Legislature(2015 - 2016)BUTROVICH 205

04/16/2015 09:00 AM Senate STATE AFFAIRS

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as

* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSSB 74(STA) Out of Committee
Moved HB 135 Out of Committee
-- Public Testimony --
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
         SB 74-MEDICAID REFORM/PFD/HSAS/ER USE/STUDIES                                                                      
9:44:08 AM                                                                                                                    
CHAIR STOLTZE announced the consideration of SB 74.                                                                             
9:44:24 AM                                                                                                                    
HEATHER  SHADDUCK,  Staff,  Senator   Pete  Kelly,  Alaska  State                                                               
Legislature, Juneau, Alaska, stated that  the concept of SB 74 is                                                               
to  slow  the  growth  of Alaska's  Medicaid  program.  She  said                                                               
Alaska's  Medicaid program  is growing  at  a very  unsustainable                                                               
rate which  puts the entire  program in jeopardy for  the state's                                                               
most vulnerable Alaskans.  SB 74 is an attempt to  make sure that                                                               
the state  has safeguards in  place for a Medicaid  program which                                                               
Alaska is federally obligated to  provide. She set forth that the                                                               
bill  gets payment  reforms in  place while  trying new  concepts                                                               
like managed  care. She  summarized that  the bill  starts Alaska                                                               
down the reform process.                                                                                                        
CHAIR STOLTZE remarked that irrespective  of whether an expansion                                                               
bill passes, SB 74 is a good policy measure.                                                                                    
MS. SHADDUCK  added that SB 74  is a good policy  call. She noted                                                               
that   the  current   administration  testified   in  yesterday's                                                               
committee  meeting  that  Alaska's current  Medicaid  program  is                                                               
unsustainable without reform.                                                                                                   
CHAIR  STOLTZE noted  that the  Department of  Health and  Social                                                               
Services  (DHSS)  responded  to  his request  for  Medicaid  cost                                                               
projections.  He said  his  intent was  to  point out  Medicaid's                                                               
growth  and  sustainability  without  expansion.  He  voiced  his                                                               
frustration that  DHSS has  not taken  ownership of  its Medicaid                                                               
cost forecasts.                                                                                                                 
9:46:58 AM                                                                                                                    
MS. SHADDUCK revealed  that DHSS has been very  open with Senator                                                               
Kelly's  office. She  disclosed  that there  was  an exchange  on                                                               
provisions that were  agreed and disagreed upon.  She pointed out                                                               
that  DHSS paid  for the  Evergreen Economics  Report. She  added                                                               
that the  Office of  Management and Budget  (OMB) and  the Alaska                                                               
Division  of  Legislative  Finance were  excellent  in  providing                                                               
fiscal note and forecasting assistance.                                                                                         
CHAIR STOLTZE stated that perhaps  Mr. Sherwood could explain why                                                               
DHSS does  not want to take  ownership of just a  simple economic                                                               
fact on the fiscal realities  of sustainability. He said DHSS has                                                               
been given  ample opportunity  to say what  they expect  to save;                                                               
however, their averting of the  discussion of what current growth                                                               
is, causes  suspicion and puts a  little kink in the  strong bond                                                               
of trust.                                                                                                                       
9:49:05 AM                                                                                                                    
JON  SHERWOOD,  Deputy  Commissioner, Medicaid  and  Health  Care                                                               
Policy  Division,   Alaska  Department   of  Health   and  Social                                                               
Services,  Juneau, Alaska,  stated  that DHSS  never intended  to                                                               
hide the numbers.                                                                                                               
CHAIR  STOLTZE  declared  that   Mr.  Sherwood  is  obligated  to                                                               
audibilize projected  year-by-year growth for the  public record.                                                               
He  reiterated that  DHSS  did not  take  ownership on  providing                                                               
Medicaid growth projections.                                                                                                    
9:50:10 AM                                                                                                                    
At ease.                                                                                                                        
9:51:51 AM                                                                                                                    
CHAIR STOLTZE called the committee back to order.                                                                               
MR.  SHERWOOD provided  Medicaid spending  projections from  2014                                                               
out to 2034 as follows:                                                                                                         
        · 2014: $1.5 billion,                                                                                                   
        · 2016: $1.7 billion,                                                                                                   
        · 2018: $2 billion,                                                                                                     
        · 2022: $2.5 billion,                                                                                                   
        · 2024: $3 billion,                                                                                                     
        · 2026: $3 billion,                                                                                                     
        · 2028: $3.5 billion,                                                                                                   
        · 2030: $4 billion,                                                                                                     
        · 2032: $4.2 billion,                                                                                                   
        · 2034: $4.5 billion.                                                                                                   
He  added that  the general  funds  component is  just over  $1.5                                                               
billion by 2034.                                                                                                                
9:53:13 AM                                                                                                                    
CHAIR  STOLTZE asked  to verify  that  DHSS's projections  assume                                                               
that the federal government keeps all of its obligations.                                                                       
MR. SHERWOOD  answered that the  forecast assumes that  the match                                                               
rates stay approximately the same.                                                                                              
CHAIR  STOLTZE  noted   that  the  forecast  is   absent  of  any                                                               
MR. SHERWOOD  confirmed that the  DHSS forecast is absent  of any                                                               
expansion or changes to the Medicaid program.                                                                                   
CHAIR STOLTZE  appreciated that Mr. Sherwood  put DHSS's Medicaid                                                               
spending  forecast on  the  record. He  asked  that Mr.  Sherwood                                                               
address areas that  DHSS supports and does not  support. He added                                                               
that  the Senate  Finance Committee  will continue  to deliberate                                                               
the bill and allow public input.                                                                                                
MR.   SHERWOOD  noted   that  Commissioner   Davidson  previously                                                               
testified about  areas of particular  concern about the  bill. He                                                               
explained  that  DHSS  wants  to make  sure  it  understands  the                                                               
intention of  Section 2 requiring  a computerized  income, asset,                                                               
and identity  eligibility verification  system. He  divulged that                                                               
DHSS has moved  forward on the assumption that  the section would                                                               
be  a  separate  component  that  would  be  an  adjunct  to  the                                                               
department's   existing  computerized   eligibility  verification                                                               
system.  He  stated  that  the   department  has  developed  cost                                                               
estimates for adding components to the current system.                                                                          
9:55:22 AM                                                                                                                    
MR.  SHERWOOD pointed  out  that  on line  4,  the department  is                                                               
instructed  to   pursue  new  payment  processes.   He  said  the                                                               
department  recommends  using  "or"  rather  than  "and"  in  the                                                               
section because  potential conflicts between some  of the methods                                                               
may occur.  He reiterated  that DHSS does  not support  Section 5                                                               
which  requires   Legislative  approval   prior  to   adding  any                                                               
mandatory  Medicaid coverage  groups. He  asserted that  the bill                                                               
contains  a  number  of beneficial  reforms  and  the  department                                                               
welcomes an opportunity to pursue those reforms.                                                                                
CHAIR  STOLTZE explained  that  the  department's noted  concerns                                                               
allows any member in the next  committee to make an amendment. He                                                               
asked that  Mr. Sherwood address  the issue of  privatization. He                                                               
asked  if  the  department  and  the  administration  will  allow                                                               
outsourcing in looking  at finding fraud. He  noted that Illinois                                                               
has been  very aggressive in  allowing a "different set  of eyes"                                                               
outside  of the  institutions. He  remarked that  outsourcing may                                                               
allow  the most  analytical  sets  of eyes  with  a proven  track                                                               
record  to  find  savings  and ferret  out  inherent  abuse  that                                                               
sometimes is not seen.                                                                                                          
9:58:34 AM                                                                                                                    
MR.  SHERWOOD replied  that DHSS  is always  willing to  consider                                                               
outsourcing  when permissible  under federal  law. He  noted that                                                               
restrictions exist; for  example, eligibility determinations need                                                               
to be  made by a civil  servant. He revealed that  DHSS currently                                                               
outsources  a substantial  amount  of Medicaid  audits and  third                                                               
party  recovery   efforts.  He  disclosed  that   DHSS  has  been                                                               
instructed  by  the  administration to  consider  cost  effective                                                               
opportunities  for outsourcing.  He summarized  that there  is no                                                               
general philosophical  opposition to  outsourcing as long  as the                                                               
department can  ensure that programs are  operated appropriately,                                                               
effectively, and desired outcomes are achieved.                                                                                 
CHAIR STOLTZE  pointed out that  technology exists to  simply use                                                               
the internet  for finding fraud.  He asked if Mr.  Sherwood found                                                               
internet searches as intrusive.                                                                                                 
10:01:03 AM                                                                                                                   
MR.  SHERWOOD  replied that  DHSS  does  an extensive  amount  of                                                               
verification;  for example,  cause  for additional  investigation                                                               
occurs when no  income is reported when  income generating assets                                                               
are noted.  He asserted that  taking advantage of  new technology                                                               
must  be done  in a  thoughtful and  equitable manner  that takes                                                               
into consideration  privacy issues  where people are  not singled                                                               
out for the wrong sorts of reasons.                                                                                             
CHAIR  STOLTZE remarked  that the  real  substantive fraud  abuse                                                               
cases  have   been  brought  on   against  large   providers  and                                                               
institutions rather than an individual  making a bad decision. He                                                               
added that the  real systematic fraud often occurs  at the higher                                                               
10:04:05 AM                                                                                                                   
SENATOR  WIELECHOWSKI noted  that legislative  staff members  are                                                               
not permitted  to use  Facebook. He asked  if DHSS  employees are                                                               
allowed to use Facebook.                                                                                                        
MR.  SHERWOOD   explained  that  state  employees   have  to  get                                                               
permission  to use  Facebook. He  noted that  an individual  must                                                               
have  a legitimate  business purpose  to access  Facebook through                                                               
state resources.                                                                                                                
SENATOR  COGHILL  addressed  uncompensated care  and  noted  that                                                               
based   upon    population,   the   federal    government   gives                                                               
disproportionate share  payments to hospitals.  He asked  how the                                                               
disproportionate share payments are calculated.                                                                                 
MR.   SHERWOOD   answered   that   there   are   two   kinds   of                                                               
disproportionate  share  payments:   Medicare  and  Medicaid.  He                                                               
specified that the state does  not have any direct involvement in                                                               
Medicare, but  the state's Office  of Rate Review  calculates how                                                               
much an institution is eligible to receive.                                                                                     
SENATOR  COGHILL  asked  to verify  that  disproportionate  means                                                               
higher  than  the  regular Medicaid  payment.  He  inquired  what                                                               
formulation is used.                                                                                                            
10:06:45 AM                                                                                                                   
MR.  SHERWOOD   answered  that  he   did  not   know  formulation                                                               
specifics.  He   revealed  that   Alaska  has   historically  not                                                               
allocated  all of  its  federal  Disproportionate Share  Hospital                                                               
(DSH)  allotment because  the  state did  not  have the  matching                                                               
general funds to go along with  it. He specified that the state's                                                               
current DSH  payments are targeted toward  the Alaska Psychiatric                                                               
Institute to the maximum extent  allowed by federal law. He noted                                                               
that  there are  three other  hospitals that  provide psychiatric                                                               
services as well.                                                                                                               
SENATOR  COGHILL  assumed  that  calculations are  based  upon  a                                                               
hospital's  billing  volume  which  includes  uncompensated  care                                                               
flow. He  advised that additional  uncompensated care  details be                                                               
provided  to  the  Senate  Finance   Committee.  He  stated  that                                                               
hospitals are probably paid fairly  well by Medicaid, but smaller                                                               
payers are  the ones  that have  felt the heat  due to  a payment                                                               
system  lag. He  pointed out  that  hospitals are  able to  shift                                                               
costs within  hospitals and  noted that  imaging centers  pay for                                                               
things like uncompensated care.                                                                                                 
10:09:50 AM                                                                                                                   
CHAIR STOLTZE  pointed out  that hospitals  in the  Mat-Su region                                                               
are  very  competitive  in  retaining  their  profitable  imaging                                                               
SENATOR  WIELECHOWSKI   asked  how  much  the   $100  million  in                                                               
uncompensated care  costs the  average family  in Alaska  and how                                                               
much an average family would save if Medicaid was expanded.                                                                     
MR. SHERWOOD answered that he did not have any cost estimates.                                                                  
10:12:01 AM                                                                                                                   
SENATOR  WIELECHOWSKI noted  that 65  to 70  percent of  Alaskans                                                               
receive  government healthcare:  state workers,  federal workers,                                                               
military members, veterans, and  Medicare recipients. He asked if                                                               
Mr.  Sherwood had  an estimate  of what  percentage of  the total                                                               
state population is already on government healthcare.                                                                           
MR. SHERWOOD answered that he does not have the information.                                                                    
SENATOR  WIELECHOWSKI  replied  that  he would  like  to  receive                                                               
information with a breakdown.                                                                                                   
CHAIR STOLTZE asserted that a system  that wants to add people on                                                               
requires  some  type  of  mechanism  that  is  watching  out  for                                                               
institutional  fraud before  it gets  too far  and racks  up real                                                               
numbers. He reiterated  that privatization involves organizations                                                               
that specialize  in ferreting out fraud.  He asked if there  is a                                                               
commitment to outside eyes that  have total objectivity solely on                                                               
cost containment.  He noted that  are not always the  most savory                                                               
during times of budgetary deficits.                                                                                             
10:14:42 AM                                                                                                                   
MR.   SHERWOOOD   answered   that    the   department   and   the                                                               
administration are  in complete agreement that  limited resources                                                               
should go  to meet the  real needs of  individuals and not  go to                                                               
support  fraud or  abuse.  He  remarked that  a  role exists  for                                                               
external  entities   in  assisting  the  department   in  staying                                                               
appropriately focused on program integrity                                                                                      
SENATOR  HUGGINS asked  to confirm  that  Mr. Sherwood  projected                                                               
Medicaid costs to increase by 300 percent from 2014 to 2034.                                                                    
10:18:30 AM                                                                                                                   
MR. SHERWOOD answered correct.                                                                                                  
SENATOR   HUGGINS  noted   that  Mr.   Sherwood  worked   off  of                                                               
assumptions  that   lower  projected   growth  is  due   to  cost                                                               
containment. He  admitted that  Mr. Sherwood's  growth forecast's                                                               
big number  frightens him if  the calculations are  incorrect. He                                                               
asked of the state's overall  healthcare picture is under control                                                               
and sustainable.                                                                                                                
10:20:10 AM                                                                                                                   
MR.  SHERWOOD  revealed that  he  has  worked with  the  Medicaid                                                               
program for  25 years and  during the entire time  the department                                                               
has actively tried to manage  and control costs. He remarked that                                                               
managing costs has  not been the department's  only objective and                                                               
noted  the  creation  of the  Denali  KidCare  program,  expanded                                                               
coverage, and added  services where needed. He  detailed that the                                                               
20 year  Medicaid cost forecast  is based on  historical spending                                                               
patterns and does not include  program changes. He concurred that                                                               
the forecast is  concerning, but admitted that he  has lived with                                                               
the concern for 25 years. He  said there are always ways to "bend                                                               
the curve" and noted that  the 2012 forecast's 20 year projection                                                               
would have been  $6 billion instead of $4.5  billion. He remarked                                                               
that Medicaid is not unique  and noted that healthcare in general                                                               
has  seen  its expenses  rise  where  its  share of  the  economy                                                               
increases due to inflation. He  said DHSS will work vigorously to                                                               
manage the Medicaid program.                                                                                                    
10:22:34 AM                                                                                                                   
SENATOR  HUGGINS  asked to  verify  that  Mr. Sherwood  has  been                                                               
involved with Medicaid for 25 years.                                                                                            
MR. SHERWOOD answered yes.                                                                                                      
SENATOR  HUGGINS  asked  what  the state  has  done  with  Denali                                                               
KidCare over time.                                                                                                              
MR. SHERWOOD explained that Denali KidCare was started in 1999.                                                                 
CHAIR  STOLTZE  added that  Denali  KidCare  was part  of  "Smart                                                               
MR.  SHERWOOD  explained  that the  Children's  Health  Insurance                                                               
Program (CHIP)  was an option  that was added to  expand Medicaid                                                               
for children. He  detailed that existing coverage  for low income                                                               
children and pregnant women was  rolled into a package and called                                                               
Denali KidCare. He  specified that income limits were  set at 200                                                               
percent of the poverty level.                                                                                                   
CHAIR  STOLTZE asked  what the  program's starting  cost was  and                                                               
what the current costs are.                                                                                                     
MR.  SHERWOOD  answered  that  he   could  not  provide  specific                                                               
CHAIR STOLTZE  asked that Mr.  Sherwood provide  legislators with                                                               
Denali KidCare's growth analysis.                                                                                               
10:24:39 AM                                                                                                                   
SENATOR COGHILL moved to report  CSSB 74(STA) from committee with                                                               
individual recommendations and attached fiscal note(s).                                                                         
10:24:58 AM                                                                                                                   
CHAIR  STOLTZE announced  that without  objection, CSSB  74(STA),                                                               
[version:  29-LS0692\F], moves  out of  the Senate  State Affairs                                                               
Standing Committee.                                                                                                             

Document Name Date/Time Subjects
HJR 22 Ver A - Initial Version.pdf SSTA 4/16/2015 9:00:00 AM
HJR 22
HJR 22 Sponsor Statement.pdf SSTA 4/16/2015 9:00:00 AM
HJR 22
HJR 22 Fiscal Note LEG-SESS 4-8-15.PDF SSTA 4/16/2015 9:00:00 AM
HJR 22
SB74 DHSS Medicaid Spending Forecast without Expansion 4-16-15.pdf SSTA 4/16/2015 9:00:00 AM
SB 74
SB74 Fiscal Note DHSS-PAA 4-15-15.pdf SSTA 4/16/2015 9:00:00 AM
SB 74
SB74 DHSS Position on CS(STA) - Email Commissioner's Office 4-15-15.pdf SSTA 4/16/2015 9:00:00 AM
SB 74
SB74 DHSS Response to Questions on Section 5 of CS(STA) - Email Commissioner's Office 4-15-15.pdf SSTA 4/16/2015 9:00:00 AM
SB 74
HB135 ver A.pdf SSTA 4/16/2015 9:00:00 AM
HB 135
HB135 Supporting Document - Roth 457 FAQs.pdf SSTA 4/16/2015 9:00:00 AM
HB 135
HB135 Support Document - Press Release DOA 3-12-15.pdf SSTA 4/16/2015 9:00:00 AM
HB 135
HB135 Sectional Analysis.pdf SSTA 4/16/2015 9:00:00 AM
HB 135
HB135 Public Employee Roth Contributions Transmittal Letter.pdf SSTA 4/16/2015 9:00:00 AM
HB 135
HB135 Fiscal Note #1 DOA-DRB 2-17-15.pdf SSTA 4/16/2015 9:00:00 AM
HB 135
HJR22 Support Document - Letter Hyder Community Association 4-16-15.pdf SSTA 4/16/2015 9:00:00 AM
HJR 22
SB74 OMB Spreadsheet of Fiscal Notes for Version F - 4-16-15.pdf SSTA 4/16/2015 9:00:00 AM
SB 74