Legislature(2003 - 2004)
04/02/2003 09:00 AM Senate FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE BILL NO. 108 "An Act relating to payment rates under the Medicaid program for health facilities and to budgeting, accounting, and reporting requirements for those facilities; abolishing the Medicaid Rate Advisory Commission; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Wilken explained that this bill, which is being presented at the request of Governor Murkowski, would eliminate the Medicaid Rate Advisory Commission and, thereby, specify that the Department of Health and Social Services would be responsible "for calculating and setting Medicaid payment rates for health care facilities." JOEL GILBERTSON, Commissioner, Department of Health and Social Services, distributed, at the request of Co-chair Wilken, Medicaid program charts [copies on file] titled: "Medicaid Total Average Eligibles and Costs;" "Medicaid Eligible Children and Costs;" "Medicaid Eligible Adults and Costs;" "Medicaid Elderly Eligibles and Costs;" "Medicaid Disabled Eligibles and Costs" to Committee members. Co-chair Wilken explained that these charts are being distributed because, "the width and breadth and the growth" of the program's history would be beneficial for the Senate Finance Committee members. [NOTE: Further discussion regarding these charts occurs later in the meeting.] Commissioner Gilbertson informed the Committee that SB 108 eliminates the Medicaid Rate Advisory Commission that was established in 1984 to determine Medicaid payment rates that must, by federal law, guarantee that a fair rate for reasonable costs be paid to acute care facilities. He continued that "in 1989, by Executive Order," the Commission's role changed from a rate-setting entity to that of advisor to the Commissioner of the Department of Health and Social Services, who was, thereby, responsible for establishing the Medicaid payment rates. Commissioner Gilbertson continued that the federal law was repealed in 1997 and replaced with public process requirements. Therefore, he continued, this legislation would: eliminate the Medicaid Rate Advisory Commission; acknowledge that the rate setting function is a responsibility of the Department; and provide for a single public process within the Department. Additionally, he furthered, these changes would allow the Department to align with current federal law and develop a variety of payment methodologies that would be more efficient and responsive to the needs of differing size facilities. Commissioner Gilbertson elaborated that this legislation would allow the Department to establish an Office of Rate Review within the Commissioner's Office and to centralize the Department's rate setting operations for care facilities as well as for other services such as physician services, subsidized adoptions and foster care. He summarized that this legislation would allow "Alaska law to mirror federal law which requires simply a public process." Commissioner Gilbertson informed that the elimination of the Medicaid Rate Advisory Commission would result in a small fiscal note savings resulting from associated travel and per diem expenses. Senator Taylor clarified that the Medicaid Rate Advisory Commission's current role is advisory. Commissioner Gilbertson concurred. Senator Taylor furthered that the Commissioner must approve payments to facilities. Commissioner Gilbertson concurred. Senator Taylor asked whether additional benefits would be afforded by the elimination of the advisory Commission. Commissioner Gilbertson reiterated that, in addition to the savings resulting from the elimination of the Commission's travel expenses, this legislation would allow the Department's policies to align with current federal regulations that would permit the Department to develop, through the public process, separate payment policy methodologies for facilities rather than being restricted to the current single methodology. Senator Taylor asked how this new system would differ from the current system in addressing a Certificate of Need request, as, he revealed, Bartlett Regional Hospital in Juneau underwent five hearings over a six-year period in order to be granted a Certificate of Need for the purchase of a Magnetic Resonance Imaging (MRI) machine, and he declared that it is unknown as to whether Bartlett ever received the Certificate of Need that was required for the hospital to receive reimbursement. He opined that the Commissioner was responsible for the delay in this situation; and he questioned whether the elimination of the Advisory Commission would improve the situation. Commissioner Gilbertson clarified that the legislation would not affect the Certificate of Need regulation. JACK NIELSON, Executive Director, Medicaid Rate Advisory Commission, Division of Medical Assistance, Department of Health and Social Services testified via teleconference from Anchorage to respond to Senator Taylor's question. He reiterated that this bill would provide the Department with "rate setting flexibility and regulatory relief." He noted that the State settled the aforementioned situation with Bartlett Regional Hospital, and he stressed that the flexibility afforded by this legislation would help the Department "avoid those situations in the future." Co-Chair Green shared her surprise at having received letters from Commission members lobbying legislators to increase Medicaid funding. She stated that Commission members should advise the Department rather than lobby, and she voiced support for this legislation. Senator Olson voiced discomfort regarding language in Section 2 of the bill that reads as follows. Sec. 2(a) The department by regulation shall require a uniform system of accounting, budgeting, and [FINANCIAL] reporting for health facilities receiving [PROSPECTIVE] payments under this chapter. The regulations must provide for reporting revenues, expenses, assets, liabilities, [AND} units of service, and other items considered necessary by the department to implement this chapter. [THE DEPARTMENT SHALL SPECIFY THE DATE THE SYSTEM BECOMES EFFECTIVE FOR EACH HEALTH FACILITY.] New Text Underlined [DELETED TEXT BRACKETED] Senator Olson stated that this language indicates that, "the determination regarding what the rates would be is at the discretion of the Department." He continued that, "there appears to be no oversight." Mr. Nielsen responded that were the Department to implement a reporting requirement on a facility, the Department would be required to abide by the public process and regulation adoption process procedures before the requirements could be imposed. Senator Olson reiterated that the Department would still make the determination. Mr. Nielson specified that, while the Department makes the decision, the regulatory process is required. Senator Olson asked the composition of Commission members. Mr. Nielson reported that four of the five Commission member positions have representation; however, he noted that the physician allocation on the Commission has been vacant for approximately one year. Senator Olson asked whether Commission members support the bill. Mr. Nielson affirmed that three of the four members "generally" support the bill. He specified that he has not had contact with the fourth member. Senator Olson asked whether hospitals support the legislation. Mr. Nielson replied that hospital administrators have not communicated a position regarding the bill; however, he believed that hospital administrators testified on the bill in earlier committee hearings. Commissioner Gilbertson interjected that the Alaska State Hospital Nursing Home Association does not oppose the bill. Commissioner Gilbertson responded to Senator Olson's concern regarding Section 2 by specifying that the section would allow the Department to gather information from facilities necessary for establishing rates. He stated that this information would provide for a uniform accounting and budgeting system for the rate setting function, and he verified that the public process is a requirement for gathering the information. Senator Taylor voiced that he does not object to the bill as he has questioned the value of the Commission for some time. However, he opined, "rate setting has always been very contentious between the State and our hospital and medical facilities." He professed that the rates often determine whether a facility would survive, and he voiced concern that language in the bill would provide broader authority to the Department to audit and review facilities. Senator Taylor voiced appreciation for language in the bill that would allow differing rates for facilities; however, he noted that federal and State auditors place "great, and duplicate," demands on medical facilities. He urged the Commissioner to determine measures to reduce the burden that auditing places on a facility. Commissioner Gilbertson replied that, while the costs associated with the auditing function are high, the need for good data is important. He stated that the Department would endeavor to reduce the administrative burden of the reporting requirement. Co-Chair Wilken asked whether the Department's negative fiscal note is included in the Governor's budget proposal. Commissioner Gilbertson replied that it should be. Co-Chair Wilken ordered the bill HELD in Committee. [Note: Further discussion concerning SB 108 continues later in the meeting.] [Note: the following Committee discussion regards the Medicaid program discussed in SB 108 and SB 109.] Senator B. Stevens, referring to the Medicaid charts provided by the Department of Health and Social Services during the hearing on SB 108, generalized that the Medicaid program is experiencing "a two-pronged" containment problem: the first being the cost of providing services; and the second being "the eligibility of your monthly recipients." He noted that, according to the chart on page one, titled "Medicaid Total Average Monthly Eligibles and Costs," there has been a 47 percent increase in eligible monthly participants between FY 99 and projected FY 04. He continued that the chart on page two titled "Medicaid Eligible Children and Costs" indicates that, during the same time frame, there has been an increase of 73 percent in monthly eligible children, while, he noted, the page three chart titled "Medicaid Eligible Adults and Costs" reflects a decrease of approximately one half of one percent. He continued that other charts in the packet indicate an approximate 18-percent increase in senior recipients and a 33- percent increase in disabled recipients. He asserted that, "no sector of our population is growing at that rate." He asked for an explanation to justify the increases in eligible participants. Senator B. Stevens stated that SB 108 and SB 109 focus on cost containment, and he specified that, "the average cost per month per member" is identified on the charts. However, he identified the containment of program eligibility as the primary focus. He expressed that between FY 99 and FY 04, the total number of program recipients has increased by 30,691, with 27,734 of that total number being children. Commissioner Gilbertson acknowledged Senator B. Stevens's concern, and stated that the growth in the Medicaid program "is a national trend." However, he clarified that on the national level, 71 percent of Medicaid cost increases result from seniors and disabled individuals; whereas, he attested, these groups account for approximately 50-percent of the cost increase in Alaska. He furthered that the costs for these groups are projected to align with the national average as "the graying of Alaska" results in more demand for long-term care and as people with disabilities "live longer." He specified that the most rapid population growth in the Medicaid program has been in children services, which is reflected by the growth of the Denali KidCare program while the only program that reflects a reduction is the adult program. He attributed this reduction to the success of such efforts as the State's welfare reform and welfare to work programs. However, the program has experienced an increase in costs associated with the number of pregnant women in the program. He noted that separate legislation is being considered to address eligibility standards for the various programs. Co-Chair Green interjected that the increase in costs is associated with pregnant women who qualify for services through the Denali KidCare program. Commissioner Gilbertson concurred, and he commented that "the vast majority" of growth in terms of children is associated with the Denali KidCare program. He professed that the State would eventually incur the majority of its cost increases from the overall growth in services to seniors and the disabled. BOB LABBE, Deputy Commissioner, Department of Health and Social Services informed that prior to the "expansion" of the Denali KidCare program in 1999, the child population growth in the Medicaid program "was flat," and the family being on temporary assistance determined the edibility for a child. With the implementation of welfare reform measures, he continued, the number of child participants in the Medicaid program decreased "as the parents went to work." He noted that when the eligibility policy expanded to 200-percent of the poverty level, the caseloads started to increase. Mr. Labbe stated that while the elderly Medicaid population growth has been "very predictable and very constant," the level does not correspond to the overall number of seniors in the State. He informed that to qualify for Medicaid funding, seniors must be receiving public assistance. However, he stated, the high incomes of many seniors excludes them from the program. Mr. Labbe opined that these seniors might not qualify for the program until the age of 85 or older when long-term care services might be required. Mr. Labbe noted that the State is experiencing a growth of individuals with disabilities as "baby boomers" are aging and as adults and children with disabilities live longer lives. He expressed that the population growth in the number of children in the Medicaid program is the result of a State "policy choice" to expand the State services through the Denali KidCare program. Senator B. Stevens asked whether the eligibility specifications are located in Section B(13) of the Denali KidCare program. Mr. Labbe was unsure of the specific section. Commissioner Gilbertson interjected that the 200 percent of poverty level eligibility guideline is the standard for children and pregnant women through the Denali KidCare program. Senator B. Stevens asked the level of the current federal poverty guidelines. Commissioner Gilbertson replied that it is determined by the size of the family. Co-Chair Wilken interjected that discussion relating to eligibility for the Denali KidCare program would be more appropriately addressed through forthcoming legislation. Senator Bunde commented that, antidotally, people move to Alaska in order to qualify for the Permanent Fund Dividend and other State benefits. He asked whether the Department "tracks" the length of residency of new individuals to the Medicaid program. Mr. Labbe responded that the Department does not track length of residency; however, he noted, Medicaid recipients are required to be a resident of the State. He mentioned that the Department had, several years previously, conducted studies in which a length of residency question was included and, he commented, that information could be provided. Senator Bunde suggested that a length of residency question would be beneficial. He asserted that the minimum length of residency to qualify for Medicaid benefits should be at least 30 days. Commissioner Gilbertson responded that the Medicaid program is an entitlement program whereby if an individual meets the program's criteria, they must be enrolled in the program. However, he agreed that the length of residency information could be beneficial. Senator Taylor asked the penalty that might be incurred were a state to deny benefits to individuals, contrary to federal standards. Commissioner Gilbertson responded that were the State to disregard federal guideline standards for the Medicaid program, the State would be denied access to federal Medicaid funds. However, he noted that a state's participation in "the Medicaid program is optional; it is voluntary for States," and he continued, although "it is rare," states have the option to submit and manage their own plans through a wavier process. Co-Chair Wilken asked whether a bill that passed in an earlier Legislative session included a study being conducted regarding the Medicaid program and the Permanent Fund. Co-Chair Green reminded the Committee that the bill in question had been vetoed.