Legislature(2015 - 2016)BUTROVICH 205

04/15/2015 08:00 AM Senate STATE AFFAIRS

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Time and Date Change --
Moved CSSSSB 1(STA) Out of Committee
Heard & Held
Moved CSSB 89(STA) Out of Committee
Moved HB 142 Out of Committee
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
         SB 74-MEDICAID REFORM/PFD/HSAS/ER USE/STUDIES                                                                      
9:03:57 AM                                                                                                                    
CHAIR STOLTZE announced the consideration of SB 74.                                                                             
9:04:07 AM                                                                                                                    
SENATOR COGHILL moved  that the committee adopt the  CS for SB 74,                                                              
[version 29-LS0692\F], as the working document.                                                                                 
CHAIR STOLTZE objected for discussion purposes.                                                                                 
9:04:28 AM                                                                                                                    
HEATHER  SHADDUCK,   Staff,  Senator  Pete  Kelly,   Alaska  State                                                              
Legislature, Juneau,  Alaska, reviewed the  changes made to  SB 74                                                              
as follows:                                                                                                                     
     Section 1, page 1, line 10 through page 2, line 3:                                                                         
        · This sections allows DHSS to enter into a                                                                             
          contract  through the  competitive bidding  process                                                                   
          under  the  State  Procurement   Code  for  durable                                                                   
          medical  equipment  or  specific  medical  services                                                                   
          provided in the Medicaid program.                                                                                     
MS. SHADDUCK  detailed that  the new  Section 1  has no  impact on                                                              
the current  used durable medical  equipment bill that  is running                                                              
through  both bodies.  She  continued to  address  the changes  as                                                              
     Section 2, page 2, lines 4-16:                                                                                             
        · Subsection   (a)   directs    the   department   to                                                                   
          establish   a  computerized   income,  asset,   and                                                                   
          identity  eligibility verification  system for  the                                                                   
          purpose   of  verifying  eligibility,   eliminating                                                                   
          duplication  of  public  assistance  payments,  and                                                                   
          deterring   waste   and   fraud   in   the   public                                                                   
          assistance programs.                                                                                                  
        · Subsection (b) directs the department to enter                                                                        
          into  a competitively  bid contract  with a  third-                                                                   
          party  vendor  for  the   eligibility  verification                                                                   
          system.  The department  may also  contract with  a                                                                   
          third-party   vendor  to  provide   information  to                                                                   
          facilitate   reviews   of   recipient   eligibility                                                                   
          conducted by the department.                                                                                          
     Section 4 (Section 2 in Version S):                                                                                        
        · Page 4, line 14-22, (8) redesigning the payment                                                                       
          process,   changes   specifically    list   payment                                                                   
          reforms that should be included:                                                                                      
             ƒ(A)   premium   payments    for   centers   of                                                                   
             ƒ(B)     penalties    for     hospital-acquired                                                                   
               infections,    readmissions,    and    outcome                                                                   
             ƒ(C) bundled payments for specific episodes                                                                       
               of care; and                                                                                                     
             ƒ(D) global payments for contracted payer,                                                                        
               primary care managers, and case managers for                                                                     
               a recipient or for care related to a                                                                             
               specific diagnosis                                                                                               
        · Page 6, lines 7-8, adds new (14) to the annual                                                                        
          report related  to Medicaid reform. DHSS  will also                                                                   
          report  on the  cost, in state  and federal  funds,                                                                   
          for   providing    options   services    under   AS                                                                   
          47.07.030(b), the Medicaid program.                                                                                   
     Section 5, page 6, lines 14-19:                                                                                            
        · Requires the Legislature to approve any new                                                                           
          additional  groups added  to  the Medicaid  program                                                                   
          on or after March 23, 2010.                                                                                           
     Section 12 - (Section 9 in Version S):                                                                                     
        · At the request of Legislative Legal, made                                                                             
          technical   fixes   to   the   conditional   effect                                                                   
          language   in  Subsections   (a)  through  (e)   by                                                                   
          replacing   "that   section"  with   the   specific                                                                   
          provision reference of the bill.                                                                                      
     Conforming changes were made to renumber sections and                                                                      
     references to specific sections.                                                                                           
9:08:17 AM                                                                                                                    
SENATOR  WIELECHOWSKI  asked what  the  rationale  was behind  the                                                              
date: March 23, 2010, in Section 5, page 6.                                                                                     
MS.  SHADDUCK   answered  that   the  intent   was  to   have  the                                                              
Legislature   approve   additional   groups  prior   to   Medicaid                                                              
expansion. She  noted that  the date is  an official  reference to                                                              
when the Affordable Care Act (ACA) went into effect.                                                                            
SENATOR WIELECHOWSKI  asked if any legal opinions  were sought out                                                              
as to whether the section potentially violates federal law.                                                                     
MS. SHADDUCK answered no.                                                                                                       
SENATOR  WIELECHOWSKI   noted  that  Legislative   Legal  Services                                                              
advised his office  that the section potentially  violates federal                                                              
law.   He  added   that   his  office   will   seek  out   further                                                              
MS. SHADDUCK related  that the U.S. Supreme Court  rule will cover                                                              
any groups  that are optional  under ACA.  She said she  will talk                                                              
to Legislative Legal Services to get some legal opinions.                                                                       
SENATOR WIELECHOWSKI  stated that he  would like to hear  from the                                                              
Department of Health and Social Services (DHSS).                                                                                
9:10:56 AM                                                                                                                    
VALERIE DAVIDSON,  Commissioner, Alaska  Department of  Health and                                                              
Social Services,  Juneau, Alaska, stated that she  will comment on                                                              
sections that the department has concerns over as follows:                                                                      
     Section   2,  the   department   actually   has  a   new                                                                   
     computerized   public   assistance    system:   Alaska's                                                                   
     Resource  for Integrated  Eligibility Services  (ARIES).                                                                   
     ARIES pretty  much meets all of the  requirements except                                                                   
     the only  feature it does not  have is an  income, asset                                                                   
     and  identity eligibility  verification  system. We  are                                                                   
     anticipating  that this section  would really require  a                                                                   
     plug-in  feature   for  the  existing  system   and  not                                                                   
     require  us  to  go  out and  develop  an  entirely  new                                                                   
     system which  could cost millions,  but a plug-in  would                                                                   
     be a lot  more affordable and efficient; if  that is the                                                                   
     intent of  the CS,  then we are  a lot more  comfortable                                                                   
     with  that, we  anticipate a  fiscal note  for this  and                                                                   
     that will be forthcoming from our vendor.                                                                                  
     Page  4,  Section  8,  lines 14-21,  we  are  fine  with                                                                   
     these,  the  only  question  we  had  was  on  line  19,                                                                   
     whether  we  might  consider   changing  "and"  to  "or"                                                                   
     because  the bundle  payments  and global  payments  may                                                                   
     conflict;  if on the  other hand this  was to develop  a                                                                   
     payment process  that includes these options,  then that                                                                   
     is  something  certainly a  little  bit easier  to  live                                                                   
     with, but  we want  to make sure  that by having  "and,"                                                                   
     those  don't present  the opportunity  to conflict  with                                                                   
     each other.                                                                                                                
     Page 6, Section  5, this section appears to  require the                                                                   
     department  to seek  the approval  from the  Legislature                                                                   
     for any  mandatory coverage  for Medicaid. The  way that                                                                   
     Medicaid is  administered, there are mandatory  services                                                                   
     and  there  are optional  services.  Mandatory  services                                                                   
     are exactly  that, they are mandatory.  The department's                                                                   
     position is  it's highly unusual  for the department  to                                                                   
     be  required  to  seek  the  advanced  approval  of  the                                                                   
     Legislature  to  comply  with   federal  law.  Mandatory                                                                   
     groups  do  actually get  added.  We  have a  couple  of                                                                   
     examples  and quite frankly,  we don't want  to be  in a                                                                   
     position  of jeopardizing  our  entire Medicaid  program                                                                   
     simply  because we were  not required  with a  mandatory                                                                   
     provision of federal law.                                                                                                  
She  stated   that  Deputy  Commissioner  Sherwood   will  provide                                                              
examples of where some mandatory groups have been added.                                                                        
9:15:32 AM                                                                                                                    
JON  SHERWOOD,   Deputy  Commissioner,  Medicaid   &  Health  Care                                                              
Policy, Alaska Department  of Health and Social  Services, Juneau,                                                              
Alaska, explained  that mandatory  groups do  not get  added often                                                              
and  typically  are  part  of larger  structural  changes  to  the                                                              
Medicaid  program's barter  healthcare  system.  He detailed  that                                                              
examples  include   special  Medicare   beneficiaries   which  are                                                              
mandatory  groups  created to  provide  assistance  to low  income                                                              
Medicare   recipients  with   their   co-payments,  premiums,   or                                                              
deductible  expenses.  He  said  another example  of  a  mandatory                                                              
group that  was added by the ACA  was for children who  age-out of                                                              
state  foster  care, a  mandatory  coverage  group that  would  be                                                              
impacted by the provision.                                                                                                      
9:17:37 AM                                                                                                                    
CHAIR STOLTZE  said the  committee was  not dealing with  Medicare                                                              
expansion,  but  noted  that  there   was  a  lot  of  intertwined                                                              
connectivity. He asked if Section 5 is a deal breaker.                                                                          
COMMISSIONER  DAVIDSON   declared  that  the   department  opposes                                                              
Section 5.                                                                                                                      
CHAIR STOLTZE asked  if the department vigorously  opposes Section                                                              
COMMISSIONER DAVIDSON answered yes.                                                                                             
SENATOR COGHILL opined  that Section 5 appears to  say if Congress                                                              
is  going to  unilaterally  change  the  state's budget  that  the                                                              
Legislature should have a say.                                                                                                  
9:19:09 AM                                                                                                                    
MR.  SHERWOOD  answered  that  the  department  typically  has  to                                                              
submit a  new plan amendment  for a new  federal mandate  in order                                                              
to  assure implementation.  He added  that  the Legislature  would                                                              
become  aware of the  new mandate  through the  budget process  if                                                              
increased  expenditures are  required. He  revealed that  there is                                                              
no  direct  approval for  a  federal  mandate and  state  statutes                                                              
instruct  compliance with  the federal law,  both for  eligibility                                                              
categories and services.                                                                                                        
SENATOR COGHILL  commented that he  is willing to take  the chance                                                              
with  the provision  because  Medicaid has  always  been called  a                                                              
state-federal  partnership.  He  remarked that  unilateral  action                                                              
can  quickly  overrule  the  state  and  create  difficulties.  He                                                              
remarked that  he would  want to  find out prior  to a  bill being                                                              
sent  to the  Legislature  and the  mandate  is  already set  into                                                              
motion.  He  opined that  more  Medicaid  mandates will  occur  as                                                              
Medicare  starts  to  wonder more  frequently  into  the  Medicaid                                                              
wrap-around services.                                                                                                           
CHAIR STOLTZE  remarked that  he has the  same concerns  about the                                                              
state's  appropriations   and  financial  responsibilities   where                                                              
Alaska  is  on the  hook  in  its relationship  with  the  federal                                                              
9:21:54 AM                                                                                                                    
SENATOR HUGGINS  asked if illegal  aliens have access  to Medicare                                                              
or Medicaid via presidential executive orders.                                                                                  
MR. SHERWOOD  answered  that the  general rule  for Medicaid  is a                                                              
person must be a  U.S. citizen or a legal permanent  resident that                                                              
has been  present in the  U.S. for at  least five years.  He noted                                                              
that one exception applies to emergency services.                                                                               
9:24:12 AM                                                                                                                    
CHAIR STOLTZE  noted that his office  received an e-mail  prior to                                                              
the committee  meeting from Mr.  Tony Newman, Legislative  Special                                                              
Assistant  for DHSS.  He asked if  Mr. Newman's  e-mail should  be                                                              
included as the department's position.                                                                                          
COMMISSIONER DAVIDSON answered yes.                                                                                             
SENATOR WIELECHOWSKI  asked if Commissioner Davidson  supported SB
COMMISSIONER DAVIDSON  answered that DHSS  has no position  on the                                                              
bill,  but  opposes  Section  5. She  added  that  the  department                                                              
believes that reform  and expansion go hand-in-hand.  She said the                                                              
department  would like to  see a  Medicaid expansion provision  in                                                              
the bill.                                                                                                                       
SENATOR  HUGGINS  asked  to  verify that  the  department  has  no                                                              
position on the bill.                                                                                                           
COMMISSIONER  DAVIDSON  reiterated  that  the department  has  not                                                              
taken an  overall position  on the bill,  but the department  does                                                              
oppose Section 5.                                                                                                               
SENATOR  HUGGINS commented  that  he see  reform as  an avenue  to                                                              
have a  conversation about expansion.  He remarked  that expansion                                                              
is not part  of the bill and  he's a bit disappointed.  He thanked                                                              
Commissioner Davidson for stating her position.                                                                                 
9:26:34 AM                                                                                                                    
SENATOR WIELECHOWSKI  noted that  the Governor has  introduced his                                                              
own  bill   to  reform   and  expand   Medicaid.  He   asked  that                                                              
Commissioner Davidson  describe some of the reform  efforts in the                                                              
Governor's bill and how much the state would save.                                                                              
COMMISSIONER  DAVIDSON  answered that  SB  74 and  the  Governor's                                                              
bill are  closely aligned  in terms of  reform efforts.  She noted                                                              
that  some  of the  provisions  in  the Governor's  bill  includes                                                              
specific language on the following:                                                                                             
        · Use an 1115 Waiver to negotiate with the Centers for                                                                  
          Medicare & Medicaid Services (CMS) that will allow the                                                                
          state to take advantage of 100 percent federal match.                                                                 
        · Work with the tribal health system to enhance their                                                                   
          ability to provide care for beneficiaries.                                                                            
        · Engage with an independent third party to make                                                                        
          recommendations and report at the beginning of the                                                                    
          next session for a provider-tax.                                                                                      
She  detailed  that  in  order   to  implement  the  provider-tax,                                                              
separate  legislation  would  be   required.  She  disclosed  that                                                              
Alaska is  the only  state without  a provider-tax. She  explained                                                              
that  most states  typically impose  a  provider-tax on  hospitals                                                              
and nursing homes.                                                                                                              
COMMISSIONER  DAVIDSON  set  forth  that  Medicaid  expansion  and                                                              
reform is healthy for Alaskans and detailed as follows:                                                                         
   · Increases access to healthcare coverage.                                                                                   
   · Saves the state $107 million over the first 6 years.                                                                       
   · Saves resources that the state is currently paying for with                                                                
     100 percent from the General Fund.                                                                                         
   · Good for the economy by infusing over $1 billion in new                                                                    
     resources into Alaska.                                                                                                     
   · Acts as a catalyst for reform.                                                                                             
She  reiterated that  reform and  expansion  go hand-in-hand.  She                                                              
voiced that reform  is a constant process that happens  all of the                                                              
time.  She  asserted  that  DHSS  has  already  undertaken  reform                                                              
efforts based on  current and prior administrations.  She remarked                                                              
that since reform  efforts have been undertaken,  the state should                                                              
do expansion.                                                                                                                   
9:30:26 AM                                                                                                                    
CHAIR STOLTZE  noted that he had  asked at the  previous committee                                                              
meeting  that  Commissioner  Davidson   provide  a  projection  on                                                              
departmental  letterhead, absent  expansion,  for the  anticipated                                                              
growth in Medicaid up to 2030.                                                                                                  
COMMISSIONER    DAVIDSON   answered    that   Medicaid's    growth                                                              
projections are  expected to  range from $4.5  billion to  over $6                                                              
billion by  2032. She disclosed  that the projections do  not take                                                              
into  account   the  reform   efforts  that   the  department   is                                                              
undertaking. She  said DHSS recognizes  that the  Medicaid program                                                              
in its current form  is not sustainable and there's  no choice but                                                              
to reform.                                                                                                                      
9:32:30 AM                                                                                                                    
CHAIR  STOLTZE asked  if there  is  an aversion  to providing  the                                                              
committee with  a projection  document as part  of the  record. He                                                              
said a Medicaid  growth projection from DHSS is  an important part                                                              
of the record.                                                                                                                  
COMMISSIONER   DAVIDSON  replied  that   DHSS  will   provide  the                                                              
document to the committee.                                                                                                      
CHAIR  STOLTZE  noted  that his  request  will  give  Commissioner                                                              
Davidson an  opportunity to  provide her  own numbers  in contrast                                                              
to the projections that she has challenged.                                                                                     
SENATOR WIELECHOWSKI  asked how  much uncompensated care  there is                                                              
in  Alaska, who  pays for  the uncompensated  care,  and how  much                                                              
uncompensated  care  is expected  to  be  covered by  the  federal                                                              
government if Medicaid was expanded.                                                                                            
CHAIR  STOLTZE pointed  out that  the committee  does not  have an                                                              
expansion bill.  He said  the expansion bill  was not  referred to                                                              
the committee.                                                                                                                  
COMMISSIONER  DAVIDSON  answered  that  according  to  the  Alaska                                                              
State  Hospital  and Nursing  Home  Association  (ASHNHA),  Alaska                                                              
hospitals  provide   over  $100  million  in   uncompensated  care                                                              
annually. She  noted that  Arizona saw a  30 percent  reduction in                                                              
uncompensated  care during  its first  6 months  of expansion  and                                                              
added that ASHNHA  has testified that they projected  a 30 percent                                                              
drop in  their uncompensated  care.  She said  with regard  to who                                                              
pays  for uncompensated  care, everyone  does  because a  hospital                                                              
has to increase what they charge to recoup their loss.                                                                          
9:34:36 AM                                                                                                                    
CHAIR STOLTZE noted  that the Governor has said  that expansion is                                                              
reform.  He  asked   if  there  has  been  an   evolution  by  the                                                              
administration that just spending more money is not reform.                                                                     
COMMISSIONER  DAVIDSON  replied  that  she  does  not  recall  the                                                              
Governor  making  the  statement  that expansion  is  reform.  She                                                              
reiterated that  expansion and reform actually  goes hand-in-hand.                                                              
She opined that  if the Governor's position was  that expansion is                                                              
reform, then  he would  probably have introduced  a bill  that was                                                              
just  on expansion,  but he  instead chose  to do  a bill that  is                                                              
both expansion and reform.                                                                                                      
CHAIR STOLTZE commented  that there may have been  an evolution by                                                              
the Governor.                                                                                                                   
SENATOR HUGGINS  said there are studies that  indicate "ObamaCare"                                                              
has had  little or  no effect on  uncompensated care  or emergency                                                              
room usage.                                                                                                                     
9:36:46 AM                                                                                                                    
COMMISSIONER  DAVIDSON replied that  the states  in the  study may                                                              
have  benefited from  a  bill similar  to  Governor Walker's  that                                                              
requires  identifying someone  that  over  utilizes the  emergency                                                              
room department.                                                                                                                
SENATOR WIELECHOWSKI  noted that  Commissioner Davidson  mentioned                                                              
the total savings  on the Governor's reform bill  of $107 million.                                                              
He  said he  thought  the  total savings  over  6  years was  $330                                                              
9:38:27 AM                                                                                                                    
COMMISSIONER DAVIDSON  specified that the savings  for the state's                                                              
general fund would be $107.8 million in the first 6 years.                                                                      
CHAIR STOLTZE  pointed out  that an expansion  bill is  in another                                                              
committee.  He  asked  that  questions  be  general  and  not  too                                                              
involved in the expansion bill.                                                                                                 
SENATOR  WIELECHOWSKI  asked  why  the  state  should  expand  now                                                              
versus waiting until reforms kick in.                                                                                           
9:40:05 AM                                                                                                                    
COMMISSIONER  DAVIDSON asserted  that reforms  had already  kicked                                                              
in.   She  detailed   that  the   reforms  began   in  the   prior                                                              
administration  in addition  to the reforms  that were  undertaken                                                              
in December, including  benefits from the super-utilizer  program.                                                              
She  revealed  that  the  ACA's  enhanced  federal  match  of  100                                                              
percent  for  Medicaid  expansion  only lasts  through  2016.  She                                                              
detailed  that  the  state  has already  missed  $146  million  or                                                              
$400,000  per  day   from  the  federal  match   opportunity.  She                                                              
specified that  federal match  over the  coming calendar  years as                                                              
   · 2017: 95 percent                                                                                                           
   · 2018: 94 percent                                                                                                           
   · 2019: 93 percent                                                                                                           
   · 2020 and beyond: 90 percent.                                                                                               
She  noted that  93 percent  federal  match  is the  same for  the                                                              
state's  aviation or  runway improvements  and 90  percent is  the                                                              
same  match   for  transportation   and  road  improvements.   She                                                              
summarized that the  state has an opportunity to  make Alaskans as                                                              
healthy  and productive  as  possible  using 100  percent  federal                                                              
funds in the first year.                                                                                                        
9:42:28 AM                                                                                                                    
She  addressed  recent  testimony from  two  different  providers:                                                              
PeaceHealth   Hospital  from  Ketchikan   and  Central   Peninsula                                                              
Hospital  from Soldotna.  She detailed  that PeaceHealth  received                                                              
an  innovation grant  from  the Centers  for  Medicare &  Medicaid                                                              
Services  (CMS)  and  spent  $700,000  to be  able  to  lose  $1.5                                                              
million   in  order   to  improve   health   outcomes  for   their                                                              
population. Central  Peninsula said they had interest  in pursuing                                                              
a  Medicaid  demonstration  project described  in  the  Governor's                                                              
bill  that  would  change  the way  Medicaid  is  reimbursed.  She                                                              
specified that  Central Peninsula  preferred to use  the resources                                                              
from  Medicaid  expansion  because  they  would  not  realize  the                                                              
savings and make  much progress. She said similar  to PeaceHealth,                                                              
Central Peninsula intends to spend money to lose money.                                                                         
9:45:43 AM                                                                                                                    
BECKY HULTBERG,  President/CEO, Alaska State Hospital  and Nursing                                                              
Home  Association  (ASHNHA),  Juneau,   Alaska,  provided  general                                                              
comments on SB 74 as follows:                                                                                                   
     We've  had  a  really good  dialog  this  session  about                                                                   
     reform and  I think that is  healthy and it's  also step                                                                   
     one  of what needs  to be  an ongoing  dialog. We  agree                                                                   
     with  the  sponsor  and  the  department  that  Medicaid                                                                   
     costs are growing at an unsustainable rate.                                                                                
     In  my  past  job  I  sat  in  this  building  and  said                                                                   
     healthcare  costs are growing  at an unsustainable  rate                                                                   
     and that is  still the case; but, I think  to understand                                                                   
     why  healthcare costs  are growing  at an  unsustainable                                                                   
     rate, we have  to look at how we pay for  healthcare and                                                                   
     what  we pay  for, I'm  going to  take a bit  of a  step                                                                   
     back  and talk  about that  because it  is essential  to                                                                   
     reform  and how  reform can  actually  move forward  and                                                                   
     make  change. Our  healthcare payment  system right  now                                                                   
     incentivizes  the wrong things.  We work within  what is                                                                   
     called  a fee-for-service system  which basically  means                                                                   
     providers  get   a  fee  for  each  service   that  they                                                                   
     provide. Providers  are thus financially  rewarded based                                                                   
     on  the volume  of care  provided,  not necessarily  the                                                                   
     value of that  care, value meaning that the  quality and                                                                   
     cost of that  care are both considered. So  we know that                                                                   
     nationally  the trend  in  healthcare  is toward  paying                                                                   
     for  value,  toward  paying for  quality  outcomes,  and                                                                   
     toward  incentivizing  providers  for  reduced  cost  in                                                                   
     getting  those  outcomes;  but  this is  a  really  huge                                                                   
     shift  in  how care  is  delivered  and how  payment  is                                                                   
     made,  it  is going  to  take  time,  it's going  to  be                                                                   
     disruptive,  and  systematic   change  will  not  happen                                                                   
     until  those financial  incentives  change. Portions  of                                                                   
     this bill do  begin to address that question  of payment                                                                   
     reform.   Some   payers   are    already   making   this                                                                   
     transformation,  Medicare is  moving toward  value-based                                                                   
     purchasing,  pretty  aggressively;  so this  is  coming,                                                                   
     the question  for us is how  we are going to  respond in                                                                   
     this  environment. Providers  are working  to make  this                                                                   
     transition    in   a    pretty   challenging    economic                                                                   
     environment  and I just  want to  take a minute  because                                                                   
     again, I think this is essential to reform.                                                                                
9:48:12 AM                                                                                                                    
MS. HULTBERG continued her overview as follows:                                                                                 
     Hospitals  are a unique  industry sector  in many  ways.                                                                   
     One of  the most significant  ways that our  industry is                                                                   
     unique  is that  we  are legally  required  to give  our                                                                   
     services  away  for  free, that's  because  the  federal                                                                   
     Emergency  Medical  Treatment  and Labor  Act  (EMTALA),                                                                   
     requires  hospitals to  take care of  patients that  are                                                                   
     present at  the emergency room  whether they can  pay or                                                                   
     not;  this  uncompensated  care  amounts  to  over  $100                                                                   
     million  per year  and  that's a  conservative  estimate                                                                   
     for  Alaska  hospitals, some  hospitals  have  testified                                                                   
     that it is between 10 and 20 percent of their charges.                                                                     
     Alaska hospitals'  other area  of financial pressure  is                                                                   
     Alaska hospitals  are facing very significant  financial                                                                   
     pressures  from the Medicare  program. Alaska  Hospitals                                                                   
     will see  $600 million  in Medicare  reductions in  a 15                                                                   
     year time  horizon; that  started in  2010, it goes  out                                                                   
     to 2024.  There are another  $300 million of  cuts under                                                                   
     consideration,  which  could  bring  the total  cuts  to                                                                   
     Alaska hospitals  to almost  $900 million, that's  a lot                                                                   
     of money coming out of the system.                                                                                         
     The cuts have  come through a couple of ways  and I want                                                                   
     to  address that  and I  think  part of  this refers  to                                                                   
     something  Senator Huggins  has  spoken about  regarding                                                                   
     Medicare  crowd-out. Some of  those cuts  did come  as a                                                                   
     result  of ACA, between  $250 million  and $300  million                                                                   
     of  those  cuts  came  about because  of  the  act.  The                                                                   
     assumption  was that  if uncompensated  care goes  down,                                                                   
     which  it should, if  people have  coverage through  the                                                                   
     exchanges or  through Medicaid expansion,  the hospitals                                                                   
     could  absorb Medicare  cuts.  In states  that have  not                                                                   
     expanded Medicaid,  those uncompensated  care reductions                                                                   
     have  been  much,  much  less.   The  concern  for  non-                                                                   
     Medicaid  expansion-states  is  that the  hospitals  are                                                                   
     going  to take  those  cuts regardless.  Now  I want  to                                                                   
     point  out that  while some  of the  cuts originated  in                                                                   
     ACA,  they  are now  not  really  linked to  it  because                                                                   
     Republican  budget proposals  have kept  the cuts,  even                                                                   
     as  they  propose  repealing  the ACA,  so  we  have  to                                                                   
     assume  those cuts  are here  to  stay and  they are  an                                                                   
     economic reality  that our  industry is now  learning to                                                                   
     deal with.                                                                                                                 
     So in  this economic environment  it is kind of  hard to                                                                   
     talk  about  reform because  what  do  you want  out  of                                                                   
     reform?  The goal of  reform is  bending the cost  curve                                                                   
     and  reducing   the  cost   of  healthcare.  So   in  an                                                                   
     environment  where  we  are  taking  money  out  of  the                                                                   
     system, we  are saying now we  need to take more  out of                                                                   
     the  system, that's  a really  challenging  conversation                                                                   
     to have with any industry.                                                                                                 
9:50:42 AM                                                                                                                    
MS. HULTBERG continued her overview as follows:                                                                                 
     But  we  are here  supporting  reform  for a  couple  of                                                                   
     reasons. First,  we know it's the right thing  to do and                                                                   
     it's absolutely  what we  have to do  as an industry  to                                                                   
     survive.  Secondly,  because  we have  this  opportunity                                                                   
     with  the  carrot  of Medicaid  expansion  to  put  some                                                                   
     money back into  the system to help us reform  as we are                                                                   
     taking   money   out  and   so   I  think   that's   why                                                                   
     understanding that  this bill is related to  reform that                                                                   
     from  a  hospital  perspective  it's hard  to  have  the                                                                   
     reform   conversation  without   having  the   expansion                                                                   
     conversation. Couple  quick reasons, Medicaid  reform is                                                                   
     not a point  in time event, it's an ongoing  process and                                                                   
     again,  I   want  to  thank   this  committee   and  the                                                                   
     Legislature  for really  considering  these issues  this                                                                   
     year.  We  will  be  successful in  reform  and  we  are                                                                   
     having  these conversations  every year,  so I think  it                                                                   
     has  been a good  dialog, but  we shouldn't  necessarily                                                                   
     wait  for  reform  because  we will  never  arrive,  the                                                                   
     industry is  too dynamic, it  is too complex, and  it is                                                                   
     changing  too  fast to  ever  say  that we  have  really                                                                   
     arrived  at   reform.  Second,  innovation   and  change                                                                   
     require  capital.  For  any  business  to  fundamentally                                                                   
     change  its business  model,  and that's  what is  being                                                                   
     required   in  healthcare   right  now,   that  is   not                                                                   
     something  that can  be done without  an investment  and                                                                   
     it is  certainly not something  that is easy to  do when                                                                   
     you are taking  money out of that system,  which is what                                                                   
     is happening  right now. So  if we are going  to succeed                                                                   
     at  reform,  we are  going  to have  to  find  a way  to                                                                   
     invest  to  change  how care  is  delivered,  and  we're                                                                   
     going  to  have  payers  who are  willing  to  have  the                                                                   
     conversations about  how do we pay for value  instead of                                                                   
     paying  for volume, those  two things  have to go  hand-                                                                   
     As  the  commissioner  mentioned,  PeaceHealth-Ketchikan                                                                   
     talked about  how they have  been successful  at reform,                                                                   
     they  have been  successful at  coordinating care;  they                                                                   
     received  a $3 million  innovation  grant to fund  their                                                                   
     project,  the result  of that  project  has been  better                                                                   
     quality outcomes  and reduced  revenue at the  hospital.                                                                   
     So  you have  to  ask the  question,  under our  current                                                                   
     system,  if they  are to  reform without  a grant,  they                                                                   
     will be  spending money to  lose money to improve  care;                                                                   
     there are not many businesses that choose that path.                                                                       
     So how  do we as  a state help  to drive reform  in that                                                                   
     economic  environment? The  answer is  we have to  help,                                                                   
     especially  our  smaller  facilities  that do  not  have                                                                   
     financial  capacity, identify  resources  that they  can                                                                   
     invest  in   reform  and  then  we  have   to  have  the                                                                   
     conversation about  how we pay for value so  that we can                                                                   
     sustain  that  reform;  that's   really  where  Medicaid                                                                   
     expansion   comes   in   because    the   reduction   in                                                                   
     uncompensated care  improves margins, which  then allows                                                                   
     for   the  risk   capital  for   innovation.  From   our                                                                   
     standpoint,  this is  an  issue on  many  levels, it  is                                                                   
     from  a hospital  perspective an  important issue  about                                                                   
     providing  care for  the  vulnerable  in our  community,                                                                   
     it's an  economic issue, and  it's a fiscal  issue; but,                                                                   
     it's also very  much an issue about how we  are going to                                                                   
     sustain  the   business  model  of  the   hospital  that                                                                   
     provides  care in  the community  and  that's, I  think,                                                                   
     for us  a really important  conversation. Our  hospitals                                                                   
     cannot  pick  up  their practices  and  move,  they  are                                                                   
     here,  they  are integral  parts  of the  community  and                                                                   
     often  they are  the  backbone of  a  community. So  the                                                                   
     question for  us and why we  are here saying we  want to                                                                   
     reform  is  that  we  know  we  must  reform  to  remain                                                                   
     viable,  but  the landscape  looks  really  challenging.                                                                   
     According to  the National Rural Health  Association, 48                                                                   
     Critical  Access  Hospitals   (CAH)  have  closed  their                                                                   
     doors. CAH are  hospitals below 25 beds, 48  have closed                                                                   
     their doors  since 2010, and  an estimated 300  more are                                                                   
     at risk.  As we look at  this era of disruptive  change,                                                                   
     we have  to figure out how  we navigate it  and navigate                                                                   
     it in  an environment of  reduced resources;  we believe                                                                   
     reform  is critical  to that  conversation  but we  also                                                                   
     believe   that    expansion   is   critical    to   that                                                                   
     So  Mr. Chairman,  those are  just  my general  comments                                                                   
     about  the  bill. I  am  happy  to answer  any  specific                                                                   
     questions  about the  legislation. I  think we  believe,                                                                   
     again,  reform  and expansion  should  go  hand-in-hand,                                                                   
     but we do  appreciate the efforts of the  bill's sponsor                                                                   
     to address this difficult question of reform.                                                                              
9:55:23 AM                                                                                                                    
CHAIR STOLTZE  pointed out that  the President said ACA  was going                                                              
to  be established  to  cover people  with  better healthcare  and                                                              
spend less  money. He asked if  Ms. Hultberg was  actually shocked                                                              
that the things the President said are a little upside down.                                                                    
MS.  HULTBERG  replied  that the  healthcare  industry  was  going                                                              
through   changes  before   ACA  and  noted   that  the   economic                                                              
environment  for  healthcare was  difficult  before  the ACA.  She                                                              
disclosed  that  businesses were  driving  their  own change.  She                                                              
added that  commercial payers are  the best payers  for hospitals.                                                              
She  opined  that ACA  accelerated  change,  but  it was  not  the                                                              
driving  force  necessarily for  some  of  the changes  that  were                                                              
currently  being seen. She  disclosed that  the American  Hospital                                                              
Association  supported  ACA  and  was willing  to  work  with  the                                                              
administration because  of the increased  coverage covered  by the                                                              
act.  She summarized  that  the state  has  to figure  out how  to                                                              
navigate  the current  business  landscape  in order  to  maintain                                                              
hospitals,  provide   quality  care,  and  ensure   continuity  of                                                              
services regardless  of what an individual thinks  might happen in                                                              
the future or what happened in the past.                                                                                        
CHAIR STOLTZE opined  that "reform" is a broad  and nebulous term.                                                              
He  said  the  terms  "cost  control,"   "cost  containment,"  and                                                              
"sustainability"  narrows the discussion  in making  a sustainable                                                              
program. He remarked  that the approximate $ 6  billion projection                                                              
by 2032  would be  a pretty  healthy chunk  of the state's  budget                                                              
with Permanent  Fund earnings  used well  before federal  mandates                                                              
are met.  He reiterated  that the  term "reform"  leaves a  lot of                                                              
the other  discussions  off of the  table because  everybody  is a                                                              
9:58:41 AM                                                                                                                    
MS.  HULTBERG affirmed  Chair  Stoltze's  point and  related  that                                                              
Medicaid reform can be divided into three "buckets" as follows:                                                                 
   1. Programmatic Reform: making reforms in the existing                                                                       
   2. Benefit Redesign: looking at what other states have done to                                                               
     things like benefit plans and co-payments.                                                                                 
   3. Payment Reform: making sure the state is paying for the                                                                   
     outcomes it wants.                                                                                                         
CHAIR  STOLTZE stated  that he  is  a little  concerned about  the                                                              
sentiment,  "Pass the  bill  and we'll  work  on it."  He said  he                                                              
wants  to make  sure the  committee  understands how  the bill  is                                                              
going  to affect  the state  and  the providers.  He opined  about                                                              
seeing an awakening  of the providers realizing  that expansion is                                                              
not just a free check.                                                                                                          
SENATOR  WIELECHOWSKI commented  that  ASHNHA has  a  lot of  non-                                                              
profits who are  providing care and not making a  profit off of it                                                              
because the government  requires that care be provided  for anyone                                                              
that  walks  in  the  door. He  said  providers  are  losing  $100                                                              
million per  year in uncompensated  care and  asked if it  is fair                                                              
to  say  that the  Legislature  has  the  ability to  help  ASHNHA                                                              
members recover  a significant portion from uncompensated  care by                                                              
expanding Medicaid.                                                                                                             
MS. HULTBERG answered  yes. She asserted that expansion  will help                                                              
ASHNHA help  the state  invest in  the kind  of care redesign  and                                                              
reform  that assists  in lowering  the  cost curve  over the  long                                                              
term which is a real win for everyone.                                                                                          
SENATOR WIELECHOWSKI  stated that the current  healthcare business                                                              
model  is  not  good.  He  remarked  that  the  healthcare  system                                                              
continues to need  significant improvement and he was  glad to see                                                              
the  committee   addressing  reform.   He  asked  if   any  ASHNHA                                                              
organizations  will  go  out  of  business  if  they  continue  to                                                              
provide $100 million-plus in uncompensated care.                                                                                
10:01:42 AM                                                                                                                   
MS. HULTBERG  revealed that  hospital finances  are a  significant                                                              
spectrum where  some facilities are  very profitable and  some are                                                              
on the margin.  She remarked that she is concerned  about ASHNHA's                                                              
Critical  Access Hospitals  as  the economic  environment  becomes                                                              
increasingly difficult.                                                                                                         
SENATOR  WIELECHOWSKI   commented  that  he  would   hate  to  see                                                              
hospitals  shutdown  and  Alaskans  lose access  to  medical  care                                                              
because  ASHNHA  organizations   are  providing  $100  million  in                                                              
uncompensated care.  He asserted  that the Legislature  not taking                                                              
the  opportunity to  fix the  problem in  the next  week would  be                                                              
extremely unfortunate for Alaskans.                                                                                             
10:02:30 AM                                                                                                                   
SENATOR  COGHILL  said a  whole  range  of delivery  services  for                                                              
Medicaid  must be  looked  at, not  just  hospitals.  He asked  if                                                              
ASHNHA organizations are using telemedicine.                                                                                    
MS.  HULTBERG replied  that telemedicine  is  really exploding  in                                                              
the  Lower  48 and  has  a lot  of  promise  in Alaska.  She  said                                                              
Alaska's  tribal  system  is  very sophisticated  in  its  use  of                                                              
telemedicine. She admitted  that Alaska is behind the  rest of the                                                              
country in the  adoption of telemedicine due to  barriers that she                                                              
is not equipped to address.                                                                                                     
SENATOR  COGHILL  stated  that  prior to  adding  more  people,  a                                                              
connection  must  be made  between  hospitals with  expertise  and                                                              
some of  the needs in  other communities.  He noted that  not just                                                              
the hospitals  are feeling  the weight of  change, but  people who                                                              
have  delivered  services  that  have not  been  paid  because  of                                                              
system changes,  like elder care  or child care. He  asserted that                                                              
due  to not  changing behavior,  profit  and nonprofit  deliverers                                                              
who  do  not  get  paid  may  not  be  capable  of  adding  a  new                                                              
10:05:32 AM                                                                                                                   
CHAIR STOLTZE remarked  that there are two bills, one  that is the                                                              
Governor's  bill and  the other  referred to  as the "reform  cost                                                              
containment"   bill.   He   specified  that   the   "reform   cost                                                              
containment"  bill  was directed  by  the legislative  process,  a                                                              
deliberative  consideration   by  three  committees   with  public                                                              
testimony and  multiple hearings. He  said Governor Walker  made a                                                              
pretty  public  demand that  his  bill  have a  less  deliberative                                                              
process of only  two committees. He asserted that  the Legislature                                                              
put  more due  diligence  on the  "reform  cost containment"  bill                                                              
than on  the Governor's bill. He  remarked that the  Governor made                                                              
a  pretty  public  "request  slash  demand"  and  the  Legislature                                                              
yielded to the  invasion from another branch of  government out of                                                              
respect and courtesy.  He said the "reform cost  containment" bill                                                              
process  has  been  more  deliberative  on  cost  containment  and                                                              
reform then  on the  expansion. He  noted that several  admissions                                                              
have been made to  hurrying it up on expansion,  but the committee                                                              
does not deal with  expansion and only has one vehicle  that has a                                                              
very deliberative legislative process.                                                                                          
SENATOR HUGGINS  asked to verify  that nonprofit hospitals  have a                                                              
mechanism  to  distribute some  of  their  revenue back  into  the                                                              
10:07:15 AM                                                                                                                   
MS.  HULTBERG answered  that there  are  specific requirements  to                                                              
maintain  not-for-profit   status  that  a  facility   provides  a                                                              
certain amount of  community benefit. She detailed  that community                                                              
benefit  can  include  uncompensated  care  and  other  subsidized                                                              
services where  the facility  knows that they  are never  going to                                                              
make  break-even,  but the  services  are considered  a  community                                                              
SENATOR  HUGGINS   asked  to  establish   that  the   dollars  for                                                              
providing community benefits come out of the non-profit system.                                                                 
MS. HULTBERG  answered that the  assumption is that  the community                                                              
benefit dollars  would have been paid  in taxes so the  benefit is                                                              
going  back into  the community  in a  different way,  recognizing                                                              
that taxes also are a benefit to the community.                                                                                 
SENATOR HUGGINS asked how big the pot was for larger hospitals.                                                                 
MS.  HULTBERG  answered  that  the  pot was  in  the  hundreds  of                                                              
thousands of dollars.                                                                                                           
CHAIR STOLTZE  pointed out  that the largest  taxpayers in  two of                                                              
the   largest  municipalities   are   private  hospitals:   Alaska                                                              
Regional of Anchorage and Mat-Su Regional in the Mat-Su Borough.                                                                
MS. HULTBERG  agreed that the two  noted hospitals are  very large                                                              
taxpayers and there  is a community benefit associated  with being                                                              
a large taxpayer as well.                                                                                                       
CHAIR  STOLTZE disclosed  that  Mr. Price  had  comments from  the                                                              
private sector.                                                                                                                 
10:09:42 AM                                                                                                                   
JEREMY  PRICE, State  Director,  Americans for  Prosperity-Alaska,                                                              
Anchorage, Alaska,  explained that Americans for  Prosperity is an                                                              
organization  devoted  to  economic   freedom.  He  detailed  that                                                              
Americans  for  Prosperity  define economic  freedom  as  policies                                                              
that  help  small  businesses and  individuals  be  successful  by                                                              
keeping the  cost of government  and taxes low. He  said Americans                                                              
for Prosperity  supports SB 74 and  considers the bill  as a great                                                              
piece of  legislation that takes  a valiant approach  to reforming                                                              
the cost  of Medicaid. He asserted  that reform is the  first part                                                              
of the equation  that must be figured out first.  He noted reports                                                              
that  Medicaid spending  will continue  to  increase even  without                                                              
expansion.  He asserted that  should Alaska  expand Medicaid,  the                                                              
federal  government  may  reduce  their payment  share  after  the                                                              
state is on the hook.                                                                                                           
10:14:08 AM                                                                                                                   
CHAIR  STOLTZE noted  that Commissioner  Davidson  mentioned in  a                                                              
previous committee  meeting that she wanted to meet  and hear from                                                              
all  of the  stakeholders'  voices.  He  opined that  Mr.  Price's                                                              
testimony  represents  the interests  in  a lot  of  folks in  the                                                              
legislators' districts.  He said unfortunately there  has not been                                                              
a willingness  from some stakeholders  to voice their  opinion. He                                                              
stated that  there are a  lot voices in  the Medicaid  debate, not                                                              
just the recipients, but the folks that are paying the bills.                                                                   
MR.  PRICE  pointed  out  that  private  practice  physicians  are                                                              
coming  out  in  support  of reform,  but  against  expansion.  He                                                              
opined  that private  practice physicians  have said  that ACA  is                                                              
killing their  businesses and Medicaid  patients are treated  as a                                                              
charitable  contribution  to their  communities.  He said  private                                                              
practice  physicians  are  out  there,  but  they  are  afraid  of                                                              
testifying   against    the   bill   because    of   intimidation,                                                              
retaliation, losing customers, and taking on the Governor.                                                                      
CHAIR  STOLTZE announced  that he  will recess  to a  call of  the                                                              
chair to  leave flexibility open  to continue the discussion  on a                                                              
major piece  of legislation.  He asked  that Senator Kelly  attend                                                              
the next  committee meeting  to address the  bill's close  out. He                                                              
inquired if Ms. Shadduck had any closing remarks.                                                                               
10:17:20 AM                                                                                                                   
MS.  SHADDUCK  declared  that  she  wanted  to  point  out  a  few                                                              
provisions  that are absolutely  unique to  Senator Kelly's  bill.                                                              
She  opined that  SB 74  has a  bigger focus  on fraud,  extensive                                                              
legislative  reporting requirements,  payment  reform, and  fiscal                                                              
notes  that reflect  costs that  are not shown  in the  Governor's                                                              
bill.  She  pointed   out  that  Commissioner  Davidson   and  Ms.                                                              
Hultberg  both said payment  reform is  absolutely something  that                                                              
should  be  done   by  changing  from  a  fee-for-service   to  an                                                              
incentive  based service.  She detailed  that SB  74 has a  fiscal                                                              
note that  reflects incentive based  service reform.  She revealed                                                              
that  the  Medicaid managed  care  case  management  demonstration                                                              
program  is unique  to Senator  Kelly's bill.  She said  extensive                                                              
studies have shown  that doing managed care or  case management in                                                              
the  Medicaid  program  saves  money  and  noted  that  SB  74  is                                                              
projected to show  up to 20 percent in savings;  however, DHSS has                                                              
shown  no savings in  their fiscal  note and  are not  comfortable                                                              
with submitting an indeterminate fiscal note.                                                                                   
CHAIR STOLTZE  pointed out  that Senator Kelly  will have  a voice                                                              
on the fiscal note conversation in the Senate Finance Committee.                                                                
MS.  SHADDUCK disclosed  that DHSS  was  excited that  SB 74  adds                                                              
some   positions  for   fraud   prevention   and  addresses   cost                                                              
containment; however,  the costs only  show up on  Senator Kelly's                                                              
CHAIR  STOLTZE acknowledged  the  assistance  of Senator  Coghill,                                                              
Representative   Vazquez,  and   legislative  staff  members   for                                                              
providing  ideas  that  made  it  into the  bill.  He  noted  that                                                              
Representative Vazquez  has experience from the Department  of Law                                                              
with  fraud investigations  and  brought  relevant  issues to  the                                                              
discussion. He stated  that SB 74 was a collaborative  effort, but                                                              
the substance of the bill was yielded to the sponsor.                                                                           
10:20:37 AM                                                                                                                   
CHAIR STOLTZE  announced that the  committee will stand  in recess                                                              
to the  call of the  chair. [The committee  did not  reconvene and                                                              
SB 74 was held in committee.]                                                                                                   

Document Name Date/Time Subjects
SB74 SSTA Workdraft CS(STA) version F 4-14-15.pdf SSTA 4/15/2015 8:00:00 AM
SB 74
SB1 SSTA CS Workdraft version S - 4.14.2015.pdf SSTA 4/15/2015 8:00:00 AM
SB 1
SB1 Support Documents - Letters of Support to SSTA - 4-14-15.pdf SSTA 4/15/2015 8:00:00 AM
SB 1
SB1 Opposition Documents - Letters of Opposition to SSTA - 4-14-15.pdf SSTA 4/15/2015 8:00:00 AM
SB 1
SB74 DHSS Response to Committee Question - Medicaid Enrollment and Spending in Alaska Forecast 2015.pdf SSTA 4/15/2015 8:00:00 AM
SB 74
SB89 Support Documents - Additional Letters of Support to SSTA 4-14-15.pdf SSTA 4/15/2015 8:00:00 AM
SB 89
SB89 Opposition Documents - Additional Letters of Opposition to SSTA 4-14-15.pdf SSTA 4/15/2015 8:00:00 AM
SB 89
SB89 AASB Reply to Committee Questions on 4-14-15.pdf SSTA 4/15/2015 8:00:00 AM
SB 89
HB142 Sponsor Statement.pdf SSTA 4/15/2015 8:00:00 AM
HB 142
HB142 Version W.pdf SSTA 4/15/2015 8:00:00 AM
HB 142
HB142 Fiscal Note DOA-FAC 3-20-15.pdf SSTA 4/15/2015 8:00:00 AM
HB 142
HB142 Supporting Document - Letter Kawerak 3-23-15.pdf SSTA 4/15/2015 8:00:00 AM
HB 142
HB142 Supporting Document - Letter of Support Alaska Commission on Aging 4-5-15.pdf SSTA 4/15/2015 8:00:00 AM
HB 142
HB142 Supporting Document - Letter Pioneer Homes 3-26-15.pdf SSTA 4/15/2015 8:00:00 AM
HB 142
SB89 Opposition Document - Letter Elizabeth Miner - 4-14-15.pdf SSTA 4/15/2015 8:00:00 AM
SB 89
SB 74 Explanations of Changes for SSTA Workdraft F.pdf SSTA 4/15/2015 8:00:00 AM
SB 74