Legislature(2003 - 2004)

04/02/2003 09:00 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                                                            
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                                                            
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                                                            
[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                                                            
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                                                            
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                                                            
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                                                            
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                                                            
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                                                            
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                                                            
[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                                                            
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                                                            
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.                                                                                                                    

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