The state's system for paying to get low-income elderly and disabled clients to medical appointments was so loosely monitored that an unknown amount of taxpayer dollars was squandered shuttling some patients to shopping malls, beaches, movie theaters and other unauthorized destinations.

The state says reforms enacted last year have halted such practices.

"We just can't have our members abusing the system," said Patti Bazin, a Department of Human Services official involved with oversight of the Medicaid program for 41,000 low-income elderly, blind and disabled residents.

The state has been unable to estimate the extent of the abuse and how long it persisted, partly because of the lax monitoring.

With the reforms in place, however, the agency is grappling with a new challenge.

Despite the tighter controls, expenditures on ground transportation have soared to what Bazin called exorbitant levels, and DHS is trying to rein in the costs.

This year, the department expects to pay about $10 million, roughly four times the annual amounts DHS recorded in recent years, when abuses apparently were occurring unchecked.

With an eye toward improving care and curbing costs, the department a year ago began reforming the Medicaid insurance program for the 41,000 aged, blind and disabled residents when DHS switched from a fee-for-service model to a managed-care one.

The state hired two companies, 'Ohana Health Plan and Evercare Quest Expanded Access, to administer the program, including overseeing use of nonemergency ground transportation services.

Before that conversion, DHS used a clunky manual system for monitoring payments to transportation companies — mostly taxi and van operators — to shuttle the low-income clients to their appointments. Medicaid regulations generally require a state to cover trips considered medically necessary, such as going to and from a doctor's appointment.

But Bazin told legislators at a briefing last year that the agency's oversight over time had "loosened to the point where we were significantly surprised."

Mentioning just one example, she said the state had been paying for Medicaid clients to go to Ala Moana Center to shop.

"We didn't have the controls in place that we should've had in place to prevent some mismanagement of the system," Bazin told legislators at the February 2009 hearing.

In response to Advertiser questions, the department recently said it did not have the staff needed under the old system to manually match bills submitted by the transportation companies against the trip authorizations that DHS issued annually for the Medicaid clients.

While the annual authorizations specified such conditions as the frequency of trips permitted and allowed for last-minute "emergency" transportation without prior approvals, no specific locations were included, DHS said.

PROVIDERS SURGE

The lax monitoring, which industry officials said became evident around 2004, sparked a surge in new transportation companies trying to get a cut of the loosely monitored market.

The number of transportation providers jumped from less than 20 in 2005 to more than 80 today, according to industry estimates.

"It grew like crazy," said Donna Schmidt, who owns a case management business and has dealt with the transportation network on behalf of clients since the late '90s.

Asked to quantify to what extent the abuse contributed to Hawai'i's high transportation costs, how long that abuse persisted or why the controls became so lax, DHS told the newspaper in a written statement: "We do not have the resources to try to re-create what happened in the past. It is important, however, that we can explain the present."

As part of the switch to managed care in February 2009, the state last summer implemented a new transportation policy for 'Ohana and Evercare to follow. The policy required, among other things, that each trip be pre-approved by the health plans. To help with the monitoring, the companies have automated systems that document pick-up and drop-off locations, according to DHS.

"Now when bills come in from transportation pro- viders, they are matched with the internal authorization system," the agency said in its written response. "This means transportation is now being managed under the QExA program to protect taxpayer dollars."

FEWER TRIPS NOW

The tighter controls already are having an effect, according to executives of the two health plans.

David Heywood, Evercare's executive director, estimated that the number of trips taken by the 19,000 clients his company oversees has dropped about 10 percent compared with the initial few months of the QExA contract.

Erhardt Preitauer, 'Ohana's regional president, said at a January legislative briefing that he expects transportation costs for the 22,000 Medicaid clients his company oversees to drop roughly 30 percent.

When the two companies took over the program, they received requests from clients seeking transportation to malls, beaches, movie theaters, supermarket, drug stores or other destinations not permitted under Medicaid rules, according to Bazin and others familiar with the system.

Some clients became angry when their requests were denied, pointing out that such travel was allowed under the old system. But people now seem to realize that only medically related trips are permitted, officials said.

"Last year, we implemented systems and processes to help assure that transportation is used appropriately, per state policy," Preitauer said in a statement to the newspaper. "Since then, we have made solid progress toward a more reasonable model. Most of our members and providers have been understanding in working with us on this, which we greatly appreciate."

Evercare's Heywood said it would be difficult to estimate the extent of the abuse that was occurring previously. More of it, though, likely focused on the type of transportation used, not the destination, he said.

Some clients probably were getting to their destinations via taxi cabs and private vans even though they were physically able to use less costly Handivans or the city bus system, he said.

Both health plans have done assessments of their members to better match the clients' needs with the appropriate mode of transportation.

COST STILL RUN HIGH

Despite the reforms, the state still pays unusually high amounts for nonemergency ground transportation.

The department says it now pays about $20 per member per month, four times the $5 that most states pay.

Health care actuaries have told DHS that the highest per-member cost they were aware of, outside of Hawai'i, was $10 per month.

Even though DHS officials have told legislators that Hawai'i's nonemergency ground costs were by far the highest in the country, the agency now cautions about comparing the $20 per-member amount to the $5 one. The latter number may not be limited to aged, blind and disabled Medicaid clients, skewing any comparison, Bazin said.

In its written response to the newspaper, DHS said Hawai'i's high costs were mainly due to "increased access and utilization, including for inappropriate uses. That is why management is needed to ensure appropriate use."

The increased use has been due largely to increased awareness among Medicaid clients, industry officials say.

During the conversion to managed care, all clients received booklets explaining what was covered under the program, and many didn't know until then that ground transportation was a benefit, according to Leolinda Parlin, director of Hilopa'a Family to Family Health Information Center, which serves as an ombudsman for QExA clients.

Under the old fee-for-service model, the state estimated it spent about $2.5 million annually on ground transportation, a figure that some industry officials believe substantially understates the cost because of poor DHS monitoring.

BALANCE ACHIEVED

Last year's switch to managed care initially sparked numerous complaints from clients about a wide variety of transition problems, including some related to transportation.

When the health plans took over, they went almost to an extreme in controlling trip costs, and the state had to talk to them to work that out, Bazin told legislators.

People who have worked with Medicaid clients for years said that before 2004, the state had tight controls on transportation services.

Schmidt, the case manager, said she had to fill out detailed forms for each of her Medicaid clients annually, providing such information as how often the trips were needed, why they were needed and what the address was for the physician's office. Schmidt also said the doctors had to verify the type of transportation needed. If the trips were approved, she added, DHS would issue tickets for Handivan services.

But around 2004, Schmidt said, the detailed forms no longer were required, and trip tickets became readily available.

About the same time, new transportation providers started entering the market.

"We noticed a proliferation of these van services popping up," said Diane Terada, division administrator for Catholic Charities Hawai'i, which provides transportation services for the elderly but not through the Medicaid program.

Hilopa'a's Parlin said the state's loosening of controls around 2004 was in response to growing concerns that access to Medicaid services was too tightly controlled, preventing some elderly and disabled from getting help.

But as the pendulum swung toward less monitoring, "some people were able to take advantage of the situation," Parlin said.

She said she didn't believe the abuses generally reflected an attempt to defraud the system. More likely, the lax oversight contributed to an evolving process in which people would take legitimate medical trips but started adding unauthorized destinations to the route, Parlin said.

For Kahuku resident Donna Brown, the new system for arranging medical transportation for her 14-year-old son, Kahiau, who has cerebral palsy and is confined to a wheelchair, is a major improvement.

The old one was inefficient, could take months to arrange trips, and often the service was unreliable, Brown said. "It was a nightmare," she said. "We would be crossing our fingers the whole time hoping we wouldn't miss the appointment."

Trips under the new system typically take two or three days to arrange and sometimes even less time, Brown said. "For us, it's been very sufficient."