Legislature(2015 - 2016)HOUSE FINANCE 519

04/10/2015 09:00 AM House FINANCE

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09:04:22 AM Start
09:06:14 AM HB148
10:21:11 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 148                                                                                                            
     "An   Act  relating   to   medical  assistance   reform                                                                    
     measures;   relating   to   eligibility   for   medical                                                                    
     assistance  coverage;  relating to  medical  assistance                                                                    
     cost containment  measures by the Department  of Health                                                                    
     and  Social Services;  and providing  for an  effective                                                                    
9:06:14 AM                                                                                                                    
BECKY  HULTBERG,  PRESIDENT  AND  CHIEF  EXECUTIVE  OFFICER,                                                                    
ALASKA  STATE  HOSPITAL  AND NURSING  ASSOCIATION  (ASHNHA),                                                                    
supported  HB 148  and Medicaid  expansion. She  voiced that                                                                    
Alaskan hospitals  provided over  $100 million each  year in                                                                    
uncompensated  care.  She   asserted  that  expansion  would                                                                    
reduce  the  amount  of   uncompensated  care  and  provided                                                                    
significant economic and fiscal  benefits for the state. The                                                                    
cost of healthcare  for the state was  unsustainable and was                                                                    
"simply  a  math equation."  She  believed  the problem  was                                                                    
solvable  and   that  expansion   "might  be  part   of  the                                                                    
solution." She  believed that the state's  healthcare system                                                                    
must  be  "transformed."  She  stated  that  healthcare  was                                                                    
different from  any other industry  in the state  in service                                                                    
delivery, payment, magnitude of  the costs, and the personal                                                                    
nature  of  the  service.  She   thought  that  a  different                                                                    
approach  to the  issue was  necessary.  She shared  concern                                                                    
about  policy  debates  that  were  based  on  sound  bites,                                                                    
deceptive  Facebook ads,  and speculation  in an  attempt to                                                                    
"scare" the public.  She stated that her  purpose before the                                                                    
committee was  to answer member's questions  and address the                                                                    
idea of healthcare transformation.                                                                                              
Ms. Hultberg discussed the issue  of the Medicaid Management                                                                    
Information  System (MMIS)  [Xerox contract  with Department                                                                    
of  Health  and  Social  Services (DHSS)].  She  stated  her                                                                    
concern and shared  that the association had  dealt with the                                                                    
issue for  over one and a  half years. She related  that the                                                                    
association was  "deeply engaged"  with the state  and Xerox                                                                    
due  to   disruptions  in   payments.  She   indicated  that                                                                    
currently  ASHNHA's clients  were receiving  timely payments                                                                    
and   the  system's   improvements  were   significant.  She                                                                    
reported that back payments were  still problematic from the                                                                    
time that the system was  not functioning properly and would                                                                    
be resolved  over time. The  association was  confident that                                                                    
the  system  could handle  a  "small  number" of  additional                                                                    
recipients added  to the system  due to  Medicaid expansion.                                                                    
She stated that from a  provider's view point ASHNHA was not                                                                    
concerned with the  status of the MMIS system  in regards to                                                                    
Medicaid expansion.                                                                                                             
Co-Chair  Neuman disagreed  with  her characterization  that                                                                    
"the  policy debate  was an  attempt to  scare people."  Ms.                                                                    
Hultberg clarified  that she believed that  Facebook ads and                                                                    
soundbites were  an attempt to  scare people.  She advocated                                                                    
for honest  policy debates  regarding healthcare  reform and                                                                    
Medicaid expansion.                                                                                                             
9:11:21 AM                                                                                                                    
Representative  Gattis  asked  what  amounted  to  a  "small                                                                    
number"  of people  in regards  to  Medicaid expansion.  Ms.                                                                    
Hultberg remembered  that up  to 20  thousand people  out of                                                                    
the  potential  40 thousand  eligible  could  enroll in  the                                                                    
program, which  represented a small percentage  of the total                                                                    
number of  Medicaid recipients. She added  that the "volume"                                                                    
would  not   overwhelm  the  system  relative   to  what  it                                                                    
currently handles. Representative  Gattis requested specific                                                                    
numbers.  Ms. Hultberg  deferred to  the department  for the                                                                    
JON SHERWOOD, DEPUTY COMMISSIONER,  MEDICAID AND HEALTH CARE                                                                    
POLICY, DEPARTMENT  OF HEALTH AND SOCIAL  SERVICES, answered                                                                    
that approximately 160  thousand beneficiaries were expected                                                                    
to  enroll in  Medicaid  next year.  He  expounded that  the                                                                    
20,000 new  enrollees from expansion would  represent a one-                                                                    
eighth increase  in the Medicaid population  or roughly 12.5                                                                    
percent. The expansion population  was not anticipated to be                                                                    
high utilizers similar to  other populations already covered                                                                    
such as, people with  disabilities therefore, the new claims                                                                    
volume was expected to be less than 12.5 percent.                                                                               
Representative Gara  agreed that  the ads that  Ms. Hultberg                                                                    
referred to were deceptive.                                                                                                     
Vice-Chair Saddler  cited Facebook  ads by  DHSS encouraging                                                                    
citizens to contact their legislator  in support of Medicaid                                                                    
expansion.  He  strongly   agreed  that  policy  discussions                                                                    
should  not be  based on  Facebook soundbites.  He requested                                                                    
discussions focused  on utilization rates and  reductions in                                                                    
uncompensated  care   in  addition  to  what   other  states                                                                    
experiences were.                                                                                                               
Ms. Hultberg "sincerely  regretted mentioning Facebook…" and                                                                    
would discuss the policy merits.                                                                                                
9:16:04 AM                                                                                                                    
Representative  Pruitt referred  back to  the idea  of small                                                                    
numbers regarding  expansion. He  wondered what  happened in                                                                    
relation to  the estimated number  of new  recipients versus                                                                    
the actual  number of  new enrollees,  in other  states that                                                                    
expanded  Medicaid.  He  asked  how  a  larger  number  than                                                                    
anticipated of  new recipients would impact  the system. Ms.                                                                    
Hultberg  concurred that  some states  experienced a  higher                                                                    
number  of new  enrollees  than projected.  She stated  that                                                                    
ASHNHA had  confidence in  the department's  projections but                                                                    
realized   they  could   be   inaccurate.  The   association                                                                    
expressed  confidence  that  the MMIS  system  could  handle                                                                    
additional   volume   over    the   20,000   estimated   new                                                                    
beneficiaries  based   on  how  the  system   was  currently                                                                    
handling claims.                                                                                                                
Co-Chair Neuman  stated that the  committee would  hear from                                                                    
experts on the MMIS system from DHSS at a later date.                                                                           
Representative  Wilson wondered  how expanding  Medicaid was                                                                    
going  to save  the state  money since  the state  paid much                                                                    
higher  rates  for  medical  procedures.  She  deduced  that                                                                    
Medicaid  recipients were  being served  and that  the issue                                                                    
was  about who  was paying  for the  services. Ms.  Hultberg                                                                    
responded  that  the  short   answer  was  that  "structural                                                                    
change" in  healthcare delivery  and how  and what  was paid                                                                    
for  was needed  to lower  healthcare costs.  The healthcare                                                                    
system needed  to pay for  "value" instead of  "volume." She                                                                    
felt that  the necessary  changes would be  "significant and                                                                    
disruptive." She opined that making  disruptive change in an                                                                    
established  system "required  both capital  and confidence"                                                                    
and would  be a  huge challenge.  She declared  that "change                                                                    
was going to happen" due  to the economics of the healthcare                                                                    
cost  curve on  federal and  state levels.  She pointed  out                                                                    
that how  the state responded  to the change was  the issue.                                                                    
If  the state  was not  the  "architect" of  the change  the                                                                    
state would be "victims" of any changes.                                                                                        
Representative  Wilson declared  that Ms.  Hultberg's answer                                                                    
"made  no   sense."  She  thought  that   Ms.  Hultberg  was                                                                    
advocating  for  more  government  involvement  in  managing                                                                    
healthcare  and  thought  that was  a  private  matter.  She                                                                    
believed  that Medicaid  expansion instituted  over a  short                                                                    
time frame  was "irresponsible." She stated  that 30 percent                                                                    
of  the state's  population would  be eligible  for Medicaid                                                                    
and many  new recipients  would not have  jobs. She  did not                                                                    
believe expansion could happen  without "a lot of government                                                                    
9:22:56 AM                                                                                                                    
Ms.  Hultberg  answered that  she  could  better answer  the                                                                    
question if she could get  through more of her presentation.                                                                    
She  revealed that  government currently  paid approximately                                                                    
50 or  more percent  of healthcare costs  and was  already a                                                                    
huge  payer, which  made the  industry different  than other                                                                    
business. She  remarked that government and  healthcare were                                                                    
linked  in ways  other industries  were not.  Representative                                                                    
Wilson felt like  she was hearing a lot of  rhetoric and had                                                                    
not  heard statistics  or facts.  She wanted  to hear  about                                                                    
other  states that  did not  choose  expansion but  utilized                                                                    
some other system of healthcare  before hasty decisions were                                                                    
made on Medicaid expansion in Alaska.                                                                                           
Representative  Edgmon   thought  that  the   committee  had                                                                    
previously   engaged  in   thorough  discussions   regarding                                                                    
expansion with  representatives from medium  sized hospitals                                                                    
from Kenai  and Ketchikan  (04/09/2015 08:37AM).  He deduced                                                                    
that Medicaid expansion provided  the "front-end capital" to                                                                    
initiate  innovation.  He  cited   the  following  from  the                                                                    
previous  meetings  testimony,   "Healthcare  in  Alaska  is                                                                    
fragmented and lacked coordination…"  He summarized that the                                                                    
only way  to implement  a payment restructuring  system with                                                                    
accountability and information sharing was with the front-                                                                      
end  capital  that  Medicaid  expansion  could  provide.  He                                                                    
believed  that  projections  were not  possible  to  predict                                                                    
exactly.  He requested  that  the  committee hear  testimony                                                                    
from  the large  providers in  Anchorage and  the Matanuska-                                                                    
Susitna Borough  who would be  the primary  beneficiaries of                                                                    
expansion.  He  felt  that the  healthcare  industry  was  a                                                                    
business and Medicaid expansion  was creating a new business                                                                    
Co-Chair Neuman agreed to provide the requested testimony.                                                                      
9:26:02 AM                                                                                                                    
Representative  Guttenberg   requested  that   Ms.  Hultberg                                                                    
highlight the  areas where ASHNHA  thought savings  could be                                                                    
achieved through expansion.                                                                                                     
Co-Chair  Neuman  requested  examples and  comparatives  and                                                                    
more information regarding a provider tax.                                                                                      
Vice-Chair  Saddler  referred   to  Representative  Edgmon's                                                                    
comments and  disagreed with his  conclusions. He  felt that                                                                    
the  medium  sized hospitals  spoke  about  "what might  be"                                                                    
through  Medicaid  expansion  and "cherry  picked"  elements                                                                    
from a demonstration  project they were involved  in and not                                                                    
as part of a "systematic revamping expansion of Medicaid."                                                                      
Co-Chair Neuman asked  the committee to stay  focused on the                                                                    
presentation at hand.                                                                                                           
Ms.  Hultberg moved  the discussion  to payment  reform. She                                                                    
referenced  the previous  day's  testimony regarding  reform                                                                    
and  summarized that  tangible examples  of feasible  reform                                                                    
were  currently   taking  place.  She  recounted   that  the                                                                    
Ketchikan hospital's current  demonstration project resulted                                                                    
in better quality  outcomes at lower costs.  The project was                                                                    
funded by a  $3 million CMS (Centers  for Medicaid Services)                                                                    
innovation grant but was not  sustainable because of the way                                                                    
hospitals were  reimbursed; they were incentivized  to treat                                                                    
people in the hospital. She  detailed that the project could                                                                    
continue  through payment  reform that  financially rewarded                                                                    
hospitals  for  "keeping people  out  of  the hospital"  and                                                                    
improved margins  that expansion  would provide.  The second                                                                    
reform  project was  a community  care organization  project                                                                    
modeled  after  a  currently  operating  reform  project  in                                                                    
Oregon.  She explained  that  the model  paid  a provider  a                                                                    
"global  payment" which  was a  fixed dollar  amount payment                                                                    
based upon  a number of  people in a  pool. If the  costs of                                                                    
providing  healthcare  was  larger   than  the  payment  the                                                                    
provider absorbed the loss.  The provider gained financially                                                                    
if they  provided better quality  outcomes at a  lower cost.                                                                    
She  delineated that  the benefit  of a  global payment  was                                                                    
that every  provider's financial incentives  were "aligned."                                                                    
The goal was  better care at a low cost  versus more care at                                                                    
a higher cost. The  Kenai (Central Peninsula) hospital would                                                                    
develop the  model if they  can make it  financially viable.                                                                    
She voiced  that Ketchikan's demonstration  project required                                                                    
more capital. The Central Peninsula  hospital did not have a                                                                    
grant  source   and  were  relying   on  the   reduction  in                                                                    
uncompensated  care achieved  through Medicaid  expansion to                                                                    
implement  its  demonstration   project.  She  thought  that                                                                    
without Medicaid  expansion the  hospitals would  still seek                                                                    
new models of  delivering care, but the models  would not be                                                                    
as  comprehensive  and   innovative  without  the  expansion                                                                    
capital to implement them.                                                                                                      
Representative Guttenberg  understood the concept  of global                                                                    
payment systems.  He wondered what safeguards  were in place                                                                    
in instances  when a hospital  was turning people  away from                                                                    
the  ER for  treatment  in a  different  facility. He  asked                                                                    
whether the  system was integrated  and would  ensure follow                                                                    
up care.                                                                                                                        
9:32:31 AM                                                                                                                    
Ms.  Hultberg  stated   that  integrated  "IT"  (Information                                                                    
Technology)  systems were  part of  the model.  She revealed                                                                    
that  the  model  included multiple  providers,  along  with                                                                    
hospitals  uniting  to  form   the  healthcare  system.  The                                                                    
providers were paid based on  quality benchmarks as well and                                                                    
had  no incentive  to deny  care. They  are incentivized  to                                                                    
ensure that the  care was delivered at the  best location at                                                                    
the  best  value.  She  furthered  that  "by  combining  the                                                                    
financial  incentives  and  the quality  matrix"  one  could                                                                    
guarantee   high  standards   of   care   at  lower   costs.                                                                    
Representative Guttenberg provided an  example of a hospital                                                                    
discharging a  sick patient  due to  cost factors.  He asked                                                                    
whether the model  would allow the patient to  be treated at                                                                    
multiple facilities without penalizing  one provider for not                                                                    
providing quality  care on their  end. Ms.  Hultberg relayed                                                                    
that the  patient would retain  a primary care  provider and                                                                    
had  a choice  of clinics  within  the system  but that  all                                                                    
providers  were "on  the same  page" regarding  the patients                                                                    
needs.  She  understood that  at  some  point someone  would                                                                    
stray  outside  the model's  health  system  and would  most                                                                    
likely be  back in the  Medicaid fee for service  model. She                                                                    
stated that  she needed more information  regarding how that                                                                    
particular "dynamic" was handled in Oregon.                                                                                     
Representative Gattis remained fixed  on the business model.                                                                    
She  wanted  to  address  the   business  model  of  private                                                                    
insurers. She  thought that the private  insurance companies                                                                    
would  be interested  in participating  in the  cost cutting                                                                    
models and  weren't part of  the conversation.  Ms. Hultberg                                                                    
suggested  that  many  of  the  models  also  had  insurance                                                                    
partners. The  exemplified coordinated care model  in Oregon                                                                    
had  insurance partners  as part  of  the model  due to  the                                                                    
level of risk.                                                                                                                  
Co-Chair  Neuman  agreed   with  Representative  Gattis  and                                                                    
wondered  whether the  coordinated  care  model allowed  the                                                                    
state to  submit RFP's (request for  proposals) from private                                                                    
insurance  companies to  manage a  coordinated care  system.                                                                    
Ms. Hultberg  suggested that the managed  care demonstration                                                                    
projects  proposed  in  the legislation  provided  for  wide                                                                    
ranging managed  care opportunities besides  the coordinated                                                                    
care model.                                                                                                                     
9:39:32 AM                                                                                                                    
Representative Gara  stated that  there were  many questions                                                                    
about how  Medicaid "produced savings."  He noted  that much                                                                    
of   the  testimony   addressed  multiple   instances  where                                                                    
Medicaid would  cover costs that  were currently  being paid                                                                    
for  by   the  state's  general  fund.   He  identified  the                                                                    
additional  Medicaid coverage  in lieu  of general  funds as                                                                    
cost savings to the state.   He reiterated that it cost more                                                                    
to treat people in  an ER than in a clinic  and was one area                                                                    
of  potential  savings.  He   reminded  the  committee  that                                                                    
Medicaid coverage would  decrease Alaska Regional Hospital's                                                                    
costs for  uncompensated care which allowed  the hospital to                                                                    
provide   a  primary   care  type   clinic  under   Medicaid                                                                    
expansion.   He  asked   whether  the   scenario  could   be                                                                    
widespread under  Medicaid expansion  to other  hospitals in                                                                    
the  state. Ms.  Hultberg responded  that he  identified two                                                                    
types  of  savings.  One  saved  general  fund  expenses  by                                                                    
offsetting general funds  through federal Medicaid expansion                                                                    
funding.  The  other  savings  were  within  the  healthcare                                                                    
system through  Medicaid expansion  and payment  reform. She                                                                    
hoped that other hospitals would  choose the Alaska Regional                                                                    
model but could  not speak for them. She  emphasized that in                                                                    
general,    the   "highest    likelihood   for    healthcare                                                                    
transformation" was  through Medicaid expansion  and payment                                                                    
Vice-Chair  Saddler agreed  with Representative  Edgmon that                                                                    
hospitals were  businesses and  that the  federal government                                                                    
was "squeezing"  hospitals into reducing  uncompensated care                                                                    
costs  with  a "stick"  and  that  the carrot  was  Medicaid                                                                    
expansion which  provided additional  funding. He  asked her                                                                    
to describe the efforts the  association had done before the                                                                    
possibility  of  Medicaid  expansion to  accomplish  payment                                                                    
reform or provide managed care.                                                                                                 
Ms. Hultberg  answered that  Medicare was  primarily driving                                                                    
payment  reform throughout  the country  as well  as private                                                                    
payers  in  some  states. Several  large  corporate  private                                                                    
payers like  Walmart and Boeing  were driving  larger change                                                                    
through  alterations in  their plans.  She pointed  out that                                                                    
the  association's  members   were  businesses  and  payment                                                                    
reform   required  risk   to   potentially  lower   revenue.                                                                    
Currently,  forces aligned  to  "allow  the conversation  to                                                                    
occur."  Some  of  the  changes were  being  driven  by  the                                                                    
"future"  realization  of  even higher  costs  without  cost                                                                    
containment and  some change  was driven  by the  carrot and                                                                    
stick of Medicaid expansion. She  shared that providers were                                                                    
aware  that  change  had  to occur  and  that  changing  the                                                                    
business model was disruptive and  could potentially lead to                                                                    
loss in revenue. She believed  that providers were currently                                                                    
"at the  table" because it was  the "right thing to  do" and                                                                    
Medicaid  expansion  offered  the   carrot  to  do  it.  The                                                                    
financial  incentives to  lower costs  had to  accompany the                                                                    
need  for  change  or  hospitals  and  providers  would  act                                                                    
"rationally"   as  businesses   facing  losing   profit  and                                                                    
continue the  current system  "given the  payment structure"                                                                    
even though it was not the "right thing to do."                                                                                 
Co-Chair  Neuman understood  Ms. Hultberg's  opinion on  the                                                                    
Vice-Chair  Saddler  restated  his  question.  Ms.  Hultberg                                                                    
replied that  the association had  not had  the conversation                                                                    
of payment  reform before  because the  financial incentives                                                                    
did not exist.                                                                                                                  
Co-Chair  Neuman wanted  to hear  more about  provider taxes                                                                    
and  the  differences  between  large  hospitals  and  small                                                                    
office providers.                                                                                                               
9:46:09 AM                                                                                                                    
Ms.  Hultberg moved  to  the topic  of  provider taxes.  She                                                                    
reported  that  a  white  paper  produced  by  Alaska  State                                                                    
Hospital  and  Nursing  Home  Association  (ASHNHA)  titled,                                                                    
"Provider Taxes  - A comprehensive Overview"  (copy on file)                                                                    
was included  in the members  backup packets.  She explained                                                                    
that  provider  taxes were  taxes  imposed  on providers  by                                                                    
states. If a state wanted to  use the proceeds of the tax as                                                                    
part of  the Medicaid  match then the  state must  adhere to                                                                    
certain  federal  requirements.   The  federal  requirements                                                                    
delineated that  the tax  must be broad  based and  apply to                                                                    
all  providers. The  tax must  be uniform  to all  providers                                                                    
within a  class of providers  and cannot hold  the providers                                                                    
harmless;  in  this  case  guarantee   that  the  state  was                                                                    
compensated for the  entire amount the state  paid in taxes.                                                                    
The requirements  also included specific limits  on how much                                                                    
a provider could  be taxed. She noted that  the provider tax                                                                    
was  applied in  49 states.  She voiced  that often  the tax                                                                    
worked  for both  the provider  and the  state; specifically                                                                    
when the Medicaid  rate for services was  below the Medicaid                                                                    
upper payment limit the tax  can leverage additional federal                                                                    
reimbursement up to the upper  payment limit. She summarized                                                                    
that the provider  tax levied a tax on the  provider and the                                                                    
state received  the revenue. The federal  government matched                                                                    
the revenue and  the "pot of new money"  was divided between                                                                    
the providers  and the state.  Providers received  the funds                                                                    
in the form of increased  rates or supplemental payments and                                                                    
the state  gained tax revenue  to help support  the Medicaid                                                                    
program.  She declared  that it  was not  known whether  the                                                                    
provider tax system would work  in Alaska. The association's                                                                    
consultant  would study  the issue.  The  tax was  typically                                                                    
levied  on  hospitals  and  nursing  homes.  However,  under                                                                    
federal law,  19 classes of  providers could be  taxed which                                                                    
included  physicians  and  ambulatory surgery  centers.  She                                                                    
expounded  that  one  of  the  decisions  in  considering  a                                                                    
provider tax would  be assessing what type  of providers the                                                                    
state wanted  to tax. The  broad based tax could  be applied                                                                    
differently  within  a  class by  taxing  similar  types  of                                                                    
facilities  within  one   class  differently.  For  instance                                                                    
within  the hospital  class large  hospital  could be  taxed                                                                    
differently  than  small   hospitals.  She  summarized  that                                                                    
within  the broad  based requirement,  classes of  providers                                                                    
could  be carved  up based  on specific  criteria and  taxed                                                                    
Representative  Pruitt referred  to  Ms. Hultberg's  comment                                                                    
that 50  percent of healthcare  was paid for  by government.                                                                    
He assumed that  the majority of the 50  percent was derived                                                                    
from  Medicare and  Medicaid. He  thought that  if providers                                                                    
saw the benefit from  expansion through increased enrollees,                                                                    
he  wondered how  long  it would  be  before providers  come                                                                    
forward to ask the state  for "more" based on increasing the                                                                    
market  for providers  through expansion.  He was  concerned                                                                    
about  rising  costs for  the  state  as Medicaid  expansion                                                                    
grew.  Ms. Hultberg  clarified that  her 50  percent comment                                                                    
only  applied to  hospitals and  no other  provider classes.                                                                    
She  responded  that "government  was  the  worst payer  for                                                                    
hospitals."  She  emphasized   that  her  statements  merely                                                                    
reflected the reality that at  some hospitals the government                                                                    
paid  for  50  percent  of   the  bill.  She  revealed  that                                                                    
commercial  payers  were  better payers.  The  association's                                                                    
intent  was  not to  "crowd  out"  the private  payers.  The                                                                    
current business model of the  legal mandate to provide free                                                                    
care in the form of  uncompensated care was not optimal. She                                                                    
believed that  the opportunity  to reduce  the uncompensated                                                                    
care costs at  the same time as implementing  changes to the                                                                    
entire system was compelling.                                                                                                   
9:52:56 AM                                                                                                                    
Vice-Chair Saddler asked  for clarification regarding taxing                                                                    
one  classification of  providers at  different rates  under                                                                    
the provider  tax. Ms. Hultberg  restated that the  tax must                                                                    
be  broad based  within a  provider group.  She offered  the                                                                    
example of  physicians as a  provider group and  stated that                                                                    
"all similarly  situated providers" must be  treated equally                                                                    
within the  broad based tax.  However, classes  of providers                                                                    
within a  group were  allowed to  be taxed  differently. She                                                                    
exemplified  hospitals as  an example.  She elaborated  that                                                                    
hospitals classified  as "Perspective Payment  System" (PPS)                                                                    
were large  hospitals and  "critical access  hospitals" were                                                                    
small  hospitals.  Based  on   the  two  types  of  hospital                                                                    
providers, the tax could be  differentiated within that same                                                                    
class of hospital providers.                                                                                                    
9:54:58 AM                                                                                                                    
JEFF JESSEE,  CHIEF EXECUTIVE OFFICER, ALASKA  MENTAL HEALTH                                                                    
TRUST  AUTHORITY, declared  that  the  Alaska Mental  Health                                                                    
Trust  Authority (AMHTA)  was  interested  in both  Medicaid                                                                    
expansion  and  reform.  The   trustees  believed  that  the                                                                    
current   system  was   "unsustainable"  and   that  drastic                                                                    
solutions were  necessary. He thought  that "reform  was not                                                                    
an option or a destination" but  was a process over time. He                                                                    
felt  that  restructuring  healthcare payment  and  delivery                                                                    
systems would be  necessary. He reported that  over the last                                                                    
6  years  the  trust successfully  reformed  the  children's                                                                    
mental health system.  He detailed that over  $40 million of                                                                    
state funding  was reprogrammed to create  a community based                                                                    
system of care within the  state versus sending children and                                                                    
funding outside  of the state. Currently,  92 children, down                                                                    
from  a  high  of   438  remained  out-of-state.  The  trust                                                                    
provided over  $16 million to  assist in the  reform effort.                                                                    
He  reported  that the  trust  was  excited about  expansion                                                                    
because of  the potential capital opportunities  offered via                                                                    
Medicaid expansion. In addition,  the trust was charged with                                                                    
reformation in  certain areas  of Department  of Corrections                                                                    
(DOC) and the Criminal Justice System.                                                                                          
Mr. Jessee  stated that  the prisons  were currently  at 101                                                                    
percent of  capacity and reform  efforts could not  wait. He                                                                    
shared that  the trust beneficiaries  were either  not being                                                                    
served or  were served  inappropriately at very  high costs.                                                                    
Beneficiaries  could not  receive substance  abuse treatment                                                                    
when  necessary and  ended  up in  jail  or psych  emergency                                                                    
rooms. He  explored potential  savings in  DOC, particularly                                                                    
focused  on 24  hour  hospitalizations. He  referred to  the                                                                    
white paper and a  distribution chart titled, "Alaska Inmate                                                                    
Hospitalization Costs  FY 12-15" (copy on  file) distributed                                                                    
by  AMHTA  and  declared  that the  savings  under  Medicaid                                                                    
expansion  in regards  to  24  hour inmate  hospitalizations                                                                    
were real.                                                                                                                      
10:00:41 AM                                                                                                                   
Mr. Jessee  identified a critical  point related to  24 hour                                                                    
hospitalizations; whether  the inmates would have  access to                                                                    
Medicaid  when  they were  released  from  the hospital.  He                                                                    
stressed the  importance of  providing support  for sobriety                                                                    
and  recovery  when  released from  prison;  65  percent  of                                                                    
inmates  were AMHTA  beneficiaries  and over  80 percent  of                                                                    
inmates  had substance  abuse problems.  He elucidated  that                                                                    
Medicaid  eligibility was  a critical  piece of  funding for                                                                    
criminal  justice  reformation  due  to  the  importance  of                                                                    
providing  services in  order to  keep recidivism  down. The                                                                    
trust  viewed  Medicaid expansion  as  a  way to  accelerate                                                                    
providing services  to beneficiaries  at lower costs  to the                                                                    
state. He thought that the work  could be done, but it would                                                                    
be  much  more  difficult  without  Medicaid  expansion.  He                                                                    
believed  that  without  addressing substance  abuse  issues                                                                    
criminal  justice  reform  and recidivism  would  be  nearly                                                                    
Representative Wilson referred to  the 24-hour hospital stay                                                                    
and  asked for  verification that  Medicaid expansion  would                                                                    
apply  "to the  new group  and not  for the  current group."                                                                    
Mr.  Jessee  answered  that Medicaid  expansion  applied  to                                                                    
anyone currently  in prison that was  eligible for Medicaid.                                                                    
Representative  Wilson  asked  how  many  inmates  currently                                                                    
stayed  in the  hospital longer  than 24  hours. Mr.  Jessee                                                                    
pointed  to the  inmate count  on the  chart titled  "Alaska                                                                    
Inmate Hospitalization Costs FY 12-15" (copy on file).                                                                          
Vice-Chair   Saddler  noted   that  one   of  Mr.   Jessee's                                                                    
"underpinning"  of   support  for  Medicaid   expansion  was                                                                    
substance abuse treatment in order  to reduce recidivism. He                                                                    
asked  how many  times  an individual  needed treatment  and                                                                    
what  obligation  did the  state  have  to keep  sending  an                                                                    
individual  to  expensive  treatment services  in  order  to                                                                    
reduce recidivism. Mr.  Jessee answered that in  his case it                                                                    
took one  time in  a treatment  program to  achieve sobriety                                                                    
and for others it varied.  He delineated that the experience                                                                    
was not  different than other  diseases like  diabetes where                                                                    
success of treatment  and follow up also  varied. He thought                                                                    
that follow-up  played a major part  in minimizing relapses.                                                                    
He  emphasized that  relapses were  a  common occurrence  in                                                                    
10:06:48 AM                                                                                                                   
Representative  Pruitt asked  for an  interpretation of  the                                                                    
graphs distributed  by the trust. Mr.  Jessee explained that                                                                    
in viewing  the graphs moving  from left to right  the lines                                                                    
represented the  numbers of individuals  and what  the costs                                                                    
were   per  person.   He  exemplified   the   50  mark   and                                                                    
extrapolated that  50 inmates  hospitalizations for  over 24                                                                    
hours costs  $10 thousand  per person  and increased  to $50                                                                    
thousand for  the next  50 inmates  and continued  until the                                                                    
line  spiked upward.  He concluded  that a  relatively small                                                                    
number  of  inmates  hospitalizations were  very  expensive.                                                                    
Representative  Pruitt could  not see  the correlation  with                                                                    
the graphs  and the points  that Mr. Jessee was  making. Mr.                                                                    
Jessee  deduced that  the  cost of  inmates  going into  the                                                                    
hospital remained  relatively stable  from year to  year and                                                                    
therefore the costs and savings were predictable.                                                                               
Co-Chair Neuman related  that up to 95 percent  of the costs                                                                    
in  Medicaid  could  be  associated  to  5  percent  of  the                                                                    
Medicaid  recipients  which  were  trust  beneficiaries.  He                                                                    
stated that  managed care was  broad ranging. He  wanted Mr.                                                                    
Jessee  to  better  define  managed   care  in  relation  to                                                                    
beneficiaries and discuss the  different services that could                                                                    
be provided.                                                                                                                    
10:11:55 AM                                                                                                                   
Representative Gattis  asked why private industry  could not                                                                    
provide  services   under  managed  care  and   why  private                                                                    
insurers   were   not   offering   managed   care   services                                                                    
particularly if it realized savings for private insurers.                                                                       
Mr. Jessee stated that private  insurers were moving towards                                                                    
managed   care    services   through   health    fairs   and                                                                    
informational  emails. He  disliked  the  term managed  care                                                                    
because for  many it meant a  set fee for service  system of                                                                    
managing  payment. He  stated that  the most  important goal                                                                    
was to  assist beneficiaries to become  smarter utilizers of                                                                    
services because many were high  users of mental health care                                                                    
as well as health care in general.                                                                                              
Representative Wilson asked why the  trust had not offered a                                                                    
private insurance policy  specifically for beneficiaries and                                                                    
used trust funding as an  insurance policy. She wondered why                                                                    
the trust  had not explored  an insurance model.  Mr. Jessee                                                                    
stated that the  Trust had already invested  in medical home                                                                    
pilot programs in partnership with  the Department of Health                                                                    
and  Social  Services  (DHSS)  and  was  looking  into  that                                                                    
option. He furthered  that the Trust was not  in a financial                                                                    
position to  become an insurance  company and  was proposing                                                                    
placing  the beneficiaries  into  an  insurance plan  called                                                                    
"Medicaid  expansion." Representative  Wilson  felt that  he                                                                    
missed her  point. She  asked why the  trust did  not invest                                                                    
the millions of dollars that  the trust had already spent in                                                                    
programs  and  provided   beneficiaries  insurance  policies                                                                    
instead of  investing in programs.  Mr. Jessee  replied that                                                                    
it  would be  too expensive  for the  Trust and  "beyond its                                                                    
means"  to  provide  insurance  coverage  for  thousands  of                                                                    
individuals. However,  the Trust could provide  some capital                                                                    
for system reformation.                                                                                                         
10:17:15 AM                                                                                                                   
Vice-Chair  Saddler   stated  that  his  son   was  a  trust                                                                    
beneficiary and  received a  Medicaid waiver.  He understood                                                                    
that the decision  by the trust to  cover the administrative                                                                    
costs  of Medicaid  expansion "diluted"  the expenditure  by                                                                    
including non-beneficiaries.  He wondered whether  the trust                                                                    
was concerned  over the dilution  of trust funds and  who in                                                                    
the trust  decided to  pay for  the administrative  costs of                                                                    
expansion.   He  asked   for  clarification   regarding  the                                                                    
decision  making  process.  Mr.  Jessee  reported  that  the                                                                    
trustees  made the  decision  and would  review  it in  May,                                                                    
2015. The trustees were always  concerned when an investment                                                                    
was made  that benefited  people outside of  the beneficiary                                                                    
pool. He  elaborated that if  the reform was  "systemic" and                                                                    
would  benefit  beneficiaries  "over   the  long  haul"  the                                                                    
trustees would  consider paying administrative costs  a good                                                                    
investment even if it helped non-beneficiaries.                                                                                 
10:19:15 AM                                                                                                                   
Representative  Edgmon  wondered   whether  information  was                                                                    
available that  discussed what "the  building blocks  of the                                                                    
argument  really are."  He listed  reform, costs,  benefits,                                                                    
and  structural  changes;  administrative and  statutory  as                                                                    
necessary for  expansion. He wondered whether  a white paper                                                                    
that distilled  expansion issues into  one or two  pages was                                                                    
Co-Chair  Neuman  remarked  DHSS  was taking  notes  on  his                                                                    
request  and  would  hopefully provide  the  information  to                                                                    
Representative Edgmon.                                                                                                          
HB  148  was  HEARD  and   HELD  in  committee  for  further                                                                    

Document Name Date/Time Subjects
HB 148 Inmate Hospital Costs.pdf HFIN 4/10/2015 9:00:00 AM
HB 148