Legislature(2009 - 2010)BUTROVICH 205

02/23/2009 01:30 PM Senate HEALTH & SOCIAL SERVICES

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Scheduled But Not Heard
Moved SB 52 Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
Heard & Held
         SB  32-MEDICAID:HOME/COMMUNITY BASED SERVICES                                                                      
CHAIR DAVIS announced consideration of SB 32.                                                                                   
1:31:08 PM                                                                                                                    
MAX HENSLEY, staff to Senator Ellis, introduced himself.                                                                        
CHAIR DAVIS asked if there is a committee substitute (CS).                                                                      
MR. HENSLEY answered yes.                                                                                                       
SENATOR ELLIS suggested  that he provide an overview  of the bill                                                               
and then  Mr. Hensley will go  through the CS that  the committee                                                               
may choose to entertain.                                                                                                        
CHAIR DAVIS agreed.                                                                                                             
SENATOR  ELLIS advised  the  committee that  since  the bill  was                                                               
first heard  about three weeks  ago, he  and his staff  have been                                                               
working with  Commissioner Hogan and  his staff and  with Senator                                                               
Davis's  office to  find  a way  to implement  the  goals of  the                                                               
legislation while respecting  the administrative difficulties the                                                               
department might have in minimizing overhead costs.                                                                             
The  intent  of  the  language,  that  home  and  community-based                                                               
services are the key to improving  the quality of life of seniors                                                               
and people, especially  children, with developmental disabilities                                                               
is something he firmly believes.  It has been conclusively proven                                                               
that  home   and  community-based   care  can  help   replace  or                                                               
ameliorate the need  for institutional care and do so  at a lower                                                               
cost to  the state  on an  individual case  basis and  across the                                                               
whole system.  A recent study  in the Academic Journal  of Health                                                               
Affairs found that states  with long-established high proportions                                                               
of home and community-based services  saw a three percent overall                                                               
decrease  in long-term-care  spending between  1995 and  2005, as                                                               
opposed to  a 14.5  percent increase  in states  that have  a low                                                               
proportion of home and community-based services.                                                                                
According  to Department  of Health  and Social  Services (DHSS),                                                               
Medicaid spending  in Alaska is  projected to reach  $3.6 billion                                                               
in 2028.  Per enrollee spending is  expected to go from  $7400 to                                                               
$22,000; long-term  care is  expected to  be the  fastest growing                                                               
segment of  those services and  a DHSS report suggests  that home                                                               
and community-based  services are the reasons  that institutional                                                               
spending is projected  to be relatively flat over  the years 2008                                                               
to 2028. That  is not an attack on  Alaska's wonderful long-term-                                                               
care  facilities; it  just means  that  home and  community-based                                                               
services are  the least  restrictive level of  care and  the most                                                               
1:34:25 PM                                                                                                                    
SENATOR  ELLIS asserted  that policy  choices have  a significant                                                               
impact on  these projections; the  state can control  this growth                                                               
with a  wise allocation of  current resources. The  Department of                                                               
Health  and Social  Services and  the legislature  together hired                                                               
Meyers and  Stouffer, consultants to provide  recommendations for                                                               
home and community-based service  methodologies. There is a broad                                                               
acknowledgement   that  the   current  system   is  broken;   the                                                               
department  wants  to  do   better  and  appreciates  legislative                                                               
guidance in this regard.                                                                                                        
Except  for an  across-the-board four  percent increase  in 2008,                                                               
most providers  haven't seen increases  since 2004;  many haven't                                                               
seen  any increase  in  ten  years and  have  reached a  breaking                                                               
He admitted that there were  serious problems in the contractors'                                                               
methodology; they  left out  testimony from  most of  the smaller                                                               
providers that this bill is aimed at helping.                                                                                   
This   legislation   specifically   gives  the   department   the                                                               
flexibility  to  devise  a cost-based  system  that  works  while                                                               
fixing the  disparity between  home and  community-based services                                                               
and institutional care rates. Hospitals  and nursing homes have a                                                               
statutorily defined  methodology and required rate  review; there                                                               
is  really  no  reason  that  home  and  community-based  service                                                               
providers  who are  licensed by  the State  of Alaska  should not                                                               
receive the  same treatment  by the  state as  institutional care                                                               
1:36:20 PM                                                                                                                    
SENATOR PASKVAN moved to adopt  the proposed committee substitute                                                               
(CS) for  SB 32,  labeled 26-LS0218\C,  as the  working document.                                                               
There being no objection, version C was adopted.                                                                                
MR.  HENSLEY  said  there  are four  major  changes  between  the                                                               
original,  R version,  and  this CS.  The first  is  to move  the                                                               
bill's  location  in  statute  from AS  47.07.070-074  to  a  new                                                               
section  47.07.069  to give  the  department  the flexibility  to                                                               
interpret the  bill in  a way  that is  more appropriate  for the                                                               
many small providers.                                                                                                           
1:38:01 PM                                                                                                                    
SENATOR ELLIS interjected  that this proposed change  was easy to                                                               
do  and  deals with  the  concerns  of  the Alaska  Hospital  and                                                               
Nursing  Home Association  from their  long-litigated portion  of                                                               
the statutes. It was never his  intent to affect what is going on                                                               
currently with nursing homes.                                                                                                   
MR. HENSLEY continued;  the second change is on page  1, lines 8-                                                               
11 and adds  two other categories of service to  the provision of                                                               
home  and  community-based  waiver  services:  the  provision  of                                                               
personal care services in a recipient's  home (lines 8 and 9) and                                                               
assisted living homes  for needy or vulnerable  persons (lines 10                                                               
and 11).                                                                                                                        
The third change is  on pages 2 and 3 in Sections 2  and 3 and is                                                               
conforming language to change the  references for assisted living                                                               
homes  to  match  the  fact   that  their  rates  are  now  being                                                               
determined by this  new process of rate review as  opposed to the                                                               
older process, which  was a minimum of $70  with the department's                                                               
ability to adjust in regulation.                                                                                                
Fourth,  page  3,   Section  4,  lines  12-26,   state  that  the                                                               
department will give an annual report  on the trends in rates for                                                               
each of  the next five years  to keep them informed  of what this                                                               
rate-review process  is doing to  the rates  and how it  is being                                                               
implemented and  received. The  report will  be provided  to [the                                                               
governor and]  the legislature through the  presiding officers of                                                               
each  house, the  chairs of  the two  finance committees  and the                                                               
chairs of the two health and social services committees.                                                                        
1:40:52 PM                                                                                                                    
Section 5 repeals the reporting  requirement after five years, at                                                               
which point the program will be well-established.                                                                               
Finally, Section  6 contains a  change made in  consultation with                                                               
the  department; it  provides for  a two  year delayed  effective                                                               
date to  allow the department  time to develop a  methodology for                                                               
determining  costs  in  a  way  that will  work  with  the  small                                                               
1:41:35 PM                                                                                                                    
CHAIR DAVIS asked  Mr. Hensley what exactly will  be different if                                                               
the bill passes in this new form.                                                                                               
MR.  HENSLEY  answered that  the  changes  he went  through  were                                                               
changes from the  original bill; the language of  the bill itself                                                               
remains  basically  unchanged.  It   has  moved  to  a  different                                                               
section, but  the bill requires  Department of Health  and Social                                                               
Services to review  rates paid through Medicaid  to the providers                                                               
of home and community-based services  annually based on costs, so                                                               
that the providers are paid a  rate that reflects the actual cost                                                               
of providing those services.                                                                                                    
CHAIR DAVIS queried,  "So with this bill it will  not give a rate                                                               
increase in year 2010?"                                                                                                         
MR.  HENSLEY answered  no, the  bill does  not take  effect until                                                               
July  2011  and any  future  rates  will  be determined  by  this                                                               
review. In the  opinion of the sponsor, it is  early to determine                                                               
what will  happen to the  rates; they will probably  increase but                                                               
there is  no way  to say  how much  because it  has been  so long                                                               
since there has been any comprehensive study done.                                                                              
1:43:21 PM                                                                                                                    
SENATOR THOMAS said the fiscal  notes show increases in 2010, and                                                               
asked what those represent.                                                                                                     
MR.  HENSLEY  responded  that  the  fiscal  notes  refer  to  the                                                               
original  version  of bill.  He  suggested  that there  are  some                                                               
representatives from  the department who  may be able  to address                                                               
how the proposed CS would change  those fiscal notes; but a major                                                               
reason for  the new  version is to  lower the  administrative and                                                               
overhead costs shown in those fiscal notes.                                                                                     
SENATOR THOMAS asked  if he is correct in believing  that the new                                                               
process isn't phased in, but happens all once.                                                                                  
MR. HENSLEY confirmed that is correct.                                                                                          
1:44:31 PM                                                                                                                    
CHAIR  DAVIS asked  Jon Sherwood  from Department  of Health  and                                                               
Social Services to come forward.                                                                                                
JON   SHERWOOD,   Administrator,   Medicaid   Special   Projects,                                                               
Department  of  Health  and Social  Services,  Juneau,  said  the                                                               
department has  been working with  the committee and  the sponsor                                                               
to  come  to  some  understanding  about the  best  way  to  move                                                               
forward. They  do want to improve  their rate-setting methodology                                                               
and a  number of  their concerns are  addressed in  the committee                                                               
substitute; they  still have concerns  about setting out  the way                                                               
rates are set in statute and  it may be that they simply continue                                                               
to be in disagreement over that  issue. With regard to the fiscal                                                               
notes, the  way this bill  has been restructured, they  would not                                                               
expect  the same  kind of  administrative  costs either  factored                                                               
into the rate the providers pay  to do Medicaid cost reporting or                                                               
into the  department's audits and  review of those  cost reports.                                                               
So although they  have not had an opportunity  to recalculate the                                                               
fiscal notes,  they would  expect a  substantial decrease  in the                                                               
amounts. The delayed effective date  means that they would not be                                                               
seeing FY 2010 expenditures with regard to the rate increase.                                                                   
CHAIR DAVIS  asked if  the department will  be submitting  a zero                                                               
fiscal note based on this CS.                                                                                                   
MR. SHERWOOD  answered that it  would not  be a zero  fiscal note                                                               
for  the  life  of  bill  and   that  there  may  be  some  small                                                               
administrative expenses  required this  year; he  reiterated that                                                               
they have  not had a chance  yet to recalculate the  fiscal notes                                                               
based on the committee substitute.                                                                                              
1:47:12 PM                                                                                                                    
SENATOR  DYSON  asked what  the  administration  would prefer  be                                                               
different in the rate-setting mechanism.                                                                                        
MR. SHERWOOD  responded that the  department doesn't  mind having                                                               
to do  the regulations, to set  rates or to subject  them to some                                                               
kind of  annual review,  but their  attorneys always  get nervous                                                               
when the specific  language about exactly what they  have to look                                                               
at when  they calculate the  rates goes  into statute. It  is one                                                               
more opportunity for  people to argue about  what the legislature                                                               
1:48:19 PM                                                                                                                    
SENATOR DYSON  said he  can appreciate that;  he wondered  if the                                                               
administration  is  concerned  that  this  puts  the  review  and                                                               
changing of the rates on "auto pilot" and out of their control.                                                                 
MR.  SHERWOOD said  they  are concerned  that  it would  restrict                                                               
their ability to constrain rates if necessary.                                                                                  
SENATOR DYSON  asked if the  state would  be required to  fund an                                                               
increase or if it would be subject to legislative appropriation.                                                                
MR. SHERWOOD was not sure, but  noted that the Division of Senior                                                               
and Disabilities  Services receives an appropriation  that covers                                                               
nursing homes and home and  community-based services and would be                                                               
affected by  both the rates they  pay and the people  they serve.                                                               
So  if there  is some  constraint in  their budget  and they  are                                                               
required by statute to give  a rate increase, then something else                                                               
would have to change... the number  of people they serve, some of                                                               
the service limitations or something else.                                                                                      
1:50:14 PM                                                                                                                    
SENATOR DYSON asked, "So you  are not required to provide service                                                               
to everyone who applies?"                                                                                                       
MR.  SHERWOOD explained  that for  Medicaid waiver  services they                                                               
are not  required to  serve everyone who  is eligible;  they tell                                                               
the federal government  how many people they are  going to serve.                                                               
They cannot  directly constrain  the number  of people  served by                                                               
personal   care  services,   although  they   could  change   the                                                               
eligibility criteria.                                                                                                           
1:51:23 PM                                                                                                                    
SENATOR DYSON  asked if they  have traditionally seen  line items                                                               
for these services showing up in the supplemental budget.                                                                       
MR. SHERWOOD said he did not know.                                                                                              
1:51:44 PM                                                                                                                    
SENATOR ELLIS  thanked Mr. Sherwood  for assisting  the committee                                                               
with this legislation and stated that  he wants it made clear for                                                               
the  record, that  the legislature  always retains  its right  to                                                               
appropriate.  The governor  does not  have  a budget;  she has  a                                                               
budget  proposal and  the legislature  appropriates the  money or                                                               
does not.  If there  is a  cost-based rate  review process  on an                                                               
annual  basis,  the  department  will  make  a  proposal  to  the                                                               
legislature  and  the  legislature  will fund  or  not  fund  the                                                               
services as they do in all  other areas. While he appreciates the                                                               
department's   discomfort  with   setting  cost-based   rates  in                                                               
statute, all  logic dictates  that costs  would be  a significant                                                               
factor  in the  setting  of rates;  so he  does  not believe  the                                                               
committee has  gone beyond reason  in this legislation.  They are                                                               
trying  to set  up a  system to  get a  better handle  on how  to                                                               
establish those  rates and ultimately  any system  of rate-review                                                               
would consider the  cost of providing these services  by home and                                                               
community-based services just like they  do for nursing homes and                                                               
SENATOR ELLIS  added that he  has been  surprised by some  of the                                                               
people  in   the  legislative  process   who  are   viewing  this                                                               
legislation positively as a management  tool for the legislature.                                                               
He asked Mr.  Sherwood to comment on the report  and how it might                                                               
be used to  help the department and the legislature  to be better                                                               
policy makers and budget writers.                                                                                               
1:54:48 PM                                                                                                                    
MR. SHERWOOD  said he's glad  Senator Ellis asked  that question.                                                               
The department  sees the report  as a vehicle  for accountability                                                               
to give them  a forum in which  to state what they  are doing and                                                               
encourage open  discussion about  it. As  the talking  about this                                                               
report, he was reminded of  the annual developmental disabilities                                                               
wait-list;  by providing  that information  to people,  they have                                                               
been  able to  sustain  substantial progress  at removing  people                                                               
from  the wait-list  and getting  them into  service. They  think                                                               
this report will  provide a similar vehicle  for discussion about                                                               
rates and to  see if the legislature supports  the direction they                                                               
are going.                                                                                                                      
1:56:12 PM                                                                                                                    
SENATOR ELLIS commented that reports  required by the legislature                                                               
are sometimes seen  by departments as a hassle and  he is pleased                                                               
that  DHSS  thinks  this  is  a  good idea;  it  can  be  a  good                                                               
management tool.                                                                                                                
1:56:41 PM                                                                                                                    
CHAIR  DAVIS  said   she  is  a  co-sponsor  on   this  bill  and                                                               
appreciates the work that has been  put into it, but she does not                                                               
think  this gets  them where  they  need to  be. She  has a  real                                                               
problem with  the two-year  delay when  they've been  waiting for                                                               
years for this  rate review to be completed so  they can begin to                                                               
give these organizations the increases  they need; she gets calls                                                               
almost daily  from people who  are concerned about lack  of money                                                               
to run  their programs. Just today  she received a letter  from a                                                               
grantee saying that they had just  been through a rate review and                                                               
were told  they have to hire  4.5 more staff members  in order to                                                               
continue the program; they said  it will cost them about $300,000                                                               
and yet  the state is  not going to assist  them in any  way with                                                               
funding. She  believes there should be  some increase forthcoming                                                               
during this 90-day session.                                                                                                     
1:58:24 PM                                                                                                                    
MR.  SHERWOOD  said the  department's  concern  with the  delayed                                                               
effective date  had to  do with  having a  statutory rate-setting                                                               
mechanism  in place  that they  could implement  and be  ready to                                                               
comply with  when the statute becomes  effective. Experience with                                                               
their contractors,  Meyers and Stouffer,  didn't get them  as far                                                               
as they'd hoped it would toward  determining how to do that rate-                                                               
setting or  get reasonable cost information  from providers. They                                                               
don't want to  put anyone in the position of  having to come into                                                               
statutory  compliance immediately.  That said,  they do  have the                                                               
ability  through  regulation to  change  rates  and if  there  is                                                               
adequate  funding in  the budget  they can  look at  changing the                                                               
rates in that way.                                                                                                              
2:00:06 PM                                                                                                                    
CHAIR DAVIS  asked if he  is saying there is  a way to  provide a                                                               
rate increase immediately.                                                                                                      
MR. SHERWOOD  said there is no  reason they can't; it  depends on                                                               
the availability of funds.                                                                                                      
2:00:54 PM                                                                                                                    
SENATOR  ELLIS  noted  that  the House  and  Senate  HSS  finance                                                               
subcommittees are  in the process  of reviewing  the department's                                                               
budget and  asked what  line item  would need  to increase  for a                                                               
rate adjustment in the near term.                                                                                               
MR.  SHERWOOD  said   it  would  be  primarily   the  Senior  and                                                               
Disabilities  Medicaid Services;  if  they want  to increase  the                                                               
amount for assisted living homes  paid through the General Relief                                                               
Assisted Living and Adult Protective  Services, that would be the                                                               
Community and  Protection section of the  Senior and Disabilities                                                               
Services budget.                                                                                                                
SENATOR  ELLIS  asked if  he  would  be  willing to  provide  the                                                               
committee  with two  or three  options regarding  what amount  of                                                               
money  would need  to  be  appropriated for  those  lines in  the                                                               
budget  to provide  for a  reasonable rate  increase in  the near                                                               
term;  they   will  forward  that  information   to  the  finance                                                               
2:02:19 PM                                                                                                                    
MR. SHERWOOD said he believes he can.                                                                                           
2:02:38 PM                                                                                                                    
SENATOR PASKVAN said, as he  understands it, while the department                                                               
may have the  option of providing personal care  in a recipient's                                                               
home, he  wonders what options  the department can exercise  if a                                                               
person has to be institutionalized.                                                                                             
MR. SHERWOOD was not sure  he understood the question. If someone                                                               
is institutionalized and  goes into a nursing home  or a facility                                                               
for the developmentally  disabled, he said, that  person is still                                                               
covered in  the same  budget component  for Medicaid,  the Senior                                                               
and Disabilities Services; it would  just be paid for a different                                                               
provider  and those  rates are  established  under the  statutory                                                               
authority in [AS 4]7.07.070. He  wondered whether he had answered                                                               
Senator Paskvan's question.                                                                                                     
SENATOR PASKVAN clarified that he  is trying to establish whether                                                               
people might  not be  covered if  they are  staying at  home, but                                                               
must be covered if they are in an institution.                                                                                  
MR.  SHERWOOD  confirmed that  there  is  mandatory coverage  for                                                               
individuals  in an  institutional setting,  but personal  care is                                                               
either  provided  through  state   option  or  through  home  and                                                               
community-based waivers,  which are  essentially a  state option.                                                               
With regard  to assisted living  services, some of  what Medicaid                                                               
will not cover  falls under the adult protection  statutes and is                                                               
covered at 100 percent general funds.                                                                                           
2:04:56 PM                                                                                                                    
SENATOR PASKVAN  stated that the  cost is less for  personal care                                                               
services in a person's own home.                                                                                                
MR. SHERWOOD agreed that is generally the case.                                                                                 
SENATOR ELLIS asked  if it is a policy of  the state to encourage                                                               
a person  to stay in  the least restrictive,  most cost-effective                                                               
level of care.                                                                                                                  
MR.  SHERWOOD  assured  him  that   is  correct;  the  department                                                               
attempts  to   offer  people  the   option  of  staying   out  of                                                               
institutions if that is their choice.                                                                                           
2:05:58 PM                                                                                                                    
CHAIR  DAVIS  asked  if  personal   care  assistants  (PCAs)  are                                                               
included in the bill now.                                                                                                       
MR. SHERWOOD answered that they are.                                                                                            
CHAIR  DAVIS  said she  has  decided  to  hold  SB 32  to  gather                                                               
additional information.                                                                                                         

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