THE MISSISSIPPI LEGISLATURE

Congress enacted Title XIX of the Social Security Act in 1965 to provide medical assistance to the poor. The Mississippi Legislature enacted enabling legislation for Mississippi’s Medicaid program during a special session in 1969. MISS. CODE ANN. Section 43-13-107 (1) (1972) places responsibility for administration of Mississippi’s Medicaid program with the Division of Medicaid (DOM), under the Office of the Governor.

In fiscal year 2001 (FY 2001), 650,000 Mississippians were enrolled in the state’s Medicaid program. In general, eligibility is limited to low-income individuals who fall into certain categories (primarily low-income elderly, blind, disabled, pregnant women, and children).

In Mississippi, as in all states, the vast majority of Medicaid program expenditures are for a broad range of health related services provided to Medicaid recipients. In FY 2001, Mississippi’s Medicaid federal/state funding match rate was 76%/24%, one of the highest match rates in the country. Mississippi’s total FY 2001 Medicaid expenditures of $2.38 billion comprised 27% of the state’s total expenditures of $8.8 billion. DOM’s FY 2001 general fund expenditures comprised 6% of the state’s total FY 2001 general fund expenditures of $3.5 billion.

In FY 2002, Mississippi’s Medicaid program experienced a funding shortfall, resulting from an unprecedented projected 25% increase in expenditures. While other states are also experiencing growth in their Medicaid expenditures due to factors such as the rapid increase in the cost of prescription drugs, Mississippi’s projected 25% FY 2002 growth rate is higher than those of its neighboring states and significantly higher than the federal FY 2002 growth rate of 12% as reported by the Congressional Budget Office.

The Division of Medicaid projects a continued rapid growth rate of 22.5% in the upcoming fiscal year, resulting in a projected FY 2003 general fund shortfall of $120 million (after netting out DOM’s projected FY 2003 general fund savings of $54.8 million from implementation of Medicaid cost saving measures included in laws passed by the Mississippi Legislature during its 2002 Regular Session).

PEER contends that more realistic DOM budget projections combined with the administrative cost saving measures identified in this report can reduce DOM’s projected FY 2003 shortfall by at least $86.7 million, to $33 million (see Table 1 below). It is even feasible that DOM could eliminate its projected FY 2003 funding shortfall, depending on how aggressively the division pursues measures such as eliminating ineligible beneficiaries from the Medicaid rolls and implementing the cost saving measures adopted by the Legislature during its 2002 Regular Session (e.g., management of pharmacy benefits, including adoption of a restricted drug formulary; increasing provider fees; implementing co-pays).

In FY 2001, Mississippi’s Division of Medicaid expended $69.2 million on administration of the state’s Medicaid program, or 2.9% of total Medicaid expenditures. DOM spends more on contractual services for program administration ($46.8 million, or 68% of total administrative expenditures) than on in-house personnel ($19.3 million, or 28% of the total). The combined categories of equipment, commodities, and travel only represented 4% ($3.1 million) of DOM’s FY 2001 administrative expenditures.

PEER determined that DOM does not consistently follow the elements of effective contracting, resulting in higher than necessary costs for services and possible compromises to service quality. DOM’s most serious deficiencies were failure to: adequately assess the need for the contracts, evaluate contract bids using consistent point values for selection criteria, and monitor the contracts.

These deficiencies resulted in DOM contracting for services that could have been performed more efficiently in-house; paying significantly higher contractual costs for services than contractual costs paid by other states for the same services; and contracting for a service that was already being performed by other entities. In the most egregious case, DOM pays $5 million to the Mississippi Hospital Association annually for a service (administrative support of the state’s Disproportionate Share Hospital and Medicare Upper Payment Limits programs) that neighboring states perform in-house for less than $100,000. Also, DOM pays at least twice the amount ($17 million total in FY 2001) that neighboring states are paying to provide non-emergency transportation services for Medicaid recipients.

Table 2 shows the potential $7.7 million in FY 2003 contractual services general fund savings identified by PEER, by contractual area.

In FY 2001, DOM eligibility staff comprised the largest percentage of total DOM staff (42%), followed by program oversight staff (11%), and non-emergency transportation staff (10%). In terms of increases in the number of staff over the period of FY 1993 through FY 2001, by functional area, the largest increases were the addition of 100 eligibility staff, 57 non-emergency transportation staff and 48 program oversight staff.

Although DOM travel expenditures grew by 219% (adjusted for inflation) from FY 1993 through FY 2001, DOM travel expenditures represent only 1% of DOM total administrative expenditures. In FY 2002, DOM reduced its travel expenditures significantly (by 41%, as of May 29, 2002) as a result of restrictions on travel. PEER conducted an in-depth review of the fourteen DOM employees who expended $6,000 or more in travel in FY 2001 and determined that travel costs for these individuals were not unreasonable. The majority of the fourteen cases reviewed by PEER perform program oversight and/or delivery functions that require travel to clients and service delivery sites around the state.

Three agencies share responsibility for making Medicaid eligibility determinations for specific categories of Medicaid applicants: DOM (primarily the aged), the Mississippi Department of Human Services (primarily pregnant women and children), and the Social Security Administration (primarily the blind and disabled).

PEER’s review of the eligibility determination process at both DOM and the Department of Human Services revealed that eligibility workers do not adequately verify an applicant’s resources prior to determining an applicant eligible to receive Medicaid benefits. In general, the eligibility workers rely on an applicant’s truthfulness in completing the application form and do not independently verify resources (other than in those cases where the applicant is qualifying through another program such as Temporary Assistance to Needy Families [TANF]). In fact, eligibility workers at the Department of Human Services told PEER staff that management in the Jackson office told them to enroll as many people in the Medicaid program as possible.

DOM’s Medicaid Eligibility Quality Control unit determined that from October 1992 to September 2000, an average of 7.34% of those Medicaid recipients determined eligible by either DOM or the Department of Human Services were actually ineligible to receive benefits, based on a more in-depth review of applicant resources.

Based on FY 2003 budget projections, every 1% increase in Medicaid enrollment results in an annual increase of $6 million in general fund expenditures. Therefore, the general fund cost of the 7.34% average error rate identified by DOM’s quality control unit is approximately $42 million.

PEER determined that DOM’s FY 2003 budget request is based on an inflated growth rate of 22.5%, rather than the Division’s statistically projected growth rate of 9.7% (based on historical expenditure data, adjusted for program changes). Using the 22.5% growth rate increased DOM’s FY 2003 estimated total funding needs by $307 million.

As shown in Table 3 below, PEER determined that the additional $307 million that DOM included in its FY 2003 budget request was comprised of four categories: Net New Eligibles, Prescription Drugs, Physician Services, and Hospital Services.

Because DOM’s statistically projected growth rate of 9.7% includes expenses associated with projected growth in the number of net new eligibles in FY 2003, DOM’s funding request for an additional $213 million for net new eligibles is a double counting of expenditures. Similarly, DOM’s FY 2003 statistical projections included the following growth rates for the remaining three categories shown in Table 3: 20% for prescription drugs, 8.8% for physician services, and 8.1% for hospital services. To arrive at its 22.5% projected growth rate, DOM added additional “funding needs” for these three categories, based on FY 2002 shortfalls alone. DOM provided no documentation to support the need for consideration of additional funding for these categories beyond their contribution to the FY 2003 projection of 9.7% growth. Funding DOM based on the division’s statistically projected growth rate of 9.7% rather than its inflated estimate of 22.5% growth reduces FY 2003 funding needs by a total of $307 million ($73 million in state general funds).

1. To ensure the procurement of quality services at a cost effective rate, the Division of Medicaid should adopt internal procurement guidelines based on generally recognized elements of effective contracting (refer to page 15). DOM should pay particular attention to the development of guidelines addressing needs assessments, systematic review of proposals, and contract monitoring.

2. The Division of Medicaid should consider two options concerning its contract with the Mississippi Hospital Association:

   • Consider asking the Legislature to amend MISS. CODE ANN. Section 43-13-117 (1972) to remove the requirement that the Division of Medicaid contract with the Mississippi Hospital Association for the administrative support of the Medicare Upper Payment Limits program and Disproportionate Share Hospital program so that DOM could perform the task in-house. This would include the reclassification of several vacant positions in order to meet staffing needs.

   • The Division of Medicaid should reduce the contract price to include only those costs associated with the tasks required by state and federal law and regulations. The Division of Medicaid should complete a cost analysis for these services to ensure a fair and competitive contract price.

If the division wants to pursue other special projects that could benefit the Medicaid program and its beneficiaries, they should define the tasks that they want to accomplish and issue a Request for Proposals to obtain the desired services in a competitive environment.

3. The Division of Medicaid should consider more cost effective ways of providing information on long term care alternatives to Medicaid beneficiaries. In considering whether to terminate its ten contracts with the Area Agencies on Aging, DOM should review the efforts of the entities that already provide these services, such as eligibility workers and hospital and nursing home discharge planners and social workers. The Division of Medicaid should also consider requiring medical providers to share this information with Medicaid beneficiaries.

4. The Bureau of Compliance and Financial Review should seek more cost effective methods of eliminating the backlog of cost report reviews, including the possibility of discontinuing its use of multiple CPA firms and seeking individual contractors or a single CPA firm to perform these services.

5. The Division of Medicaid should consider a more cost effective method for providing peer review organization services including, but not limited to, the termination of its current contract with Healthsystems of Mississippi and performance of these required services in-house. If DOM chooses to continue the use of the current contractor, it should consider establishing a new method of payment other than a per member per month fee in order to control costs.

6. The Division of Medicaid should consider a more cost effective method of providing prior approval and drug utilization services, including discontinuing the contract with Health Information Designs. DOM could perform prior authorization services in-house by using current vacancies to allocate additional staff to the Bureau of Pharmacy. DOM’s Bureau of Pharmacy could perform the drug utilization function by using data and reports generated by the Division’s Surveillance and Utilization Review Subsystem and Medicaid Management Information Retrieval System and any additional reports that can be generated by the fiscal agent.

7. The Division of Medicaid should identify methods of controlling expenditures for the non-emergency transportation (NET) program, including, but not limited to:

   1. Elimination of staff

      Other states operate their NET programs with limited staff. For example, Louisiana’s dispatch contractor operates the NET program with a staff of thirty-six including twenty to twenty-five call center unit staff. Louisiana utilizes three state staff to monitor the contract and assist with audit functions. Alabama operates their program with a staff of twenty employees including ten regional coordinators, one call center supervisor, one call center secretary, three call center operators, two directors, one clerical employee, and two inmates for office support. DOM should consider reducing the number of NET staff by reducing the number of NET regions to six regions with eighteen NET Coordinators. This could result in additional general funds savings of $464,062.

   2. Implementation of retrospective reviews of claims

      DOM should implement a retrospective review of claims to ensure that the beneficiary actually attended his/her scheduled medical appointment. Alabama conducts a retrospective review from a sample selected each month.

   3. Establishment of monthly reporting requirements

      DOM should establish monthly reporting requirements to identify process improvement.

   4. Building of relationships with other transportation entities

      DOM’s Bureau of Compliance and Financial Review should work with public transportation companies to provide transportation services to medical appointments for those beneficiaries who are physically able to use these services. The division should also work with various community transportation resources who could potentially transport beneficiaries for reduced rates or rates that are lower than those of current group providers.

   5. Identification of new methods of provider reimbursement

      Current group provider rates are not cost efficient. DOM should identify a new method of reimbursement for transportation services. States such as Louisiana have capped rates based on the miles traveled, whereas Alabama uses a voucher system and reimburses for miles traveled.

   6. Enhancement of NET system capabilities

      DOM’s Bureau of Compliance and Financial Review should work with the Division’s Information Technology staff to enhance the capabilities of the NET computer system. The system should be capable of tracking information that would assist the division in controlling costs and formulating policy. The Bureau of Compliance and Financial Review should be able to generate these reports on request.

   7. Amendment of NET policy to eliminate the ability of providers to file claims over a twelve month time period

      The Division of Medicaid should amend the requirement that allows the provider twelve months to file claims. The provider should be given a shorter time frame in which to file claims. All group providers are required to file claims electronically, so this should not be an imposition to the provider. The state of Texas requires providers to file claims within ninety-five days of appointment confirmation. Texas’ group providers’ contracts state that a provider waives his right to file the claim after the ninety-five days have passed. This will provide the agency with a more accurate accounting of program costs.

   Eligibility Determination Process

8. DOM should develop cost effective options and procedures for receiving information from the IRS for verification of eligibles’ income. DOM should report these options and the associated cost of each option to the Legislature by the beginning of the 2003 Regular Session.

9. DOM eligibility workers or Medicaid Eligibility Quality Control unit investigators should conduct random samples to verify the declared assets and search for undeclared property of Medicaid applicants at the time of application.

10. The Medicaid Eligibility Quality Control unit should investigate the use of pilot programs for identifying ineligible recipients, such as those programs implemented in Arizona and Florida. These programs sample target populations in high cost areas, such as long term care.

11. The Medicaid Eligibility Quality Control unit should establish a procedure for follow-up on cases they determine to be ineligible in order to ensure that local offices take appropriate action to terminate benefits. A case review should be completed within ninety days of referral to the local office.

Medical Services Expenditures

12. The Legislature should require the Division of Medicaid to provide documentation to support the agency’s claimed need for funding to support a 22.5% growth rate in FY 2003. In the event that the Division cannot provide documentation detailing the specific external factors driving a 22.5% growth rate, the Legislature should fund program growth in line with the 9.7% projection derived from the Division of Medicaid’s own statistical model.