Legislature(2015 - 2016)HOUSE FINANCE 519

03/24/2016 01:30 PM House FINANCE

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01:32:32 PM Start
01:33:34 PM SB74
03:54:06 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Managed Care & Accountable Care Organizations
+ Bills Previously Heard/Scheduled TELECONFERENCED
CS FOR SENATE BILL NO. 74(FIN) am                                                                                             
     "An   Act  relating   to   diagnosis,  treatment,   and                                                                    
     prescription  of drugs  without a  physical examination                                                                    
     by a  physician; relating to  the delivery  of services                                                                    
     by  a  licensed  professional counselor,  marriage  and                                                                    
     family    therapist,     psychologist,    psychological                                                                    
     associate, and  social worker by audio,  video, or data                                                                    
     communications;  relating to  the duties  of the  State                                                                    
     Medical  Board;  relating  to limitations  of  actions;                                                                    
     establishing the Alaska  Medical Assistance False Claim                                                                    
     and  Reporting  Act;  relating  to  medical  assistance                                                                    
     programs administered  by the Department of  Health and                                                                    
     Social Services;  relating to the  controlled substance                                                                    
     prescription database;  relating to  the duties  of the                                                                    
     Board  of  Pharmacy;  relating to  the  duties  of  the                                                                    
     Department   of  Commerce,   Community,  and   Economic                                                                    
     Development;   relating  to   accounting  for   program                                                                    
     receipts; relating  to public record status  of records                                                                    
     related to  the Alaska  Medical Assistance  False Claim                                                                    
     and   Reporting   Act;  establishing   a   telemedicine                                                                    
     business registry; relating  to competitive bidding for                                                                    
     medical assistance  products and services;  relating to                                                                    
     verification  of  eligibility   for  public  assistance                                                                    
     programs administered  by the Department of  Health and                                                                    
     Social  Services; relating  to annual  audits of  state                                                                    
     medical  assistance  providers; relating  to  reporting                                                                    
     overpayments    of    medical   assistance    payments;                                                                    
     establishing  authority to  assess civil  penalties for                                                                    
     violations of medical  assistance program requirements;                                                                    
     relating  to seizure  and  forfeiture  of property  for                                                                    
     medical  assistance fraud;  relating to  the duties  of                                                                    
     the   Department  of   Health   and  Social   Services;                                                                    
     establishing    medical     assistance    demonstration                                                                    
     projects;  relating  to   Alaska  Pioneers'  Homes  and                                                                    
     Alaska Veterans'  Homes; relating to the  duties of the                                                                    
     Department  of Administration;  relating to  the Alaska                                                                    
     Mental Health Trust  Authority; relating to feasibility                                                                    
     studies for the provision  of specified state services;                                                                    
     amending Rules  4, 5, 7,  12, 24,  26, 27, 41,  77, 79,                                                                    
     82, and 89,  Alaska Rules of Civil  Procedure, and Rule                                                                    
     37, Alaska Rules of Criminal Procedure; and providing                                                                      
     for an effective date."                                                                                                    
1:33:34 PM                                                                                                                    
Co-Chair Thompson discussed the meeting agenda.                                                                                 
HEATHER SHADDUCK,  STAFF, SENATOR  PETE KELLY,  referenced a                                                                    
handout  she had  previously provided  the committee  titled                                                                    
"SB 74 - Medicaid Reform  Topic and Section Reference" (copy                                                                    
on file).  She pointed to page  1 of the document  and cited                                                                    
"Coordinated Care  Projects/Payment Reform"  that associated                                                                    
two sections of the bill with the topic as follows:                                                                             
     Sec. 31 - Coordinated Care Demonstration Projects -                                                                        
     pages          31 - 34                                                                                                     
     Sec. 28 - Medicaid Reform Program (a)(8) - Redesigning                                                                     
     the  payment process - page 26                                                                                             
Ms. Shadduck  noted that the  focus of the  discussion would                                                                    
be Section  31. She noted  that the topic of  payment reform                                                                    
was complicated;  she provided  two additional  documents as                                                                    
an  aide.  One was  titled  "The  Payment Reform  Glossary,"                                                                    
(copy on  file) that contained definitions  and explanations                                                                    
of the terminology  used to describe methods  of payment for                                                                    
Healthcare services.  The other was titled  "Alaska Medicaid                                                                    
Redesign:  Approaches to  Coordinated  Care and  Value-based                                                                    
Purchasing,"  (copy  on  file)   that  provided  the  entire                                                                    
spectrum  of  models  of  care   in  chart  form  for  quick                                                                    
reference during  the discussions. She spoke  to the process                                                                    
of choosing  options for value based  purchasing. She shared                                                                    
that  Senator  Kelly had  initially  examined  a full  risk,                                                                    
capitated    care,   and    managed   care    program.   The                                                                    
administration   had  come   forward  with   "a  pitch   for                                                                    
accountable  care organizations,"  which  were  a step  down                                                                    
from  managed   care.  Through   the  testimony   process  a                                                                    
coordinated care  project that "allowed anyone  to compete,"                                                                    
was  chosen. She  addressed page  31,  line 16  of the  bill                                                                    
related to coordinated care. She read the following:                                                                            
     Sec.   47.07.039.    Coordinated   care   demonstration                                                                    
     projects.  The department  shall contract  with one  or                                                                    
     more   third  parties   to   implement   one  or   more                                                                    
     coordinated care demonstration projects…                                                                                   
Ms.  Shadduck   explained  that  the  provision   sought  to                                                                    
coordinate  "whole   person"  care;  primary  care   and  or                                                                    
behavioral  care that  "connected  the  individual to  other                                                                    
services and  social supports as necessary."  She added that                                                                    
under Section a, on  page 32, line 1, there was  a list of 8                                                                    
items  the projects  could include.  A project  must include                                                                    
three  out of  the  eight  items. She  listed  the items  as                                                                    
     (1)  comprehensive  primary-care-based  management  for                                                                    
     medical   assistance  services,   including  behavioral                                                                    
     health services and  coordination of long-term services                                                                    
     and support;                                                                                                               
     (2) care  coordination, including  the assignment  of a                                                                    
     primary care  provider located in the  local geographic                                                                    
     area of the recipient, to the extent practical;                                                                            
     (3) health promotion;                                                                                                      
     (4) comprehensive transitional  care and follow-up care                                                                    
     after inpatient treatment;                                                                                                 
     (5) referral to community  and social support services,                                                                    
     including  career   and  education   training  services                                                                    
     available   through  the   Department   of  Labor   and                                                                    
     Workforce  Development under  AS 23.15,  the University                                                                    
     of Alaska, or other sources;                                                                                               
     (6) sustainability  and the ability to  achieve similar                                                                    
     results in other regions of the state;                                                                                     
     (7)   integration   and   coordination   of   benefits,                                                                    
     services, and utilization management;                                                                                      
     (8)  local  accountability   for  health  and  resource                                                                    
1:37:38 PM                                                                                                                    
Ms. Shadduck explained  that a project would  be reviewed by                                                                    
a  project   review  committee  (line  17,   page  32).  The                                                                    
committee was comprised of the following:                                                                                       
     (1)  the   commissioner  of  the  department,   or  the                                                                    
     commissioner's designee;                                                                                                   
     (2)   the  commissioner   of  administration,   or  the                                                                    
     commissioner's designee;                                                                                                   
     (3) the  chief executive  officer of the  Alaska Mental                                                                    
     Health   Trust  Authority,   or  the   chief  executive                                                                    
     officer's designee;                                                                                                        
     (4)   two   representatives  of   stakeholder   groups,                                                                    
     appointed  by  the  governor for  staggered  three-year                                                                    
     (5) a nonvoting  member who is a member  of the senate,                                                                    
     appointed by the president of the senate; and                                                                              
     (6) a nonvoting member who is  a member of the house of                                                                    
     representatives, appointed by the  speaker of the house                                                                    
     of representatives                                                                                                         
Ms. Shadduck turned to page  33, Subsection (c) of the bill.                                                                    
She  relayed  that  the subsection  outlined  the  types  of                                                                    
organizations  that  the  Department of  Health  and  Social                                                                    
Services  (DHSS)   could  contract  with:  a   managed  care                                                                    
organization,  primary care  case manager,  accountable care                                                                    
organization, prepaid  ambulatory health plan,  or provider-                                                                    
led entity.  The payments could include  innovative payments                                                                    
such  as:  global   payments,  bundled  payments,  capitated                                                                    
payments,  shared   savings  and  risk,  or   other  payment                                                                    
structures. She  continued with Subsection  (d) on  line 10,                                                                    
page 33:                                                                                                                        
     (d) A  proposal for a demonstration  project under this                                                                    
     section  must  include,  in addition  to  the  elements                                                                    
     required  under   (a)  of  this   section,  information                                                                    
     demonstrating   how   the    project   will   implement                                                                    
     additional  cost-saving measures  including innovations                                                                    
     to  reduce  the cost  of  care  for medical  assistance                                                                    
     recipients through  the expanded use of  telehealth for                                                                    
     primary  care,  urgent   care,  and  behavioral  health                                                                    
Ms. Shadduck reported that Subsection  (e) page 33, line 17,                                                                    
addressed the third-party review. She noted the following:                                                                      
     (e) The  department shall  contract with  a third-party                                                                    
     actuary  to review  demonstration projects  established                                                                    
     under  this  section.  The actuary  shall  review  each                                                                    
     demonstration project after  one year of implementation                                                                    
     and make  recommendations for  the implementation  of a                                                                    
     similar  project  on  a statewide  basis.  The  actuary                                                                    
     shall evaluate  each project based on  cost savings for                                                                    
     the  medical assistance  program,  health outcomes  for                                                                    
     participants  in  the  project,   and  the  ability  to                                                                    
     achieve  similar results  on a  statewide basis.  On or                                                                    
     before December 31  of each year starting  in 2018, the                                                                    
     actuary shall  submit a final report  to the department                                                                    
     regarding any  demonstration project  that has  been in                                                                    
     operation for at least one year.                                                                                           
Ms. Shadduck  offered that Subsection  (f) on line  26, page                                                                    
33  required  the department  to  prepare  a plan  regarding                                                                    
regional or  statewide implementation of a  coordinated care                                                                    
project based on the results  of the demonstration projects.                                                                    
On or before November 15,  2019, the department shall submit                                                                    
a plan  to the legislature  stating the projects  they chose                                                                    
for a wider  launch. She remarked that  the final Subsection                                                                    
(g) referred to an earlier definition for telehealth.                                                                           
1:40:34 PM                                                                                                                    
Ms. Shadduck commented that  the coordinated care provisions                                                                    
were linked  to a  provision in  Section 28  that instructed                                                                    
the department  to implement redesigned fee  agreements that                                                                    
included items like bundled rates and global payments.                                                                          
Representative  Wilson  thought it  was  atypical  to put  a                                                                    
detailed  pilot project  in statute.  She  questioned why  a                                                                    
bill  was  necessary to  implement  the  pilot project.  Ms.                                                                    
Shadduck  answered  that  the   department  could  do  pilot                                                                    
projects  "all   the  day  long."   She  thought   that  the                                                                    
legislature  should set  the benchmarks  for reform  and lay                                                                    
out the  process for  pilot projects that  would "lead  to a                                                                    
full on  change" on  how the state  would pay  for Medicaid.                                                                    
She voiced that the goal was  to achieve a new and different                                                                    
payment  model  and  a  departure   from  fee  for  service.                                                                    
Representative  Wilson commented  that  her  reason made  it                                                                    
appear  that  the  legislature   did  not  trust  DHSS.  She                                                                    
wondered  whether  the  coordinated care  project  had  been                                                                    
modelled after  another program.  Ms. Shadduck  replied that                                                                    
the language  in SB 74  had been modified from  the original                                                                    
that mandated DHSS to implement  a managed care organization                                                                    
(MCO) and expanded it based  on the feedback from the Senate                                                                    
Medicaid reform  subcommittee. She reiterated  the provision                                                                    
that mandated  the department to  contract with one  or more                                                                    
third parties.  She clarified that  the issue was  not trust                                                                    
but  the  desire to  contract  with  groups outside  of  the                                                                    
department. Representative Wilson asked  where the model was                                                                    
developed.  She wondered  whether  it was  a completely  new                                                                    
plan or was based on a successful model.                                                                                        
1:44:04 PM                                                                                                                    
Ms.  Shadduck  replied that  over  the  past two  years  the                                                                    
sponsor had  heard various testimony from  many contractors,                                                                    
stakeholders, organizations  including ACO's and  MCO's, and                                                                    
through  the  committee  process about  which  projects  the                                                                    
reform process  should utilize  and took  ideas from  all of                                                                    
them. She shared  that the language had been  crafted by the                                                                    
sponsor. The Senate was cautious  of initially choosing just                                                                    
one method in order to allow  for the best projects to prove                                                                    
themselves,  based  on  the   analysis  from  the  actuarial                                                                    
review, and  then launch on  a statewide or  regional basis.                                                                    
Representative Wilson  was concerned  about putting  a pilot                                                                    
project  into statute,  which would  make  the program  much                                                                    
more  difficult   to  make  adjustments  to.   Ms.  Shadduck                                                                    
clarified that the structure for  starting the projects were                                                                    
set  in statute,  but the  department managed  the contracts                                                                    
and could terminate projects that were failing.                                                                                 
Vice-Chair Saddler referred to  the Project Review Committee                                                                    
established  on  page 32  of  the  legislation. He  wondered                                                                    
whether the make-up  of the committee was  the best possible                                                                    
mix of participants. Ms. Shadduck  revealed that the make-up                                                                    
of the  review panel was  the focus of much  discussion. She                                                                    
answered that  the commissioner of the  Department of Health                                                                    
and Social Services (DHSS) had  significant knowledge of the                                                                    
Medicaid  program. She  spoke to  the reasons  for including                                                                    
the other  positions on  the committee.  She noted  that the                                                                    
Commissioner  of   Administration's  familiarity   with  the                                                                    
statewide health plans would  offer a different perspective.                                                                    
The  chief executive  officer of  the  Alaska Mental  Health                                                                    
Trust  Authority  (AMHTA)  offered  information  on  how  to                                                                    
integrate   behavioral  health   into  whole   person  care.                                                                    
Stakeholder  group representatives  were  chosen since  they                                                                    
provided the  services. Finally, members of  the legislature                                                                    
were  included to  ensure that  the  legislative intent  was                                                                    
being  met. However,  due to  the separation  of powers  the                                                                    
legislative members had to abstain from voting.                                                                                 
Vice-Chair  Saddler   wondered  whether  a   "more  precise"                                                                    
definition  of   stakeholder  groups  was   considered.  Ms.                                                                    
Shadduck answered  that the idea  of narrowing the  focus to                                                                    
an entity that actually managed  the type of health plans in                                                                    
a  Medicaid and  non-Medicaid setting  was discussed.  Vice-                                                                    
Chair Saddler cited page 31, line 30 of the legislation:                                                                        
     …and must include three or more of the following                                                                           
     31 elements:…                                                                                                              
Vice-Chair  Saddler questioned  why so  much discretion  was                                                                    
given to the department.                                                                                                        
1:49:55 PM                                                                                                                    
Ms. Shadduck replied that the  first iteration only required                                                                    
one programmatic  element but the sponsor  determined that a                                                                    
higher threshold was necessary.  However, the sponsor wanted                                                                    
to  keep the  door  open  to as  many  different options  as                                                                    
Vice-Chair  Saddler  stated there  were  many  goals in  the                                                                    
section and wondered how achievable  they were. Ms. Shadduck                                                                    
answered that it  was difficult to measure.  She shared that                                                                    
the larger goal  was to eliminate the fee  for service model                                                                    
and the  projects were  the "baby  steps" towards  that goal                                                                    
and  were  more  quantifiable. Vice-Chair  Saddler  surmised                                                                    
that  the immediate  goal was  to test  the waters  and gain                                                                    
information  that  informed  the  next  steps  forward.  Ms.                                                                    
Shadduck answered in the affirmative.                                                                                           
Representative  Gara  referenced   redesigning  the  payment                                                                    
process on  page 26 [part  of the Medical  assistance reform                                                                    
program provisions]. He was concerned  that in cases of life                                                                    
threatening or serious conditions,  the managed care process                                                                    
would  not allow  the  patients to  find  the provider  that                                                                    
would best serve  the patient; in-state or  out-of state. He                                                                    
asked for clarification. Ms.  Shadduck replied that Medicaid                                                                    
individuals  had the  option to  choose providers.  However,                                                                    
she reported  that the  state could  not force  providers to                                                                    
accept  Medicaid.  She  deferred  to the  department  for  a                                                                    
detailed response.                                                                                                              
1:55:54 PM                                                                                                                    
Representative  Gara   wanted  to  hear  further   from  the                                                                    
department. He  believed in patient choice  in the instances                                                                    
he described.                                                                                                                   
Representative  Gattis  asked  what the  difference  between                                                                    
managed care,  accountable care,  and coordinated  care was.                                                                    
Ms.  Shadduck referred  to the  chart  she provided  titled"                                                                    
Alaska  Medicaid Redesign:  Approaches  to Coordinated  Care                                                                    
and Value-based  Purchasing." She  pointed out  that managed                                                                    
care  and  accountable care  and  all  of the  other  models                                                                    
listed on  the chart  fell under  the banner  of coordinated                                                                    
care. She  restated that all  of the models could  be tested                                                                    
under  the   coordinated  care   approach  defined   in  the                                                                    
legislation. The project  was set up to allow  all models to                                                                    
compete equally under the bill.                                                                                                 
Representative  Gattis had  been under  the impression  that                                                                    
the bill  included great savings.  She stressed that  it was                                                                    
the time to  take a "bold" approach to  achieve savings. She                                                                    
stated that  if a true  opportunity existed that  was proven                                                                    
to produce  savings she would  choose that model  as opposed                                                                    
to a pilot project.                                                                                                             
1:59:24 PM                                                                                                                    
Ms.  Shadduck thought  that  her  perspective was  accurate.                                                                    
She  shared that  providers had  offered feedback  that they                                                                    
were  fearful of  a radical  project failing  and needed  to                                                                    
ensure  that a  new approach  would work  in both  rural and                                                                    
urban settings. Representative Gattis  stated that from time                                                                    
to  time programs  that work  in the  Lower 48  can work  in                                                                    
Alaska.  She  was not  convinced  that  an existing  program                                                                    
would not  work in the  state. She  believed it was  time to                                                                    
find  great savings  and boldly  implement  an entirely  new                                                                    
Representative  Guttenberg  addressed the  coordinated  care                                                                    
demonstration  projects.  He   expressed  concern  that  the                                                                    
projects  were not  able to  integrate with  each other.  He                                                                    
wondered  how contractors  with different  data bases  would                                                                    
coordinate their  project with the other  projects chosen to                                                                    
remain as part of the reform system.                                                                                            
Ms. Shadduck  answered that the  sponsor's goal was  to find                                                                    
projects that would be sustainable  and duplicative from the                                                                    
outset.  She detailed  that the  intent of  establishing the                                                                    
review committee  was to evaluate  the proposals  and assess                                                                    
the projects  guided by  the items listed  in the  bill. The                                                                    
process  included  the filter  of  the  review committee  to                                                                    
accomplish  the  goal  of  implementing  successful  payment                                                                    
reforms.   The  recommendations   for   reforms  for   wider                                                                    
implementation were  due in a  report to the  legislature by                                                                    
November 15,  2019. Representative  Guttenberg did  not want                                                                    
to  micromanage.  He  simply   wanted  to  ensure  that  the                                                                    
projects  were able  to integrate  with  other projects  and                                                                    
worked when necessary. Ms. Shadduck  replied that the intent                                                                    
was for  all of  the programs to  integrate with  each other                                                                    
from the outset.                                                                                                                
Representative  Kawasaki had  general  questions on  managed                                                                    
care. Ms.  Shadduck noted that other  speakers would address                                                                    
the topic.                                                                                                                      
2:06:23 PM                                                                                                                    
Co-Chair Thompson introduced the following speaker.                                                                             
PAM PERRY, REGIONAL VICE PRESIDENT, MEDICAL HEALTH PLAN,                                                                        
TEXAS, AMERIGROUP, provided prepared remarks:                                                                                   
     Honorable  Chair  and   distinguished  members  of  the                                                                    
     Alaska House  Finance Committee. My name  is Pam Perry,                                                                    
     and I am Regional Vice  President for Public Affairs at                                                                    
     Anthem,  one of  the nation's  leading health  benefits                                                                    
     companies.  We serve  more than  38 million  Americans,                                                                    
     including 5.8  million Medicaid  members in  19 states,                                                                    
     soon  to be  20 next  month as  we launch  our Medicaid                                                                    
     operations  in  Iowa.  Anthem has  deep  organizational                                                                    
     expertise  and  passion  for serving  individuals  with                                                                    
     complex  needs  through  a variety  of  state-sponsored                                                                    
     As  one of  the  few remaining  states without  managed                                                                    
     care  for  Medicaid,  we  are  pleased  to  see  Alaska                                                                    
     consider  this  model  as  you   seek  to  reform  your                                                                    
     Medicaid program.                                                                                                          
     Section 29  of Senate Bill  74 includes a  provision to                                                                    
     allow  managed care  organizations to  compete for  the                                                                    
     opportunity  to  improve  access to  care  and  quality                                                                    
     improvements  for Alaska's  Medicaid beneficiaries.  We                                                                    
     believe  that a  robust  competitive environment  among                                                                    
     models  in   this  initiative  will  ensure   the  best                                                                    
     outcome, in  terms of innovation,  quality of  care and                                                                    
     cost savings.                                                                                                              
     Managed  care is  a proven,  patient-centered approach,                                                                    
     and Managed Care Organizations,  or MCOs, work directly                                                                    
     with providers  to ensure the  right care  is delivered                                                                    
     at  the right  time and  in the  right place.  MCOs are                                                                    
     accountable  for the  care of  their  members, and  are                                                                    
     able to bring all patient  care into a coordinated plan                                                                    
     by  the  timely and  effective  use  of data  and  care                                                                    
     MCOs work  with state  agency and  legislative partners                                                                    
     to  design,  implement,  and  measure  improvements  to                                                                    
     care.  MCOs  hire  local   staff,  who  understand  the                                                                    
     culture, landscape  and needs of clients.  MCOs develop                                                                    
     and implement  innovative programs  that draw  upon the                                                                    
     latest  best  practices  in  areas  as  local  provider                                                                    
     networks,   service   coordination,  care   management,                                                                    
     specialized  populations,  and value-based  purchasing,                                                                    
     customized to meet state-specific needs.                                                                                   
     MCOs work directly with  members, especially those with                                                                    
     complex  medical and  behavioral health  conditions, to                                                                    
     understand  their  health  needs. We  help  ensure  our                                                                    
     members have  a health  home, understand how  to access                                                                    
     care and  are educated about their  medical needs. MCOs                                                                    
     also work with a range  of organizations that serve our                                                                    
     members  to  address  non-medical, but  critical  needs                                                                    
     such  as   housing,  coordination  with   other  social                                                                    
     services, and employment.                                                                                                  
     These assurances,  innovations, and  accountability are                                                                    
     not  available via  the fee  for service  system, which                                                                    
     may  be  nicknamed  'fend for  self.'  Service  is  not                                                                    
     patient centric,  there is  virtually no  incentive for                                                                    
     providers to accept                                                                                                        
     Medicaid  patients  or  to  innovate,  and  unnecessary                                                                    
     expenses are incurred, health  care is compromised, and                                                                    
     taxpayer dollars are wasted.                                                                                               
     There  will be  challenges in  any Medicaid  model, but                                                                    
     much  about the  art  and science  of Medicaid  managed                                                                    
     care has evolved, and Alaska  will benefit from lessons                                                                    
     learned in other states.                                                                                                   
     I would  suggest that a  level playing field  exist for                                                                    
     the  types   of  entities   that  participate   in  the                                                                    
     demonstration,   meaning  that   the  requirements   to                                                                    
     participate  are equivalent  across the  models seeking                                                                    
     to participate.  Also, MCOs  may require  a Certificate                                                                    
     of  Authority and  other models  may not,  so we  would                                                                    
     respectfully request  network adequacy not  be required                                                                    
     in the COA application, as  this will be managed by the                                                                    
     Medicaid agency.                                                                                                           
     The  roadblocks  to  success identified  in  consultant                                                                    
     reports are  issues that  have all  been dealt  with in                                                                    
     other   markets   and   I    am   confident   that   in                                                                    
     collaboration,  we can  find solutions  for Alaska.  We                                                                    
     are  eager  to partner  with  the  State of  Alaska  in                                                                    
     overcoming these barriers. Thank you.                                                                                      
2:11:02 PM                                                                                                                    
Ms. Perry  elaborated that the  Amerigroup Company  served a                                                                    
number of rural states  with "rural frontier geography" such                                                                    
as Texas,  Nevada, Washington, and New  Mexico. She observed                                                                    
that many  of the challenges identified  in the consultants'                                                                    
reports could be overcome.                                                                                                      
Co-Chair Thompson  stated that  the state was  spending $1.4                                                                    
billion  of  General Fund  (GF)  dollars  on the  issue.  He                                                                    
wondered if managed  care would truly save  the state money.                                                                    
Ms.  Perry  answered  that  the   Center  for  Medicare  and                                                                    
Medicaid  (CMS) set  criteria for  managed  care plans.  She                                                                    
delineated  that  the  federal government  required  managed                                                                    
care programs  to provide 5  percent savings over a  fee for                                                                    
service  program. Savings  were "built  into the  system" of                                                                    
managed care.  Managed Care Organizations (MCO)  were paid a                                                                    
capitated  rate;   per  member,  per  month   rate  for  its                                                                    
membership  and  had  to  operate  within  its  budget.  She                                                                    
communicated  that the  risk transferred  from the  state to                                                                    
the MCO  which provided greater budget  predictability, care                                                                    
coordination,  health   outcomes,  and  cost   savings.  She                                                                    
provided some  examples from recent  state studies  that had                                                                    
identified  Medicaid  savings.  Louisiana had  launched  its                                                                    
program  in 2011  and discovered  that MCO's  had saved  the                                                                    
state   approximately  $440   million.  She   reported  that                                                                    
Milliman's [actuarial consultants]  analysis found that over                                                                    
the  last  6 years  MCO's  reduced  Medicaid costs  by  $3.8                                                                    
billion and further predicted an  $3.3 billion in additional                                                                    
savings  over the  next 3  years and  $7.1 billion  over the                                                                    
subsequent   9  years.   She   relayed   that  most   states                                                                    
established   a  program   after  defining   the  geography,                                                                    
populations, and services up  front, which better quantified                                                                    
savings.  She  endorsed  the   approach  over  allowing  the                                                                    
companies to define the parameters.                                                                                             
2:14:39 PM                                                                                                                    
Co-Chair  Thompson offered  that  Alaska  was different.  He                                                                    
noted that Amerigroup was currently  operating in 19 states.                                                                    
He  wondered if  all were  experiencing up  to 5  percent in                                                                    
savings.  Ms. Perry  answered that  the savings  varied. She                                                                    
shared that  Iowa was  the newest state  set to  launch next                                                                    
week that expected  to save $51 million and  she was looking                                                                    
forward  to tracking  the results.  She qualified  that some                                                                    
"phenomena"  occurred when  setting  up  managed care.  When                                                                    
implementing  capitated  payments   some  residual  fee  for                                                                    
service  claims would  still  require  payment for  services                                                                    
already rendered  overlapping the  new system.  She referred                                                                    
to the situation as "financing  the tail." The phenomena may                                                                    
challenge the  initial savings  estimates. In  addition, the                                                                    
design of the  program affected the savings  and "tended" to                                                                    
accelerate over  time. She expounded that  many states began                                                                    
managed  care  with  smaller programs  and  as  the  program                                                                    
matures grow it  over time. The more  "robust" program would                                                                    
produce greater savings. Fewer savings  would be gained, the                                                                    
more a state  parceled out different aspects  of care, carve                                                                    
out services, or limit populations and geography.                                                                               
Vice-Chair Saddler understood  that multiple MCO's operating                                                                    
in a  market resulted in more  competitive efficiencies with                                                                    
the  MCO model.  Ms. Perry  responded that  CMS set  certain                                                                    
regulations  and requirements  about  how  the managed  care                                                                    
programs operated  and one required providing  options, with                                                                    
limited   exceptions  for   rural  jurisdictions.   Medicaid                                                                    
mandated choice  for the member, providers,  and competition                                                                    
in  order to  manage  the program  effectively. More  states                                                                    
chose statewide  participation over  regional participation.                                                                    
She  communicated  that  since enrollee's  participation  in                                                                    
MCO's  was mandatory,  Medicaid required  choice between  at                                                                    
least two plans.                                                                                                                
2:18:55 PM                                                                                                                    
Ms.  Perry  interjected that  Oklahoma  had  a managed  care                                                                    
system  until 2008  and  returned to  fee  for service,  but                                                                    
currently  intended  to  return  to managed  care  for  age,                                                                    
blind,  and  disabled  beneficiaries  statewide.  The  state                                                                    
solicited a  request for information last  year and received                                                                    
22  proposals, which  indicated the  level of  interest from                                                                    
MCO's. She  continued that Iowa,  with a  Medcaid population                                                                    
of  520 thousand  through a  statewide program,  received 11                                                                    
responses from MCO's  for a request for  proposals (RFP) and                                                                    
made three  awards. She believed  that Alaska  would attract                                                                    
"robust   interest"   with  a   well-designed,   sustainable                                                                    
Vice-Chair  Saddler noted  that coordinated  care in  Alaska                                                                    
would  specifically  serve   Medical  Assistance  recipients                                                                    
totaling  approximately 170  thousand individuals.  He asked                                                                    
how a managed care model  would work encompassing all of the                                                                    
state's   health   care   populations  such   as   retirees,                                                                    
employees, and  teachers as  well as  Medicaid beneficiaries                                                                    
through  a health  care authority.  He wondered  how an  MCO                                                                    
model   would  work   in  that   situation  as   opposed  to                                                                    
exclusively  serving  Medicaid  recipients.  Ms.  Perry  was                                                                    
uncertain. She noted  that Delaware was the  only state that                                                                    
implemented an  inclusive plan. She  reported that  the type                                                                    
of  plan was  a relatively  new phenomenon  and its  success                                                                    
depended on  how well  it was designed.  The model  had been                                                                    
tested in New Mexico but  only for behavioral health and she                                                                    
did not  know the  results. She offered  that the  MCO model                                                                    
starting out with a Medicaid  population was common and many                                                                    
experienced companies were in existence.                                                                                        
2:22:45 PM                                                                                                                    
Vice-Chair  Saddler   wondered  whether   the  demonstration                                                                    
process in SB 74 was  a "typical" model other states adopted                                                                    
to transition away  from fee for service.  Ms. Perry replied                                                                    
in   the  negative.   Many  states   proceeded  in   a  more                                                                    
"comprehensive  and  directive  manner" based  on  the  many                                                                    
years  of experience,  information and  analysis, and  trial                                                                    
and errors  with Medicaid and  in transitioning away  from a                                                                    
fee for  service model. She  thought that  the "uncertainty"                                                                    
with  the bill's  approach may  lead  to ineffective  models                                                                    
that could only serve regional areas of the state.                                                                              
Vice-Chair   Saddler  referred   to  the   8  elements   for                                                                    
coordinated care  listed in the  bill and asked  which three                                                                    
of the 8 were essential  for managed care. Ms. Perry replied                                                                    
that number 1, 7, and 8 were the most important.                                                                                
2:25:57 PM                                                                                                                    
Representative  Kawasaki  asked  whether Anthem  was  a  for                                                                    
profit  agency.  Ms.  Perry  answered  in  the  affirmative.                                                                    
Representative Kawasaki  asked how  a MCO  realized profits.                                                                    
Ms. Perry explained that a  state contracted with an MCO and                                                                    
set  forth a  contract  that outlined  the geographic  area,                                                                    
services, and population of the  program. The MCO received a                                                                    
capitated rate  depending on the beneficiary  make-up, i.e.,                                                                    
how  many  children,   developmentally  disabled,  etc.  She                                                                    
elaborated that "within the rate,"  the MCO had to provide a                                                                    
network of providers and  services, and negotiated contracts                                                                    
within  the network.  The Medicaid  waiver  offered a  state                                                                    
flexibility  when  designing  a program.  She  reminded  the                                                                    
committee  that a  "menu approach"  was associated  with the                                                                    
fee for  service model  but "under  managed care  the "silos                                                                    
did  not  exist"  which enabled  MCO's  to  coordinate  care                                                                    
around a  recipient's needs. Potentially, care  and outcomes                                                                    
were  improved  and  costs  to  the  state  were  less.  She                                                                    
remarked that the Medicaid MCO was  able to make a profit of                                                                    
between 2 and 4 percent per year.                                                                                               
2:29:15 PM                                                                                                                    
Representative Kawasaki asked about  the capitation rate and                                                                    
wondered how the rate was  set. Ms. Perry responded that the                                                                    
state, working in conjunction with  a consulting actuary set                                                                    
the  rate  based on  its  fee  for service  experience.  The                                                                    
reduction  rate  was built  into  the  capitation rate.  She                                                                    
noted that some states accepted  bid rates; i.e., an MCO set                                                                    
the  rate it  wanted.  She cautioned  against accepting  bid                                                                    
rates and  stated "that  it was not  an ideal  situation." A                                                                    
state  needed to  maintain certainty  over rates  and ensure                                                                    
the rates were actuarially sound.                                                                                               
Representative Kawasaki  asked her to discuss  the situation                                                                    
where an MCO was serving one  rural area and how it impacted                                                                    
a  smaller rural  area without  an MCO.  Ms. Perry  answered                                                                    
that the legislation addressed  the issue through provisions                                                                    
that  enhanced  the ability  of  an  MCO  to serve  a  rural                                                                    
population such as telemedicine.  She furthered that options                                                                    
existed  to encourage  the  participation  of physicians  in                                                                    
Medicaid in  rural areas.  She shared  that in  other states                                                                    
the  company  incentivized  providers to  set  up  satellite                                                                    
offices serving  rural areas, open  one or two days  a week.                                                                    
She  believed   there  were  "innovations"  that   could  be                                                                    
"hatched" in Alaska that were  only possible under a managed                                                                    
care program.                                                                                                                   
Representative  Gara referred  to the  negotiated contracts.                                                                    
He mentioned  the higher medical  costs in Alaska  and noted                                                                    
that it  was often less expensive  to send a patient  out of                                                                    
state  for treatment.  He wondered  whether a  patient could                                                                    
choose a  physician outside  of Alaska  with a  managed care                                                                    
system.  Ms.  Perry  answered affirmatively.  She  qualified                                                                    
that depended  on what  the state  allowed regarding  out of                                                                    
state  providers.  She  communicated that  "out  of  network                                                                    
contracting"  existed  within  a managed  care  system  that                                                                    
enabled  the MCO  to  negotiate with  providers  out of  the                                                                    
contracts   scope.  However,   some   states  dictated   the                                                                    
parameters of out of network contracting.                                                                                       
2:34:02 PM                                                                                                                    
Representative  Gara mentioned  having  had prostate  cancer                                                                    
and his ability  to obtain the "best doctor  in the country"                                                                    
at a  much lower  rate than charged  in Alaska.  He wondered                                                                    
whether  she was  aware  of any  other  states that  allowed                                                                    
Medicaid  to  negotiate  a  rate  with  the  doctor  of  the                                                                    
patients choosing.  Ms. Perry answered  that it  depended on                                                                    
what  the  state  allowed  and whether  the  service  was  a                                                                    
covered  benefit under  the Medicaid  program. She  reminded                                                                    
the  committee  that  certain benefit  restrictions  applied                                                                    
under Medicaid  that did not  exist under  commercial health                                                                    
care  coverage.  The  MCO  was  guided  by  the  contractual                                                                    
arrangement  with the  state. She  surmised that  ultimately                                                                    
the  state  and  federal  government  were  paying  for  the                                                                    
program  and  would likely  identify  a  provider who  could                                                                    
serve  a  broader  range  of  members.  Representative  Gara                                                                    
maintained his concern.                                                                                                         
Representative   Munoz  referred   to  the   previous  day's                                                                    
testimony from  an Emergency Room  (ER) doctor  who provided                                                                    
an  example of  over utilization  of ER  services and  spoke                                                                    
about  an individual  who had  received 22  CT scans  in one                                                                    
year.  She  asked  how  an   MCO  would  prevent  a  similar                                                                    
situation. Ms. Perry  answered that a member of a  MCO had a                                                                    
health  home, primary  care  provider,  and other  necessary                                                                    
services  or   service  providers  addressed   through  care                                                                    
coordinators. She related  that the MCO would  work with the                                                                    
provider to ensure the member  was seeing their primary care                                                                    
provider and  following up  with the  member to  ensure they                                                                    
understood  how  to  manage  their  condition  and  had  the                                                                    
appropriate follow up visits with  their primary provider or                                                                    
specialists. She  voiced that a coordination  occurred under                                                                    
managed care  that did not  exist under the fee  for service                                                                    
Representative  Munoz pointed  to page  29 of  the bill  and                                                                    
cited  the  expansion  of  1915i  and  1915k  programs  with                                                                    
reimbursement rates set at 50  percent. She thought that the                                                                    
reimbursement   rate   was   much  higher   under   Medicaid                                                                    
expansion. Ms.  Perry stated  she would  familiarize herself                                                                    
with the issue and provide follow up.                                                                                           
2:39:26 PM                                                                                                                    
CAROL  STECKEL,  SENIOR   DIRECTOR,  WELLCARE  HEALTH  PLAN,                                                                    
FLORIDA (via  teleconference), read from  prepared testimony                                                                    
as follows:                                                                                                                     
     Mr. Chairman,  members of the committee,  thank you for                                                                    
     allowing me to  participate by phone today.  My name is                                                                    
     Carol  Steckel;  I  am  Senior  Director  for  Alliance                                                                    
     Development  at  WellCare  Health Plans.  I  very  much                                                                    
     appreciate  the  work  you  are  doing  to  reform  the                                                                    
     Medicaid  program.    I  have   served  as  a  Medicaid                                                                    
     Director  in Alabama  and North  Carolina  and had  the                                                                    
     honor of chairing the  national association of Medicaid                                                                    
     Directors for several  years.  In that  capacity, I had                                                                    
     the opportunity to work with  your previous Director of                                                                    
     DHHS, Bill  Streur, and learned  from him a  great deal                                                                    
     about the unique challenges faced by Alaska Medicaid.                                                                      
     WellCare  is  headquartered   in  Tampa,  Florida,  and                                                                    
     serves   more  than   3.8  million   members  who   are                                                                    
     participants in  Medicare, Medicaid and  the Children's                                                                    
     Health  Insurance Program.  We  offer Medicaid  managed                                                                    
     care services in  9 states (soon to be  10) serving the                                                                    
     full  spectrum of  Medicaid beneficiaries  from healthy                                                                    
     mothers and  their children to individuals  with severe                                                                    
     physical, mental and developmental disabilities.                                                                           
     For   more  than   25   years   WellCare  has   focused                                                                    
     exclusively  on serving  individuals who  receive their                                                                    
     health  care services  through government  programs. It                                                                    
     is based  on both my personal  experience running large                                                                    
     and  complex  Medicaid  programs  and  WellCare's  long                                                                    
     experience that I offer our comments today.                                                                                
     We appreciate  the thoughtful  approach you  are taking                                                                    
     in reforming the Alaska's  Medicaid program. We believe                                                                    
     that Medicaid managed care   would be an important tool                                                                    
     in assisting you  to achieve the goals laid  out in the                                                                    
     Menges report.                                                                                                             
     An  integrated,  fully   capitated  MCO  model  ensures                                                                    
     members with  diverse and complex needs  receive all of                                                                    
     the  physical,  behavioral   and  social  benefits  and                                                                    
     services they need to take  control of their health. It                                                                    
     also  ensures  that  barriers  and  gaps  in  care  are                                                                    
     effectively  and efficiently  identified and  mitigated                                                                    
     so that members can  achieve their individual goals for                                                                    
     health, wellness  and quality of life.  Unlike Alaska's                                                                    
     current  fee for  service program,  risk based  managed                                                                    
     care  offers  a single  point  of  entry through  which                                                                    
     members are  able to  access the  full array  of needed                                                                    
     health  services   and  care  coordination   they  need                                                                    
     without   having   to   navigate   multiple   agencies,                                                                    
     providers and community partners.                                                                                          
     The true  success of Medicaid  managed care is  that we                                                                    
     succeed  when  our  members   succeed.  The  beauty  of                                                                    
     adopting a  full risk managed  care model is  that when                                                                    
     done correctly,  a managed  care partner  like WellCare                                                                    
     is  responsible  for the  needs  of  the whole  member,                                                                    
     eliminating the fragmentation  and duplication inherent                                                                    
     in  Alaska's current  system, In  addition, unlike  the                                                                    
     many  less integrated  models identified  in the  Agnew                                                                    
     Beck  report, a  risk based  managed care  approach can                                                                    
     incorporate  those initiatives  such  as health  homes,                                                                    
     patient  centered medical  homes  and accountable  care                                                                    
     organization within the managed care  model.    Thus, a                                                                    
     full risk managed  care program is the  only model that                                                                    
     creates a single,  accountable plan partner responsible                                                                    
     for enhancing  each members'  quality of  life, improve                                                                    
     health outcomes and control costs.                                                                                         
     In order to achieve these  goals we utilize a holistic,                                                                    
     member  centered,  care  management model  designed  to                                                                    
     serve  the unique  needs of  each of  our members.  Our                                                                    
     care plan platform, which has  been built and proven in                                                                    
     the  service of  nearly  2.4  million Medicaid  members                                                                    
     nationwide,   integrates   physical  health   including                                                                    
     pharmacy and  behavioral health  with the  social needs                                                                    
     of our  members to empower  the member to  fully manage                                                                    
     their  health care  needs.   A successful  managed care                                                                    
     organization   uses  a   robust  network   of  provider                                                                    
     partners and has the  flexibility to offer supplemental                                                                    
     benefits over  and above  the current  Medicaid benefit                                                                    
     package. WellCare designs its  products to improve each                                                                    
     members' health and quality of life.                                                                                       
     Much  of  what  affects   our  member's  health  occurs                                                                    
     outside of the doctor's office.   WellCare is unique in                                                                    
     its  commitment   to  the   member  by   linking  three                                                                    
     components  - physical  health,  behavioral health  and                                                                    
     the social  determinants of health -  those issues that                                                                    
     prevent a  member from taking control  of their health.                                                                    
     WellCare's distinctive CommUnity  Commitment program is                                                                    
     designed  to  create  lasting connections  between  our                                                                    
     health  plan  and  the   social  service  agencies  and                                                                    
     community organizations  already deeply rooted  in each                                                                    
     community. Our  CommUnity Commitment  program evaluates                                                                    
     community   needs,   catalogues   existing   resources,                                                                    
     connects our members to  needed social support services                                                                    
     and,  where  appropriate,  supports these  agencies  to                                                                    
     expand or  enhance services  to meet  the needs  of our                                                                    
     members and the communities where they live.                                                                               
     In  addition  to   improving  quality  and  controlling                                                                    
     costs,  utilizing full  risk managed  care aligns  with                                                                    
     the  goals  laid  out by  the  Legislative  leaders  in                                                                    
     Alaska. Leveraging  the contracting lessons  learned in                                                                    
     the  38 states  that  utilize a  Medicaid managed  care                                                                    
     model,  plans can  and should  be  held to  performance                                                                    
     standards   aligned   with    achieving   the   state's                                                                    
     accountability  goals.   Examples  of   such  standards                                                                    
     include quality withholds  and service level agreements                                                                    
     for data submission. In addition,  by placing a managed                                                                    
     care plan fully at risk for  the cost of care, the plan                                                                    
     and  the  state  are  aligned in  their  incentives  to                                                                    
     vigorously  identify and  root  out  any fraudulent  or                                                                    
     abusive activity.                                                                                                          
     Medicaid  managed care  provides budget  predictability                                                                    
     and  bends the  cost curve  while improving  a member's                                                                    
     quality of care.  Some examples are:                                                                                       
        · In its first seven years of Medicaid managed                                                                          
          care,   Georgia's  cost   growth  rate   was  2.64                                                                    
          percent,  while  the fee-for-service  growth  rate                                                                    
          was  estimated  at  6.18 percent.  Managed  care's                                                                    
          cost  containment resulted  in a  savings of  over                                                                    
          $940 million.                                                                                                         
        · From 2011-2015, moving to a managed care model                                                                        
          has  saved  Kentucky  more than  $1.3  billion  in                                                                    
          state  and  federal   funds  while  simultaneously                                                                    
          improving the delivery of  health care services to                                                                    
          the state's Medicaid population                                                                                       
        · Louisiana saved $135.9 million in its first full                                                                      
          year of  Medicaid managed care and  a recent found                                                                    
          that  the state's  capitated managed  care program                                                                    
          saves  the state  approximately $30  per recipient                                                                    
          per month, a greater  than 12 percent reduction in                                                                    
          costs over fee-for-service Medicaid spending                                                                          
        · Between 2010 and 2013, Missouri saved an average                                                                      
          of $27 million per  year from its Medicaid managed                                                                    
          care program                                                                                                          
     In  closing,  our experience  has  shown  that even  in                                                                    
     states  where  full risk  managed  care  was viewed  as                                                                    
     "impossible"  by  many  of  the  state's  stakeholders,                                                                    
     Medicaid managed  care has  not only  been successfully                                                                    
     implemented  but has  grown  to additional  geographies                                                                    
     and populations. We  have no doubt that  the same would                                                                    
     be true in Alaska.                                                                                                         
2:46:25 PM                                                                                                                    
Representative  Wilson asked  whether the  state could  have                                                                    
accomplished the  same goal  by simply  issuing an  RFP. Ms.                                                                    
Steckel   deferred  the   question  to   staff  in   Alaska.                                                                    
Representative  Wilson  questioned   how  WellCare  procured                                                                    
contracts  with other  states and  how  detailed the  states                                                                    
criteria for the contract was.                                                                                                  
Ms. Steckel answered that it  varied depending on the state.                                                                    
She   explained  that   all  states   utilized  an   RFP  or                                                                    
competitive bid  process to award  a managed  care contract.                                                                    
Some  states set  very specific  criteria  written into  its                                                                    
RFP.  The MCO  could better  achieve a  state's expectations                                                                    
when the criteria was specific and clearly delineated.                                                                          
Representative  Gattis  expressed  doubt  that  utilizing  a                                                                    
statewide MCO was currently the wrong approach.                                                                                 
Vice-Chair Saddler  asked whether WellCare would  likely bid                                                                    
on any of  the coordinated care contracts in  the state. Ms.                                                                    
Steckel  responded  that  WellCare was  interested  and  was                                                                    
waiting for the RFP. She  reiterated that a well-crafted RFP                                                                    
created  a   more  advantageous  scenario  for   an  MCO  to                                                                    
participate in the state. She  pointed out that when a state                                                                    
moved  to   a  managed  care  system   it  sparked  "robust"                                                                    
competition  among MCO's.  She  divulged that  if the  state                                                                    
parceled out  services and benefits  to smaller  portions of                                                                    
the  Medicaid   population  it  would  lose   the  sense  of                                                                    
comprehensive  care coordination  and  weakened the  ability                                                                    
for  managed care  to  achieve  optimal results.  Vice-Chair                                                                    
Saddler  assumed that  the MCO  industry  would endorse  the                                                                    
state  taking  an  aggressive  approach  and  fully  embrace                                                                    
managed  care.  He  requested that  Ms.  Steckel  share  her                                                                    
thoughts   on  the   "sample  and   plan  process"   in  the                                                                    
legislation.  Ms. Steckel  replied that  she understood  the                                                                    
"trepidation,"  but there  was  much to  learn  from the  39                                                                    
states that had already adopted  a managed care approach and                                                                    
to look  to their "sophisticated" experiences  with MCO's as                                                                    
pilot projects,  where managing contracts to  meet goals had                                                                    
already been "played  out." She thought that  the answers to                                                                    
the lessons  to be learned  through Alaska's pilot  were out                                                                    
there in some of the other states.                                                                                              
2:52:12 PM                                                                                                                    
NANCY MERRIMAN,  ALASKA PRIMARY CARE  ASSOCIATION, ANCHORAGE                                                                    
(via teleconference), read from a statement:                                                                                    
     Good  afternoon,  Co-Chairs  Thompson and  Neuman,  and                                                                    
     members  of  the  House   Finance  Committee.  For  the                                                                    
     record,  my  name  is  Nancy Merriman,  and  I  am  the                                                                    
     Executive   Director  of   the   Alaska  Primary   Care                                                                    
     Association.   APCA    is   a    statewide   membership                                                                    
     organization  of  Alaskan   Community  Health  Centers.                                                                    
     Across  our system  of 29  organizations and  about 170                                                                    
     clinics,  1  in  7 Alaskans  receive  primary  medical,                                                                    
     dental and  behavioral health care.  A little  over 24%                                                                    
     of  Community Health  Center patients  are enrolled  in                                                                    
     the Medicaid program.                                                                                                      
     Thank  you  for  the opportunity  to  provide  comments                                                                    
     today on  Senate Bill 74 on  medical assistance reform.                                                                    
     We appreciate  the time the House  Finance Committee is                                                                    
     spending  to learn  about the  details of  the Medicaid                                                                    
     program   and  the   complexities  of   the  healthcare                                                                    
     landscape.  We share  the  goals  of providing  quality                                                                    
     care and  improving health  outcomes, while  making the                                                                    
     system more  sustainable. Today  my comments  center on                                                                    
     Accountable  Care  Organizations  (ACOs),  and  primary                                                                    
     care's role in them.                                                                                                       
     ACOs   are  formal,   legal   networks  of   healthcare                                                                    
     providers  who   take  responsibility  for   a  defined                                                                    
     patient population's health.  They align their clinical                                                                    
     programs  to   focus  on  getting  patients   the  most                                                                    
     efficient  care  possible,   and  are  incentivized  to                                                                    
     reduce the total cost of  care and to maximize clinical                                                                    
     outcomes  for an  assigned  patient population.  Often,                                                                    
     they do  this with the  addition of new data  sets that                                                                    
     allow them to target  high-risk, high-cost patients who                                                                    
     are  using  the  healthcare system  inefficiently.  For                                                                    
     example,  in a  very successful  Medicare ACO  program,                                                                    
     the providers  receive half of the  savings they create                                                                    
     against a target established by Medicare.                                                                                  
     Safety   Net   primary   care   providers,   especially                                                                    
     Community Health  Centers, are well-positioned  to lead                                                                    
     and  coordinate   ACO  formation  and   operation,  and                                                                    
     addressing  the healthcare  needs of  Medicaid patients                                                                    
     for the following reasons:                                                                                                 
   1. Health  Centers   have    served   these   populations                                                                    
     historically.  There is  a trust  between patients  and                                                                    
     providers,   and  Health   Centers   are  situated   in                                                                    
     communities where high-risk  and high-cost patients are                                                                    
     likely to live.                                                                                                            
   2. They have the  know-how, infrastructure  and operating                                                                    
     principles to most effectively  plan for the population                                                                    
     health outcomes of these groups.                                                                                           
   3. Health Centers have the EHR data - and are continually                                                                    
     improving  their data  analytics capabilities  - to  be                                                                    
     accountable for performance and quality.                                                                                   
   4. Value-based payments, such as Medical Home payments or                                                                    
     shared  savings  payments,  will   allow  for  the  key                                                                    
     component for ACOs: primary care case management.                                                                          
   5. Care coordination in Health  Centers involves  a team-                                                                    
     based approach and relies on  good electronic and other                                                                    
     communication with patients' other providers.                                                                              
     ACOs are being  fostered across the country  by CMS for                                                                    
     Medicare  patients.  And  about   10  states  now  have                                                                    
     Medicaid ACOs.                                                                                                             
2:56:43 PM                                                                                                                    
Ms. Merriman continued to read from prepared remarks:                                                                           
     The   characteristics  of   successful  State-run   ACO                                                                    
     programs that lead to successful Safety Net ACOs are:                                                                      
   1. The program does not alter  the base  compensation for                                                                    
     the  Safety Net  providers, nor  the hospitals,  in its                                                                    
     initial years.                                                                                                             
   2. The program allows for ACOs  to operate  state-wide or                                                                    
     across geographies larger than a single region.                                                                            
   3. The program does  not  require a  hospital  to be  the                                                                    
     sponsor  of the  ACO, but  does  allow for  the ACO  to                                                                    
     enter  into participation  agreements and  gain-sharing                                                                    
     agreements with hospitals and other providers.                                                                             
   4. The program   offers  some  financial   incentives  to                                                                    
     provide  the  primary  care case  management  function,                                                                    
     which  can include  care  coordination payments  and/or                                                                    
     shared savings payments.                                                                                                   
   5. The State  commits  to  providing   key  data  on  the                                                                    
     attributed Medicaid  population to  the Safety  Net ACO                                                                    
    so that it can prioritize the use of its resources.                                                                         
     We hope  that as the  Alaska State House  considers the                                                                    
     ongoing development  of an ACO or  ACO-like program, it                                                                    
     will  leave  room  for  innovation  in  the  healthcare                                                                    
     provider delivery system that would include the                                                                            
    emergence of Safety Net- or Health Center-led ACOs.                                                                         
Representative  Wilson asked  whether  accountable care  was                                                                    
done in conjunction to managed care  or if a state chose one                                                                    
or  the other.  Ms.  Merriman answered  that an  Accountable                                                                    
Care Organization  (ACO) differed  from an MCO.  She defined                                                                    
that an ACO was a  group of providers. Representative Wilson                                                                    
asked whether  "a person  would be  taking advantage  of one                                                                    
program  or  the  other."  Ms.   Merriman  answered  in  the                                                                    
affirmative.  Representative  Wilson   asked  for  the  page                                                                    
number  in  the  legislation  that referred  to  ACO's.  Ms.                                                                    
Merriman pointed to Section 31, page 33 of the bill.                                                                            
Vice-Chair   Saddler  asked   whether  Alaska's   "disparate                                                                    
geography and  distribution of  health care  facilities" was                                                                    
an unsurmountable  challenge for managed care.  Ms. Merriman                                                                    
believed that  Alaska's rural geography  had been  the issue                                                                    
that the department and legislature  had struggled with. She                                                                    
believed  an  ACO scenario  would  fit  the rural  situation                                                                    
better  in  rural   communities.  Vice-Chair  Saddler  asked                                                                    
whether there  were sufficient  primary care  facilities and                                                                    
providers in  Alaska to accommodate  the shift in  care. Ms.                                                                    
Merriman   answered  that   the  workforce   needs  of   the                                                                    
healthcare  industry was  challenging.  She elaborated  that                                                                    
Medicaid reform  allowed a  variety of  healthcare providers                                                                    
to  "practice  at  the  top of  their  licensure."  She  had                                                                    
"worked  with  the  Alaska  Mental  Health  Trust  Authority                                                                    
(AMHTA)  to  craft  language in  the  legislation  regarding                                                                    
behavioral health  providers who were situated  in a variety                                                                    
of  care  sites  including community  health  centers."  She                                                                    
thought  that   care  coordination  allowed  a   variety  of                                                                    
providers  to participate  in a  patients  care leaving  the                                                                    
most complicated  and serious cases to  physicians and nurse                                                                    
3:02:05 PM                                                                                                                    
Vice-Chair   Saddler   requested   clarification   regarding                                                                    
primary care and coordinated care  would allow more advanced                                                                    
practitioners  and M.D.'s  (medical  doctors)  time for  the                                                                    
more serious  and complicated cases. Ms.  Merriman responded                                                                    
that Medicaid  reform allowed the  expansion of  services at                                                                    
the  "lower level"  of providers  so the  midlevel providers                                                                    
could  practice  at  the  top of  their  licensure  and  the                                                                    
physicians could  focus on cases  that required  their level                                                                    
of  skill and  expertise. She  added that  care coordinators                                                                    
could perform "a critical role in a patient's care."                                                                            
Representative Gattis  referred to  an answer to  a question                                                                    
by  Vice-Chair   Saddler  stating   that  a   rural  village                                                                    
situation being better served by  an ACO. She wanted to hear                                                                    
the  managed   care  response  to   the  question   and  was                                                                    
interested in  the comparison. Ms. Steckel  answered that an                                                                    
MCO  could  include  a  subset of  ACO's  and  primary  care                                                                    
medical  homes  and  sought  to  meet  the  needs  of  rural                                                                    
communities  through telemedicine  or other  means. The  MCO                                                                    
worked  with the  communities in  rural areas  to link  with                                                                    
providers in more populous areas.                                                                                               
3:05:38 PM                                                                                                                    
JOCELYN  PEMBERTON, EXECUTIVE  DIRECTOR, ALASKA  HOSPITALIST                                                                    
GROUP, LLC, read from a prepared statement:                                                                                     
     For the record,  my name is Jocelyn Pemberton  and I am                                                                    
     the  executive  director  for  The  Alaska  Hospitalist                                                                    
     Group,  a  large  physician  practice   as  well  as  a                                                                    
     founding member of Alaska  Innovative Medicine (AIM), a                                                                    
     local  physician  driven,  Care  Coordination  Company.                                                                    
     More importantly, I was born  and raised in Alaska, I'm                                                                    
     raising my three beautiful girls  in Anchorage and I am                                                                    
     watching my parents grow old in Alaska.                                                                                    
     I agree  with the other  comments that we need  to bend                                                                    
     the cost curve and that  the pure fee for service model                                                                    
     ultimately needs  to change. Financial  incentives need                                                                    
     to be  aligned between patients, providers  and payers,                                                                    
     in  this case,  the State.  As you  know, this  is much                                                                    
     easier said than done.                                                                                                     
     The  vast majority  of our  provider  community are  in                                                                    
     private   practice;   Alaskan  physicians   and   nurse                                                                    
     practitioners  running  small   businesses  to  provide                                                                    
     medical  care  in  their community.  To  make  sweeping                                                                    
     changes  in the  payment model  is extremely  risky and                                                                    
     could be a hugely  damaging to our industry, especially                                                                    
     in  pediatrics   which  often   have  50%   or  greater                                                                    
     percentage  of Medicaid  patients.  However, there  are                                                                    
     models that would allow physicians  that are willing to                                                                    
     take risk and  participate in shared savings  to do so,                                                                    
     thereby aligning the incentives.                                                                                           
     The model that  we have experience with  is the Bundled                                                                    
     Payment  for  Care Improvement,  or  BPCI,  which is  a                                                                    
     demonstration  project  we  are participating  in  with                                                                    
     Medicare.  Essentially,  BPCI  sets a  cost,  based  on                                                                    
     historical  data, for  the  episode  of care  initiated                                                                    
     from a hospitalization plus 90  days post discharge and                                                                    
     aligns  incentives to  provide better  care at  a lower                                                                    
     cost. For example, the total  cost for a patient with a                                                                    
     hip fracture  might be  $20,000 on  average. If  we are                                                                    
     able to provide services for  less, by working to avoid                                                                    
     readmissions  for  example,  there are  shared  savings                                                                    
     back to  the providers who  are working to  reduce cost                                                                    
     and  improve  outcomes.  BPCI  allows  for  utilization                                                                    
     management by incentivizing models  of care the prevent                                                                    
     re-hospitalizations,  over-utilization  of  the  ER  or                                                                    
     duplicative  testing,   rather  than   merely  slashing                                                                    
     payments  to   providers  or  restricting   access  for                                                                    
     We appreciate  the work that  the legislature  has done                                                                    
     and  the recognition  of the  impact care  coordination                                                                    
     can bring  to the  Medicaid program. As  physicians, we                                                                    
     have recognized  this as well  and have  created Alaska                                                                    
     Innovative Medicine or  AIM for short. AIM  is a local,                                                                    
     physician  driven care  coordination company,  a result                                                                    
     of a collaboration between  primary care physicians and                                                                    
     hospitalists.   AIM  has   initially  contracted   with                                                                    
     Premera Blue  Cross to improve  the care of  their high                                                                    
     risk  members. AIM  has  a multi-disciplinary  approach                                                                    
     including  case managers,  social  workers, a  clinical                                                                    
     nursing staff, dieticians etc.                                                                                             
     Think of AIM as a  mobile patient centered medical home                                                                    
     deploying  services  as   needed.  AIM  social  workers                                                                    
     collaborate  with Primary  Care Physicians  as well  as                                                                    
     specialists  to best  support the  health plan  for the                                                                    
     patient.  Our clinical  nursing staff,  as well  as our                                                                    
     physicians are able  to meet patients in  their home to                                                                    
     avoid over  ER utilization, educate on  medications and                                                                    
     nutrition to  promote health.  With the  local provider                                                                    
     relationships  and Alaskan  experience,  the AIM  model                                                                    
     has the ability to have  huge impact to improve patient                                                                    
     care and reduce cost in our state.                                                                                         
3:10:58 PM                                                                                                                    
Co-Chair Thompson  asked about  the term  "hospitalist." Ms.                                                                    
Pemberton  replied  that it  was  a  primary care  physician                                                                    
working  in   the  hospital  and  providing   care  for  the                                                                    
hospitalized medical patients.                                                                                                  
Representative  Gara  asked  whether   there  had  been  any                                                                    
progress  between the  ACO and  DHSS towards  utilization of                                                                    
the provider model instead of  managed care in order to save                                                                    
money.  Ms.  Pemberton  relayed  that  she  had  engaged  in                                                                    
several discussions  with the department but  that the model                                                                    
was a fairly new; formed January 1, 2015.                                                                                       
3:12:50 PM                                                                                                                    
RICK DAVIS, CEO, CENTRAL  PENINSULA HOSPITAL, SOLDOTNA, read                                                                    
from prepared remarks:                                                                                                          
     Mr. Chairman,  members of the committee,  thank you for                                                                    
     the opportunity  to testify today.  For the  record, my                                                                    
     name  is  Rick  Davis  and I  am  the  Chief  Executive                                                                    
     Officer  at  Central  Peninsula Hospital  in  Soldotna.                                                                    
     Central  Peninsula  Hospital is  a  49  bed acute  care                                                                    
     hospital that  is owned by the  Kenai Peninsula Borough                                                                    
     and   leased  to   CPGH,   Inc.,   a  local   nonprofit                                                                    
     I was  asked to  provide testimony  today to  the House                                                                    
     Finance   Committee   regarding    Managed   Care   and                                                                    
     Accountable Care  Organizations as  they pertain  to SB
     74, Medicaid Reform.                                                                                                       
     The Centers for Medicare  and Medicaid Services defines                                                                    
     ACO's  as  groups  of  doctors,  hospitals,  and  other                                                                    
     health  care providers,  who come  together voluntarily                                                                    
     to  give   coordinated  high  quality  care   to  their                                                                    
     Medicare patients.  The goal  of this  coordinated care                                                                    
     is to ensure that  patients, especially the chronically                                                                    
     ill,  get  the right  care  at  the right  time,  while                                                                    
     avoiding  unnecessary   duplication  of   services  and                                                                    
     preventing medical errors.                                                                                                 
     The CMS  definition I just provided  speaks directly to                                                                    
     Medicare, however my discussion  about ACO's today will                                                                    
     refer to  specifically Medicaid. In this  context, I am                                                                    
     talking about  an Accountable Care-like  structure that                                                                    
     I will refer to as  a Coordinated Care Organization, or                                                                    
     CCO. The key  to the effectiveness of both  the ACO and                                                                    
     the  CCO  models is  that  both  of these  relationship                                                                    
     structures take the majority of  the risk away from the                                                                    
     payer, and  place it directly  on the  providers. These                                                                    
     relationships   make  the   provider  responsible   for                                                                    
     maintaining low cost and high  quality, or the provider                                                                    
     suffers the  consequences - not the  payer. Which makes                                                                    
     a lot  of sense  because the  provider and  the patient                                                                    
     are the only  two entities who really  have the ability                                                                    
     to affect health outcomes.                                                                                                 
     A  Managed Care  Organization differs  from and  ACO or                                                                    
     CCO in that  MCO plans are a type  of health insurance.                                                                    
     MCOs  have contracts  with  health  care providers  and                                                                    
     medical  facilities  to  provide care  for  members  at                                                                    
     reduced  costs in  return for  steerage of  patients to                                                                    
     those   providers.  The   obvious  difference   between                                                                    
     Managed   Care   Organizations   and   Accountable   or                                                                    
     Coordinated  Care Organizations  is that  - in  the MCO                                                                    
     model - the  payer is taking on the risk  both in terms                                                                    
     of  quality  and  cost.  Instead   of  as  I  mentioned                                                                    
     earlier, the providers taking that  risk in the ACO/CCO                                                                    
     Now I'd like to give  you some background about why and                                                                    
     how CPH  became interested in  a variant of an  ACO and                                                                    
     our  desire to  pilot  a demonstration  project on  the                                                                    
     Kenai Peninsula.                                                                                                           
3:16:02 PM                                                                                                                    
Mr. Davis continued to read from a statement:                                                                                   
     Because we are a  single stand-alone community hospital                                                                    
     and  are not  part of  a  system or  affiliated with  a                                                                    
     larger hospital, CPH must  be diligent when considering                                                                    
     future  financial  risk. We  are  keenly  aware of  the                                                                    
     changing  health  care  landscape and  believe  that  a                                                                    
     major transformation  is beginning  to take  place. The                                                                    
     changes  I am  referring to  will cause  reimbursements                                                                    
     for  health  care  services  to  be  directly  tied  to                                                                    
     quality,  outcomes,   and  efficiency.  This   type  of                                                                    
     payment transformation is moving  health care away from                                                                    
     volume and towards value.                                                                                                  
     We have already  begun to see these  changes take place                                                                    
     under Medicare with Value  Based Purchasing and bundled                                                                    
     payments.  Because  of  this,  we have  elected  to  be                                                                    
     proactive  and prepare  for anticipated  changes in  an                                                                    
     effort    to   lessen    the   impact    of   shrinking                                                                    
     reimbursements going forward. Nearly  two years ago, we                                                                    
     began to  explore different options and  payment models                                                                    
     in  order  to better  prepare  for  the compression  on                                                                    
     reimbursement as it begins to show up in Alaska.                                                                           
     We are  interested in piloting  an ACO variant  that is                                                                    
     based  on an  existing Community  Care Organization  or                                                                    
     CCO that is operating  in Eastern Oregon. Data released                                                                    
     in  February   in  the  Journal  of   American  Medical                                                                    
     Association  indicates  that:   Compared  with  a  2011                                                                    
     baseline,  the Oregon  Health  Authority reported  that                                                                    
     per-member  per-month spending  for inpatient  care had                                                                    
     decreased  in  2014   by  14.8%.  Per-member  per-month                                                                    
     spending on  outpatient care was  also lower,  by 2.4%.                                                                    
     However,  outpatient  spending  trends masked  a  19.2%                                                                    
     increase in  spending on primary care  services because                                                                    
     care transitioned  away from high cost  specialty care,                                                                    
     and over  to the  Primary Care  Medical Homes  that are                                                                    
     part of the  CCO. This improved coordination  of care -                                                                    
     lead  by  the  primary  care provider  is  the  key  to                                                                    
     lowering costs and improving care.                                                                                         
     We  would anticipate  this  model  covering the  entire                                                                    
     Medicaid  population  on  the  Kenai  Peninsula.  CCO's                                                                    
     differ  from   ACO's  in   their  acceptance   of  full                                                                    
     financial risk in  the form of the  global budget. They                                                                    
     are  similar in  that they  are both  locally governed;                                                                    
     are   accountable  for   access,  quality   and  health                                                                    
     spending;  and  both  emphasize  primary  care  medical                                                                    
     homes. Both  require Robust Data  Systems to  support a                                                                    
     Clinically   Integrated   network  for   clinical   and                                                                    
     business functions  in addition to permitting  the flow                                                                    
     of data required to make informed decisions.                                                                               
     The CCO would operate on  a fixed global budget, reduce                                                                    
     medical  cost  inflation  as   part  of  the  contract,                                                                    
     improve the quality  of care and outcomes  and create a                                                                    
     healthier  population.  The  current  Alaska  trend  of                                                                    
     growth  per capita  for Medicaid  expenditures averages                                                                    
     just   over   6%  per   year   and   we  believe   this                                                                    
     demonstration could help put  Medicaid on a predictable                                                                    
     and sustainable  path by reducing  the growth  trend in                                                                    
     per capita Medicaid expenditures.                                                                                          
3:19:25 PM                                                                                                                    
Mr. Davis continued to read from prepared remarks:                                                                              
     We view  the CCO  as the  next step  beyond traditional                                                                    
     managed  care.  This  belief is  simply  based  on  the                                                                    
     funding  structure  and  risk  bearing  nature  of  the                                                                    
     program. More importantly, providers  will no longer be                                                                    
     paid for  treating illness but instead  for providing a                                                                    
     highly  coordinated system  that  prevents illness  and                                                                    
     the high costs associated with it.                                                                                         
     The CCO  structure requires a  great deal  of front-end                                                                    
     work to bring the stakeholders  together and agree on a                                                                    
     payment  structure  within  the organization.  We  will                                                                    
     need to  form a network, a  shared savings distribution                                                                    
     program, and  develop quality  targets and  metrics for                                                                    
     Currently,  Alaska   does  not  utilize   Managed  Care                                                                    
     Organizations  or  Managed   Health  Plans.  There  are                                                                    
     different kinds  of managed care, and  we encourage you                                                                    
     to structure  any legislation  broadly enough  to allow                                                                    
     for  local innovation  like CCO's.  We  believe that  a                                                                    
     provider-led model  like a CCO  will work on  the Kenai                                                                    
     Peninsula and we are willing to pilot it.                                                                                  
     A CCO will  have the flexibility to  support new models                                                                    
     of  care that  are  patient-centered and  team-focused,                                                                    
     and reduce  health disparities. We  believe a  CCO will                                                                    
     be better  able to  coordinate services and  also focus                                                                    
     on prevention, chronic  illness management and patient-                                                                    
     centered  care. We  would have  flexibility within  our                                                                    
     budget to  provide services alongside  medical benefits                                                                    
     with  the goal  of  meeting the  Triple  Aim of  better                                                                    
     health, better care and lower  per capita costs for the                                                                    
     population we serve.                                                                                                       
     Thank  you for  the opportunity  to testify  and please                                                                    
     give   consideration    to   a   global    budget   CCO                                                                    
     demonstration  in any  legislation  you discharge  from                                                                    
     the subcommittee.                                                                                                          
3:21:34 PM                                                                                                                    
Vice-Chair  Saddler referenced  the  handout titled  "Alaska                                                                    
Medicaid  Redesign:  Approaches   to  Coordinated  Care  and                                                                    
Value-based Purchasing," and asked  where a Coordinated Care                                                                    
Organization   (CCO)  would   be  listed   on  the   chart's                                                                    
continuum. Mr.  Davis answered that  he put the  CCO between                                                                    
the  ACO and  the  MCO.  He delineated  that  the CCO  would                                                                    
assume the full risk in  contract with an insurance partner.                                                                    
Vice-Chair  Saddler asked  if the  bill currently  allowed a                                                                    
CCO to submit an  application for the demonstration project.                                                                    
Mr. Davis answered in the affirmative.                                                                                          
3:23:18 PM                                                                                                                    
Representative  Gara  asked  whether  Medicaid  allowed  the                                                                    
department  to  negotiate  a  rate  with  a  doctor  of  the                                                                    
patients choosing in cases of serious illness.                                                                                  
VALERIE  DAVIDSON, COMMISSIONER,  DEPARTMENT  OF HEALTH  AND                                                                    
SOCIAL SERVICES,  replied that  the answer  was complicated.                                                                    
She  elaborated that  Medicaid required  that  care must  be                                                                    
provided in  the closest community as  possible. Federal law                                                                    
required provider choice for  Medicaid beneficiaries but the                                                                    
state  mandated that  care must  be provided  in their  home                                                                    
community to avoid unnecessary travel.                                                                                          
JON SHERWOOD, DEPUTY COMMISSIONER,  MEDICAID AND HEALTH CARE                                                                    
POLICY, DEPARTMENT OF HEALTH  AND SOCIAL SERVICES, clarified                                                                    
that if  care was not  accessible in a community,  the state                                                                    
would pay  the travel  costs for a  person to  receive care.                                                                    
Regulations  would not  prevent  an enrollee  from seeing  a                                                                    
Medicaid  provider  in  another community,  but  the  travel                                                                    
costs  would not  be  covered  by the  state  if a  Medicaid                                                                    
provider was available in their community.                                                                                      
Representative  Gara   reiterated  his   question  regarding                                                                    
patient  choice. Mr.  Sherwood replied  in the  negative. He                                                                    
reported  that  when  travel was  necessary  the  department                                                                    
allowed a person  to travel to the closest  community and if                                                                    
the  community was  in another  state  and there  was not  a                                                                    
significant  difference in  expense DHSS  would most  likely                                                                    
authorize travel to the community  of choice. He exemplified                                                                    
a person  wanting to see  a provider in Portland  as opposed                                                                    
to  the designated  Medicaid provider  in Seattle.  He added                                                                    
that the  provider had  to agree to  enroll in  the Medicaid                                                                    
program  and accept  the allotted  rate. The  department did                                                                    
not negotiate individual rates for providers.                                                                                   
Representative Gara asked what it  meant that a provider had                                                                    
to be enrolled in a  Medicaid program. Mr. Sherwood answered                                                                    
that an out-of-state  provider would have to  be enrolled in                                                                    
the  Alaska   Medicaid  program.  He  revealed   that  if  a                                                                    
recipient  was in  another state  and needed  treatment, the                                                                    
default was that the state  would pay the particular state's                                                                    
Medicaid rate  or refer  to regulation  to determine  how to                                                                    
pay an appropriate rate if  the provider would not enroll in                                                                    
Alaska's Medicaid program.                                                                                                      
3:28:32 PM                                                                                                                    
Representative  Gara  asked  whether anything  in  the  bill                                                                    
would  prevent  the  process  Mr.  Sherwood  described  from                                                                    
happening. Mr.  Sherwood answered in the  negative. He added                                                                    
that  a  proposal under  a  managed  care model  that  would                                                                    
restrict freedom of choice was  possible in the future under                                                                    
provisions of reform.                                                                                                           
Representative  Wilson   recalled  testimony   from  Central                                                                    
Peninsula Hospital  (CPH) the previous session  that adopted                                                                    
a  similar  CCO model  and  reported  that the  hospital  in                                                                    
Unalaska had as well. She  wondered whether there would be a                                                                    
negative impact on the entities  or communities that already                                                                    
employed  a coordinated  care model  if  Medicaid adopted  a                                                                    
statewide plan.  Commissioner Davidson answered that  one of                                                                    
the things the  department liked about the bill  was that it                                                                    
offered  flexibility to  allow the  use of  different models                                                                    
that fit  different communities.  She illustrated  that what                                                                    
worked  in  Unalaska  might  not   work  in  Anchorage.  She                                                                    
referred to testimony from CPH  that noted its interest in a                                                                    
CCO  model,  which might  differ  from  a model  the  Bethel                                                                    
region   was   interested   in  piloting.   The   department                                                                    
appreciated  the  broad  flexibility the  bill  provided  to                                                                    
tailor   demonstration   projects   to  models   chosen   by                                                                    
communities  that  worked  for them.  Representative  Wilson                                                                    
voiced concern about putting the  pilot projects in statute.                                                                    
She  supported the  overall concepts  of the  bill and  felt                                                                    
that  the specific  provisions in  statute  would limit  the                                                                    
department from  piloting other  possible models  not listed                                                                    
in  the bill.  She  wondered why  the  department could  not                                                                    
issue an RFP  under direction from the  legislature based on                                                                    
the   best  ideas   from  other   states  without   adopting                                                                    
Commissioner  Davidson answered  that the  bill allowed  the                                                                    
department to do just what  she described; issue an RFP with                                                                    
defined  criteria. She  cited page  33  of the  legislation,                                                                    
under  subsections d,  e, and  f,  lines 10  through 31  and                                                                    
noted that the proposals  must include cost saving measures,                                                                    
innovation,  integrate  behavioral health,  telehealth,  and                                                                    
actuarial  follow  up.  She  reported  that  the  department                                                                    
wanted an  independent actuary to  show whether  the program                                                                    
had achieved its  goal and would work on a  wider basis. She                                                                    
believed the provisions benefitted the legislature.                                                                             
3:35:46 PM                                                                                                                    
Representative Wilson did not  disagree with anything in the                                                                    
bill. She  disagreed with the  use of statute.  She believed                                                                    
that there  were existing models  working well. She  did not                                                                    
want to  "tie the state's  hands" any further.  She declared                                                                    
that she  liked the ideas  in the legislation but  felt they                                                                    
were  not necessary  to place  in statute  in order  for the                                                                    
department  to implement.  Commissioner Davidson  understood                                                                    
her  concern.  She  shared  the  department's  concern.  She                                                                    
commented that  even though the projects  existed in another                                                                    
state, some regions  of Alaska were very unique  and did not                                                                    
exist  elsewhere in  the country.  She noted  that in  large                                                                    
remote  road  less regions  travel  was  critical to  access                                                                    
care.   She   added   that  communities   lacking   adequate                                                                    
sanitation   facilities   impacted    public   health.   She                                                                    
emphasized  that things  were  uniquely  different in  rural                                                                    
Alaska.  She understood  that other  companies may  have had                                                                    
experience in rural areas in  other states, but she repeated                                                                    
that Alaska  was very different. The  demonstration projects                                                                    
were necessary to  prove effective in rural  Alaska with its                                                                    
unique  set  of   challenges.  Representative  Wilson  asked                                                                    
whether  the committee  was going  to hear  from any  of the                                                                    
Native organizations  related to what  they may be  doing in                                                                    
their  regions of  the state.  Co-Chair Thompson  would look                                                                    
into the idea.                                                                                                                  
Vice-Chair  Saddler  agreed  that  Alaska  was  unique,  but                                                                    
believed  it  was  not  so  unique.  He  asked  whether  the                                                                    
commissioner envisioned  how the  process would play  out in                                                                    
the next 3,  5, or 10 years.  Commissioner Davidson answered                                                                    
that there  were different  things that could  be done  on a                                                                    
regional or  community basis. She  felt that what  worked in                                                                    
Anchorage  or  Juneau may  not  work  in Bethel  or  another                                                                    
community. She  cited page  33, Subsection  (e) of  the bill                                                                    
that provided for actuarial analysis  and emphasized that it                                                                    
would  provide  critically  beneficial information  for  the                                                                    
department on how to proceed.                                                                                                   
Vice-Chair Saddler referred  to page 32, line  17, Section 2                                                                    
of the  bill, which  set up a  project review  committee and                                                                    
page 33,  line 17  that allowed  the department  to contract                                                                    
with a  third party.  He asked whether  there would  be some                                                                    
value  in  using  the  project   review  committee  to  help                                                                    
evaluate  the demonstration  projects as  well. Commissioner                                                                    
Davidson  answered that  the provisions  took  place at  two                                                                    
different  points in  time. She  clarified that  the project                                                                    
review  committee  would  decide  which  projects  would  be                                                                    
selected to move forward. The  actuarial analysis took place                                                                    
after the projects were implemented.                                                                                            
3:42:16 PM                                                                                                                    
Vice-Chair Saddler  pointed to  page 33, Subsection  (f) and                                                                    
read the following:                                                                                                             
     (f)  The  department  shall prepare  a  plan  regarding                                                                    
     regional or  statewide implementation of  a coordinated                                                                    
     care project based on the  results of the demonstration                                                                    
     projects under this section. On  or before November 15,                                                                    
     2019,  the  department shall  submit  the  plan to  the                                                                    
     senate secretary  and the chief  clerk of the  house of                                                                    
     representatives  and notify  the  legislature that  the                                                                    
     plan is  available. On  or before  November 15  of each                                                                    
     year thereafter,  the department shall submit  a report                                                                    
     regarding any changes  or recommendations regarding the                                                                    
     plan  developed under  this  subsection  to the  senate                                                                    
     secretary  and   the  chief  clerk  of   the  house  of                                                                    
     representatives  and notify  the  legislature that  the                                                                    
     report is available.                                                                                                       
Vice-Chair Saddler  did not understand what  the implication                                                                    
of the  subsection was. He  asked whether the plan  would be                                                                    
statewide or if there would  be 10 different regional plans.                                                                    
Commissioner  Davidson  responded  that the  subsection  and                                                                    
bill  contemplated  both  options.  She  offered  that  some                                                                    
services may  work on  a statewide basis  and some  may only                                                                    
work  on  a regional  basis.  The  legislation provided  the                                                                    
flexibility   that  would   allow   both   to  happen.   She                                                                    
exemplified  that  Medicaid  related  travel  was  currently                                                                    
arranged on  a statewide basis and  in the past some  of the                                                                    
travel had been  arranged on regional basis,  which she felt                                                                    
might  work  better.  She noted  that  recently  a  national                                                                    
policy  change was  made to  address travel  differently and                                                                    
could be beneficial to the state.                                                                                               
Representative Munoz pointed to page  29 of the bill related                                                                    
to  the  reimbursement  rates   for  the  expanded  Medicaid                                                                    
program and wondered whether the  90 percent rate applied to                                                                    
any   of  the   options  under   discussion.  Mr.   Sherwood                                                                    
referenced page 29, Section 30,  and paragraph d items 1, 2,                                                                    
and 3.                                                                                                                          
     (d)  Notwithstanding (a)  - (c)  of  this section,  the                                                                    
     department may                                                                                                             
     (1) apply for a section  1915(i) option under 42 U.S.C.                                                                    
     1396n  to improve  services and  care through  home and                                                                    
     community-based  services   to  obtain  a   50  percent                                                                    
     federal match;                                                                                                             
     (2) apply for a section  1915(k) option under 42 U.S.C.                                                                    
     1396n to provide home  and community-based services and                                                                    
     support  to  increase  the   federal  match  for  these                                                                    
     programs from 50 percent to 56 percent;                                                                                    
     (3) apply  for a  section 1945  option under  42 U.S.C.                                                                    
     1396w-4  to  provide  coordinated care  through  health                                                                    
     homes for  individuals with  chronic conditions  and to                                                                    
     increase  the  federal match  for  the  services to  90                                                                    
     percent  for  the  first eight  quarters  the  required                                                                    
     state plan amendment is in effect;                                                                                         
Mr. Sherwood  explained that  (d) (1)  was the  1915i option                                                                    
for  Home and  Community based  services, which  provided 50                                                                    
percent  coverage of  some state  funded program's  Medicaid                                                                    
services and a portion of  that population were eligible for                                                                    
the  enhanced rate.  He continued  that the  "K" option  was                                                                    
another  home  and  community  based  program  intended  for                                                                    
people  to meet  institutional levels  of care,  which would                                                                    
receive  an extra  6 percent  over the  base match  rate and                                                                    
were not  eligible for the  enhanced rate. He  reported that                                                                    
the  last option,  Section 1945  regarding health  homes for                                                                    
individuals  with   chronic  conditions,  allowed   for  the                                                                    
enhanced rate  of 90 percent  federal match for the  first 8                                                                    
quarters of the program.                                                                                                        
3:48:11 PM                                                                                                                    
Representative  Munoz pointed  to  section  1915i and  asked                                                                    
whether  the expanded  population that  might qualify  for a                                                                    
higher rate was  the 90 percent enhanced  rate. Mr. Sherwood                                                                    
replied  in  the affirmative  and  clarified  that the  rate                                                                    
would begin at  100 percent and drop to 90  percent over the                                                                    
next  few years.  He expounded  that an  individual who  was                                                                    
eligible  in  the  expansion group  receiving  the  services                                                                    
listed  would qualify  for the  higher rate.  Representative                                                                    
Munoz  asked  why the  legislation  would  reference the  50                                                                    
percent  rate if  the expanded  population was  eligible for                                                                    
the  higher  rate.  She  also wondered  what  the  rate  was                                                                    
expected to be after two  years for the 1945 population. Mr.                                                                    
Sherwood answered that after 8  quarters the rate would fall                                                                    
to 50 percent.                                                                                                                  
3:50:32 PM                                                                                                                    
Ms.  Shadduck  clarified that  if  the  state chose  managed                                                                    
care,  the  consultants  recommended   that  three  or  more                                                                    
organizations should be involved.  She elaborated that if an                                                                    
MCO dropped  out beginning with  only two the state  was "on                                                                    
the  hook" and  the situation  complicated the  interactions                                                                    
with  rural populations  and tribal  health. She  added that                                                                    
the  sponsor  felt  that  the "the  feedback  loop  for  the                                                                    
legislature"  in  the  form  of  the  review  committee  and                                                                    
actuarial results  were an important provisions  to place in                                                                    
statute.  She reminded  the committee  that the  legislature                                                                    
had seats  on the "RFP  review committee" and if  the reform                                                                    
provisions  were not  in statute  the  department would  not                                                                    
have to  be accountable  to the legislature.  She emphasized                                                                    
the flexibility that  existed in the bill and  noted that if                                                                    
in the future  the CMS offered other  options for innovation                                                                    
the  department was  authorized to  utilize them.  She cited                                                                    
the language  in Subsection C,  on page 33,  "the department                                                                    
may  contract with…"  which was  not exclusive  language and                                                                    
suggested amended  language that  quelled the  concerns that                                                                    
the bill restricted other areas of innovation and reform.                                                                       
CSSB 74(FIN) am was HEARD  and HELD in committee for further                                                                    
Co-Chair Thompson  discussed the schedule for  the following