Highlight on Wisconsin: Medicaid waiver could be first of its kind

Wisconsin Governor Scott Walker (R) supports a number of novel Medicaid requirements for the state’s beneficiaries, including premium payments, drug testing, and a work requirement. Although a formal plan is not expected to be released until mid-April and sent to HHS by the end of May, if the plan is approved, Wisconsin would become the first state in the country with mandatory drug testing for Medicaid beneficiaries. Testing would be based upon Medicaid applicants’ answers to a screening. The proposal would mandate treatment for those who test positive. The screening is designed to limit the number of individuals in the program.

Price and Verma

The Wisconsin approach is part of a bigger theme of Republican-led states looking to limit Medicaid spending. Governors expect reciprocation from new HHS and CMS leaders regarding the restrictive ideals and, accordingly, are looking to get more out of Medicaid waivers than the Obama Administration allowed. The strategy is not without its rationale. In their first joint action, HHS Secretary Price and CMS Administrator Verma sent a letter to state governors discussing potential improvements to the Medicaid program. In that letter, Price and Verma wrote that the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) expansion of Medicaid “to non-disabled, working-age adults without dependent children was a clear departure from the core, historical mission of the program.” Also, prior to her position as Administrator, Verma worked on a proposed work requirement for Indiana’s Medicaid program. The Obama Administration rejected that proposal.

Drug screening

While the Obama Administration allowed states to differ in the expectation they placed upon program enrollees, governors like Walker are hoping they will see more eye-to-eye with Price and Verma than they did with Obama Administration officials on restrictive policies like work requirements. In light of the recent failure of the American Health Care Act (AHCA) in Congress, and that legislation’s attempt to cut Medicaid funding through per-capita caps, the Trump Administration is incentivized to find savings in other places. Walker believes Wisconsin’s plan is a promising approach. However, there is concern that the Trump Administration will be opposed to the drug screening because the Administration is trying to appear sympathetic to the growing drug epidemic. Opponents criticize the drug screening measuring, noting that the best way to help drug abusers is to expand Medicaid and provide them with the care they need.

Unconstitutional?

Other critics have called the drug screening measure illegal. However, the state’s Medicaid director defended the plan to test Medicaid recipients for drug use, rejecting assertions that the requirement would be unconstitutional. In addition to asking the Trump Administration whether Wisconsin can drug test childless adults on Medicaid, Governor Walker plans to request the ability to drug test able-bodied adults seeking other public benefits including food stamps and jobless payments—a request the Obama administration denied.

OIG reviews MassHealth and its Medicaid data and information system safeguards

MassHealth failed to adequately safeguard data and information systems through its Medicaid Management Information System (MMIS) according to an audit by the HHS’ Office of Inspector General (OIG) undertaken to determine whether Massachusetts safeguarded MMIS data as required under federal requirements.

What is MMIS?

The MMIS is “an integrated group of procedures and computer processing operations (subsystems) developed at the general design level to meet principal objectives” which are: Title XIX program control and administrative costs; service to recipients, providers and inquiries; operations of claims control and computer capabilities; and management reporting for planning and control. States receive 90 percent federal financial participation (FFP) for design, development, or installation of MMIS and 75 percent FFP for operation of state mechanized claims processing and information retrieval systems.

MassHealth MMIS

The Massachusetts Executive Office of Health and Human Services is responsible for administering the state Medicaid program, commonly known as MassHealth, and information technology architecture, maintenance, and support is provided by the Massachusetts Office of Information Technology. Application support is provided through a contract with Hewlett-Packard.

The audit

Audits of information security controls are performed routinely on states’ computer systems used to administer HHS-funded programs and states are required to implement computer system security requirements and review them biennially. The OIG’s audit of MassHealth’s MMIS included MassHealth’s websites, databases, and other supporting information systems. The review was limited to security control areas and controls in place at the time of the visit. Specifically, the OIG looked at MassHealth’s implementation of federal requirements and National Institute of Standards and Technology guidelines regarding: system security plan, risk assessment, data encryption, web applications, vulnerability management, and database applications. Preliminary findings were communicated directly to MassHealth prior to the report’s issuance.

OIG’s findings

The OIG found MassHealth did not safeguard MMIS data and supporting systems as required by federal requirements. Vulnerabilities were discovered related to security management, configuration management, system software controls, and website and database vulnerability scans. Should exploitation of the vulnerabilities have occurred (and there was no evidence that it had), sensitive information could have been accessed and disclosed and operations of MassHealth could have been disrupted. Sufficient controls must be implemented over MassHealth Medicaid data and information systems.

Specific vulnerabilities uncovered were not detailed in the report because of the sensitive nature of the information. However, specific details were provided to MassHealth so it may address the issues. In response to the report, MassHealth described corrective actions it had taken or planned to take in response to the vulnerabilities.