Legislature(2015 - 2016)CAPITOL 106
03/24/2015 03:00 PM House HEALTH & SOCIAL SERVICES
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HB 148-MEDICAL ASSISTANCE COVERAGE; REFORM 4:32:46 PM CHAIR SEATON announced that the final order of business would be HOUSE BILL NO. 148, "An Act relating to medical assistance reform measures; relating to eligibility for medical assistance coverage; relating to medical assistance cost containment measures by the Department of Health and Social Services; and providing for an effective date." 4:33:36 PM VALERIE DAVIDSON, Commissioner Designee, Office of the Commissioner, Department of Health & Social Services, said the bill provided for health care reform in the Medicaid Program, and improved the health of Alaskans by extending health care coverage through Medicaid expansion for up to 42,000 Alaskans who were eligible. She noted that the bill also identifies savings through the fiscal notes identified earlier by recognizing savings opportunities that can be transitioned to Medicaid simply because the federal government will be paying that portion. She further noted that it infuses approximately $1.1 billion in federal resources into the Alaska economy for the initial five - six years. She explained that HB 148 improves health coverage through expansion, and covers individuals with incomes up to 138 percent of the federal poverty level. She remarked that technically it is 133 percent plus a 5 percent disregard. She related that eligible individuals are single adults with annual incomes of up to $20,314 per year, with an approximate hourly earnings of $9.76 per hour based upon a 40-hour work week. She offered that a married couple earning a combined income of approximately $27,490 per year, or a combined hourly income of $13.21 per hour based upon a 40-hour work week [is eligible]. It would extend coverage to Alaskans between the ages of 19 - 64 who do not qualify for any other reason, such as, a disabling condition. She said that although approximately 42,000 Alaskans would be eligible for the expansion, only about 20,000 would actually sign up in the first year - increasing to approximately 26,000 by the year 2021. 4:36:36 PM COMMISSIONER DAVIDSON continued her overview and pointed out that the study performed by Evergreen Economics showed that approximately 44 percent of the people in the expansion population have jobs, another 29 percent are collecting unemployment which means they are actively seeking work. In terms of the federal match, she explained, under the Patient Protection and Affordable Care Act the match is 100 percent for the initial three hard calendar years, 2014 - 2016. The federal contribution match in 2016 equals 100 percent federal match, 2017 equals 95 percent, 2018 equals 94 percent, 2019 equals 93 percent, and 2020 equals 90 percent, with the match remaining constant at 90 percent after 2020. She stated that this compares to the regular Medicaid Program which is matched at approximately 50 percent, although there is a higher match available for children. In terms of projection of the average per enrollee cost of Medicaid, Evergreen Economics, which has performed Medicaid analysis for Alaska for almost a decade, estimates that the average cost per enrollee will start at approximately $7,250, and increase over time. She remarked that new federal revenue in year one was expected to be $141 million, increasing to $204.9 million in the year 2021, a total of $1 billion in new federal revenue in Alaska. She conveyed that some savings have been identified which include savings that DHSS currently pays for services. For example, she related, the Department of Corrections services provided for inmates who are out of the facility for an overnight stay are eligible for coverage. Additionally, in 2016 there is approximately $1 million in savings for Chronic and Acute Medical Assistance programs or CAMA programs, and approximately $1.5 million in behavioral health grants. Additionally, she related, the bill is clear that there is a provision making Alaska's continued participation in Medicaid expansion contingent on the federal match remaining at or above 90 percent. She further related that the bill also directs the Department of Health & Social Services (DHSS) to submit to the legislature no later than January 25, 2016, a proposal to authorize a provider tax to offset some of the costs of the Medicaid Program. She pointed out that another equally important portion of the bill is Medicaid reform, a process that evolves over time by building upon the reform efforts already undertaken by DHSS. She advised this includes maximizing the existing 100 percent federal match opportunities by working with tribal partners to increase the IHS trust fund beneficiaries who receive services from tribal providers who are also Medicaid beneficiaries. She said that when three things come together, IHS beneficiary, Medicaid beneficiary, and receiving care in an IHS facility, it is 100 percent federally matched. She expressed that this was true before Medicaid expansion, during expansion, and after Medicaid expansion. Essentially, she pointed out, there are opportunities to leverage those federal funds. 4:41:26 PM COMMISSIONER DAVIDSON stated that additional reforms include 1915(i) and 1915(k) options to take advantage of additional Federal Medical Assistance Percentage (FMAP) opportunities. DHSS would use the 1915(i) option to serve Alaskans who do not meet the nursing level of care, but meet other criteria. For example, she expressed, they may have Alzheimer's related diseases, traumatic brain injury, or severe mental illness. She described this as a savings increasing to the 50 percent match by the regular Medicaid Program. She indicated that DHSS anticipates the reforms to be in regular Medicaid, as well as the expansion population. Currently, DHSS serves people with Alzheimer's disease, traumatic brain injury, or severe mental illness, with 100 percent state general funds, but by moving them to a 1915(i) option, DHSS would increase the federal match from zero percent to fifty percent. She conveyed that the other option is a 1915(k) option to replace existing home and community based services, a waiver services, which increases the match from 50 to 56 percent. In terms of other reform opportunities, she pointed out that DHSS also included demonstration project authority to review payment reform, whether those are bundling payments or innovative service delivery models, to allow DHSS to have explicit, express broad authority that allows pursuing other opportunities as they arise, and recognizing that reform is a process. She reiterated that reform is a process that needs broad authority to take advantage of things as they arise. She opined that there are incredible opportunities for tele-health, especially in Alaska with its large geography and small population. She remarked that, as DHSS and the federal government have audit requirements, providers are seeing a doubling up of audits and spending a lot of time on administration rather than being able to provide programs and services. She advised that those audits should be streamlined to better coordinate both state and federal requirements. 4:45:16 PM COMMISSIONER DAVIDSON continued her overview and noted that a critical piece of the legislation would allow emergency regulation authority to implement savings opportunities quickly. Currently, a Request for Proposal (RFP) recently closed, requesting that a contractor review opportunities for reform in Alaska, and ways to change the way Medicaid and health care is provided. She said those opportunities will allow the state to move forward, evaluating what other states have done, evaluating how they might work in Alaska, and developing a plan to work with stakeholders so that the process is transparent. She pointed out that there is a link between the broad demonstration project authority and the RFP, acknowledging that DHSS does not have all of the best ideas and that some of those may come from this process. 4:47:09 PM JON SHERWOOD, Deputy Commissioner, Office of the Commissioner, Department of Health & Social Services (DHSS), said that in addition to the provisions regarding expansion and reform, the Department of Health & Social Services (DHSS) is also making technical amendments to the statute in order to bring it into conformity with federal law. He said it is the department's intention to make clear the standard under which it is operating. 4:48:07 PM CHAIR SEATON asked that Mr. Sherwood point out sections where there are changes to conform to the law and not a proposed expansion reform. 4:48:38 PM MR. SHERWOOD responded yes, and offered a sectional analysis as follows [original punctuation provided]: Sectional Analysis: Section 1 Adopts intent language and legislative findings related to Medicaid expansion and the need to reform the existing Medicaid program, including instructing the Department of Health and Social Services (DHSS) to propose legislation to implement a provider tax in January 2016, to help offset the cost of the Medicaid program. Section 2 Amends AS 44.23.075 to exclude the expansion population from the current Permanent Fund Hold Harmless program. Section 3 Amends AS 47.05.200(a) to clarify the minimum number of audits that DHSS should conduct each year, along with instructions that DHSS, should to the extent possible, minimize duplicative state and federal audits for Medicaid providers. Section 4 Amends AS 47.05.200(b) to allow DHSS to impose interest penalties on identified overpayments using the post judgment statutory rate. Section 5 Adopts AS 47.05.250 that authorizes DHSS to develop provider fines though regulation for violations of AS 47.05, AS 47.07 or regulations adopted under those chapters. Section 6 Amends AS 47.07.020(b) including technical corrections related to eligibility for Medicaid authorized under the Affordable Care Act. This section also provides the authority for DHSS to expand Medicaid to adults aged 19-64 who are not caring for dependent children, are not disabled or pregnant, and who earn at or below 138 percent of the federal poverty guidelines for Alaska including the 5 percent income disregard. Section 7 and 8 Amends AS 47.07.020(g) and (m) to clarify when DHSS may impose transfer of asset penalties when determining eligibility for Medicaid. Section 9 and 10 Amends AS 47.07.036(b) and adds AS 47.07.036(d) to outline cost containment and reform measures that DHSS must undertake, including seeking demonstration waivers, applying for other options under the Medicaid Act and improving telemedicine for Medicaid recipients. Section 11 and 12 Amends AS 47.07.900(4) and (17) to remove the requirement that behavioral health providers be a grantee of the state of Alaska in order to bill Medicaid. Section 13 Instructs DHSS to amend any state plan it has with the federal government to be consistent with this Act. Section 14 Authorizes DHSS to engage in emergency rule making under the Alaska Administrative Code to implement Medicaid reform measures and the provisions of this Act. Section 15 Instruct the Revisor of Statutes to make technical amendments to the title of AS 47.07.036 to conform to amendments in this Act. Section 16 Provides that Section 13 and 14 are effective immediately Section 17 Provides that Section 1- 12 and 15 of the Act are effective on July 1, 2015. 4:48:40 PM MR. SHERWOOD said Section 1 is the findings and intent language around the bill expansion and reform which includes the provision instructing DHSS to propose legislation for a provider tax by next session. He noted that Section 2 is the first of the technical amendments to reflect or accommodate changes in federal law. The provision amends the hold harmless provisions in statute for treatment of receipt of the Permanent Fund Dividend. He remarked that within the Patient Protection and Affordable Care Act states were required in their Medicaid Programs to change the way they determined income for children, pregnant women, and parent caretaker relatives to tax based rules for income. As a result, DHSS now counts income using a modified adjusted gross income (MAGI). He pointed out that this differs from previously as it tends to look more toward annual income and does not allow income disregards. He pointed out that in adding the expansion group there was no easy way to reconcile these MAGI-based Methodology rules with the hold harmless statute. Previously, he said, the Permanent Fund Dividend (PFD) was always counted as income under a monthly receipt, whereas, under MAGI it is annualized. The statute does not provide for that kind of situation. He remarked that once the PFD is annualized it becomes a very small amount of monthly income as the check is divided by 12. He said that there would be individuals slightly over income for the expansion group, but these individuals would have the federal market available to obtain substantially subsidized health insurance. He reiterated that, in these cases, the individual would go from Medicaid coverage to a substantially subsidized federal coverage. The decision was made to exempt this group from the hold harmless provision and allow them to move into the exchange. 4:51:48 PM REPRESENTATIVE WOOL asked whether an individual on the fence could opt not to receive a PFD. MR. SHERWOOD said he would check under the new federal regulations as a development of income requirement stated that an individual entitled to an income must apply for and pursue it. 4:52:30 PM REPRESENTATIVE VAZQUEZ questioned how the hold harmless provision applies at the present time and how this would change. MR. SHERWOOD responded that presently when determining eligibility for Medicaid, the statute instructs the state whether it is possible under federal requirements to disregard the PFD and not count it as income. In this case there is no asset test for the expansion group, but individuals can have up to four months of hold harmless coverage which means the state replaces the federal benefit that is provided. Essentially, he explained, DHSS would continue to leave them on Medicaid but for those 1 - 4 months that they were ineligible due to receipt of the PFD, DHSS would not claim federal funds for those individuals. In that case, the lost federal revenue is actually paid out of the PFD account and not the general fund account. 4:54:11 PM COMMISSIONER DAVIDSON explained that with this provision, the PFD hold harmless provision does not apply to the expansion population. 4:54:22 PM REPRESENTATIVE VAZQUEZ asked for an example. COMMISSIONER DAVIDSON offered a scenario of an individual who is potentially eligible for Medicaid expansion, but has an income almost at 138 percent of the federal poverty level. When that individual receives a PFD that puts them over 138 percent of the federal poverty level, they would not be eligible for expansion. Rather, the individual would then be directed to the federally facilitated market place in Alaska where they could choose to purchase a substantially subsidized market place plan. 4:55:11 PM CHAIR SEATON offered that this also relates to other programs, such as, food stamps. In the event an individual earns too much money, they don't qualify. The PFD actually pays the difference of what the individual was losing in their benefits in receiving the PFD. He pointed out that the hold harmless was not being changed, it just does not apply to the expansion population. MR. SHERWOOD answered "That is correct." 4:56:08 PM REPRESENTATIVE VAZQUEZ questioned whether the department had considered that the hold harmless also applies to food stamps and asked whether there had been any thought about excluding food stamp recipients in the hold harmless program. COMMISSIONER DAVIDSON replied that the food stamp program is not a subject of this bill. 4:56:45 PM MR. SHERWOOD said that Section 3 is the provision which reduces the mandatory number of audits required under the statute. He offered that since the law passed there has been an increase in the amount of oversight of providers through other state and federal initiatives. The Division of Quality Assurance in the department [indisc.] 14 different kinds of oversights the providers can be subject to depending upon the type of provider, federal or state. He opined that one of the prime purposes of audits is the sentinel effect and DHSS believes there is enough activity that it is achieving that. He explained that the section also gives DHSS clear authority to coordinate the audits to avoid duplication with other state or federal audit activities. 4:57:57 PM CHAIR SEATON conveyed there had been a discussion regarding certain audits being identified as being an acceptable substitute when there is coordination in receiving the results of these audits. He asked if DHSS was still thinking that would work in some instances. MR. SHERWOOD responded that DHSS does coordinate among the audits which also avoids any duplicative penalties. To the extent possible, the department would take the federal audit as part of the DHSS oversight strategy. 4:59:04 PM MR. SHERWOOD stated that Section 4 allows the department to impose penalties on overpayments when the overpayment determinations become final. This section creates an incentive for prompt resolution when there are audit findings as there is a disincentive for the provider to drag out the dispute of the findings. 4:59:39 PM REPRESENTATIVE VAZQUEZ referred to [Sec. 4, AS 47.05.200(b)], page 3, lines 17-20, which read: (b) ... The department may assess interest penalties on any identified overpayment. Interest under this section shall be calculated using the statutory rates for post-judgement interest accruing from the date of the issuance of the final audit. REPRESENTATIVE VAZQUEZ asked what statutory rate for post- judgement interest is being applied. MR. SHERWOOD answered that the language came from "our legal folks," and he assumed it was clear as to which one. He agreed to research the answer and get back to the committee. REPRESENTATIVE VAZQUEZ said it should clearly be set forth what statutory rate it is making reference to for avoiding confusion. 5:01:03 PM MR. SHERWOOD conveyed that Section 5 allows DHSS to impose fines on providers for violation of statute or regulations. Currently the only financial recovery with providers is through the audit. He said it has been discovered that it makes more sense for both parties to assess a fine. He offered as an example, if there was evidence of poor documentation that was not systemic, DHSS may choose to impose a fine rather than actually performing an audit where both sides have to drill down to determine what the evidence shows. He conveyed that there may be occasions when an audit is over-kill or impractical and simply assessing a financial penalty for failing to follow the statute or regulations is a more appropriate and efficient tool. CHAIR SEATON asked whether the fine was in dispute or someone prefers an audit, would that fine language be permissive and be part of the regulations that can be challenged. MR. SHERWOOD responded in the affirmative and stated that by adding it as a sanction there is an appeal process for any substantial sanction. 5:02:36 PM REPRESENTATIVE VAZQUEZ referred to [Sec. 5, AS 47.05.250(a)], page 3, lines 22-23, which read: (a) ...The department may adopt regulations to impose a civil fine against a provider who violates AS 47.05 ... REPRESENTATIVE VAZQUEZ noted that AS 47.05 deals with medical assistance fraud. She said if this legislation passes, it appears the department may adopt regulations to impose a civil fine against a provider who violates. Usually, she opined, in a criminal case there is restitution to be made, so why would DHSS need a separate section. MR. SHERWOOD offered that this does not extend simply to the fraud provisions of AS 47.05, but to the other administrative provisions of AS 47.05 and AS 47.07, essentially the Medicaid statute. All violations of regulations governing Medicaid would be subject to fines. REPRESENTATIVE VAZQUEZ reiterated her question whether a criminal case under AS 47.05 deals with Medicaid fraud and spells out the criminal sanctions. She pointed out that it is clearly a criminal process, and asked why this particular provision is included in that it interferes with the criminal statute. She noted that restitution is in criminal cases, and the criminal code sets forth the parameters of that restitution. MR. SHERWOOD advised that this provision was intended to allow DHSS to impose fines for violations of regulation which were not necessarily criminal. He offered that if the question is whether this language is appropriately placed in this section or in AS 47.07, he would consult with the Department of Law (DOL) to provide an answer. 5:05:36 PM REPRESENTATIVE TARR referred to [Sec. 5, AS 47.05.250(b)], page 3, lines 25-26, which read: (b) A fine imposed under this section may not be less than $100 or more than $25,000 for each occurrence. REPRESENTATIVE TARR said the provision reads like a problem that does not meet the standard of a criminal proceeding. The department wants a mechanism to encourage good behavior and the threat of a fine will likely do that. MR. SHERWOOD answered that her statement was a good assessment. Certainly, he said, the deterrent effect is in knowing there are some situations in which DHSS is not likely to pursue a full blown audit simply to obtain a modest recovery. Generally, he offered, all of DHSS sanctions tend to be progressive so initial and minor occurrences tend to be modest fines, and repeat or serious offenses tend to be higher fines. 5:06:53 PM REPRESENTATIVE VAZQUEZ commented that there may be a need to include a provision for fines but as this covers all of AS 47.05, which also covers Medicaid fraud, she suggested there should be an explicit exception to the criminal statutes, which includes criminal charges, and follows a whole criminal process and not a civil process. CHAIR SEATON asked [Mr. Sherwood] to check with the legal department to determine if there should be an exception for fraud. He stated that if there is actually fraud DHSS does not want to be submitting a fine for criminal penalties. 5:08:22 PM MR. SHERWOOD continued with the sectional analysis and stated that Section 6 amends the Medicaid eligibility statutes to bring the statute in line with the new MAGI rules, and adds the expansion group. He referred to MAGI [indisc.] several categories of coverage including many categories for children. The legislation amends AS 47.07.020(b)(8) in that it better describes a group of children that are already covered. He explained that the language dated back to the early 1990s, which artfully describes a category of children who weren't ineligible because they did not meet the old deprivation standards for Aid to Families with Dependent Children (AFDC). He offered that DHSS was making technical amendments to clarify this language to what has always been the coverage for these children who do not meet the deprivation requirements. He indicated that as the program has evolved this language has become antiquated and DHSS does not have people who would track that kind of policy back that far. The other changes related to MAGI have to do with eligibility categories for pregnant women and children and their income levels are set in statute as a percentage of the federal poverty level, he explained. He reiterated that MAGI gets rid of all income disregards that are applied before determining eligibility. The federal government made DHSS calculate the value of those disregards and adjust the income standards upward to reflect the loss of disregards for existing categories of Medicaid, he stated. This legislation is changing the numbers in the statute to match those new MAGI adjusted amounts. He offered that it appears income standards are going up, but in truth it is the equivalent standard. He pointed out that instead of applying the standard after DHSS has taken out the income disregards it is now applying the standard of gross income. Another way of looking at it, he advised, is that the disregards have been built into the standard. 5:11:19 PM REPRESENTATIVE VAZQUEZ asked for an example of at least two to three income disregards that are taken into consideration. MR. SHERWOOD replied that the disregards that come to mind include earned income disregards, child care disregards, a child support disregard, and the PFD disregard. REPRESENTATIVE VAZQUEZ asked that Mr. Sherwood explain the definition of disregard, and how it is reviewed by department personnel determining eligibility. MR. SHERWOOD answered that when determining an individual's eligibility the department typically starts with their gross income for the month, then determines whether adjustments need to be made. In that instance, a disregard may be a complete disregard of a certain type of income, or a partial disregard of earned income, and the amount of disregard is subtracted from the individual's income. Subsequently, he related, once all of the disregards have been subtracted, the department reviews the remaining income and in the old method would compare it to the income standard. 5:14:29 PM MR. SHERWOOD advised that another part of Section 6 adds the expansion group and it contains the provision that the expansion group is covered only if the federal match rate is at least 90 percent. He referred to Sections 7-8 and advised they are technical amendments which clarify that individuals determined eligible using MAGI standards are not subject to transfer of asset penalties. He explained that transfer of asset penalties are applied to individuals who receive long term care, nursing home care, and home and community based waivers. In these circumstances, an individual has been found to have given away assets in order to qualify for Medicaid, or for any purpose other than to receive some sort of direct benefit to themselves. He pointed out that they may be ineligible for Medicaid for a period of time - approximately equivalent to the value of the transfer. He remarked that the legislation clarified that MAGI standards are not subject to the transfer of asset penalty. He explained that all the categories of Medicaid that cover individuals who are aged, blind, and disabled do not use MAGI standards. He said that the over whelming majority, almost the entirety of the individuals receiving long term care, qualify under those standards for aged, blind, and disabled. 5:16:03 PM MR. SHERWOOD referred to Sections 9 - 10 and advised that the amendments to the cost containment statutes in the Medicaid statute include the reform initiatives, the Section 1115 waivers, the 1915(i) and 1915(k) options, other demonstration authorities, and enhancement and incentivizing telehealth. He advised that Sections 11 - 12 amend the statute to remove the Medicaid requirement that behavioral health providers be grant recipients. He conveyed that Section 13 instructs the department to amend the state plan in accordance with the legislation. He further conveyed that Section 14 gives clear authority to issue emergency regulations for reform and cost containment. Section 15 includes Reviser of Statutes instructions. Sections 16 - 17 are effective dates, and he noted that Sections 13 - 14 are effective immediately, while the rest of the Act is effective on July 1, 2015. 5:18:09 PM REPRESENTATIVE TARR asked for clarification that the committee will not consider amendments on Thursday but get them out for distribution. CHAIR SEATON said the committee may consider amendments on Thursday, before the public testimony comes in, so people will know what is on the table. 5:18:26 PM REPRESENTATIVE VAZQUEZ advised she will have many questions and stated it is only fair for the committee to have time to clarify certain provisions in order to understand what this bill does and does not do. CHAIR SEATON expressed his agreement. 5:19:11 PM COMMISSIONER DAVISDON offered members to forward their questions to her in the meantime. CHAIR SEATON asked the members to forward questions to Commissioner Davidson and there may be written responses back with information. REPRESENTATIVE VAZQUEZ requested that the questions and answers be distributed to every committee member. CHAIR SEATON offered that questions could be submitted to him, and he would forward the questions and receive the answers. [HB 148 was held over]