Legislature(2015 - 2016)BUTROVICH 205
04/16/2015 09:00 AM Senate STATE AFFAIRS
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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 expansion. 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 levels. 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 centers. 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 Start." 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 numbers. 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.