(a) The Secretary of the Department of Health and Human Resources shall:

(1) Develop a managed care system to monitor the services provided by the Medicaid program to individual clients;

(2) Develop an independent referral service, including the review of individual cases for abuses of the program; and

(3) Develop a schedule for implementation of the managed care and independent referral system. The managed care system shall focus on, but not be limited to, the behavioral health and mental health services.

(b) In addition thereto, and in accordance with applicable federal Medicaid laws, the secretary shall prepare recommendations, to be submitted to the Joint Committee on Government and Finance. In developing recommendations the secretary shall consider as options the following:

(1) Review of Medicaid services which are optional under federal Medicaid law and identification of services to be retained, reduced or eliminated;

(2) The elimination, reduction or phase-out of: (i) Services which are not generally available to West Virginia citizens not covered under the state's Medicaid program; or (ii) services which are not generally covered under group policies of insurance made available to employees of employers within the state;

(3) The elimination or reduction of services, or reduction of provider reimbursement rates, for identified services of marginal utility;

(4) Higher reimbursement rates for primary and preventive care;

(5) Changes in fee structure, which may include a system of prospective payments, and may include establishment of global fees for identified services or diagnoses including maternity care;

(6) Utilization caps for certain health care procedures;

(7) Restriction of coverage for cosmetic procedures;

(8) Identification of excessive use of certain health care procedures by individuals and a policy to restrict excessive use;

(9) Identification of services which reduce the need for more costly options for necessary care and retention or expansion of those programs;

(10) Identification of services for which preauthorization is a requirement for Medicaid reimbursement;

(11) Recommendations relating to the development of a demonstration project on long-term care, which demonstration project may be limited to patients with alzheimer's disease;

(12) A policy concerning the department's procedures for compliance, monitoring and inspection; and

(13) Such other options as may be developed.

(c) The secretary shall utilize in-state health care facilities for inpatient treatment when such facilities are available. Prior authorization, consistent with applicable federal law, shall be required for out-of-state inpatient treatment.

(d) The secretary shall report to the Joint Committee on Government and Finance on the development and implementation of Medicaid programs that provide incentives to working persons. The secretary shall consider: Subsidies for low income working persons; individual or small employer buy-ins to the state Medicaid Fund; prospective payment systems for primary care physicians in underserved areas; and a system to improve monitoring of collections, expenditures, service delivery and utilization.

(e) The secretary shall report quarterly to the Joint Committee on Government and Finance regarding provider and facility compliance with federal and state Medicaid laws, including, but not limited to, the following: The number of inspections conducted during the previous quarter; description of programs, services and facilities reviewed; findings; and recommendations for corrections.

(f) The secretary shall, upon federal certification of the claims management system, ensure that the claims management system processing Medicaid claims provides:

(1) Detailed quarterly financial reports to the Legislative Oversight Commission on Health and Human Resources Accountability;

(2) A management reporting system no later than July 1, 2006; and

(3) Specific utilization data by provider, member eligibility groups and service no later than October 1, 2006.