Legislature(2013 - 2014)BARNES 124

03/24/2014 03:15 PM LABOR & COMMERCE

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           HB 316-WORKERS' COMPENSATION MEDICAL FEES                                                                        
3:46:02 PM                                                                                                                    
CHAIR OLSON  announced that  the next order  of business  would be                                                              
HOUSE  BILL NO.  316, "An  Act relating  to workers'  compensation                                                              
fees  for medical  treatment and  services;  relating to  workers'                                                              
compensation regulations;  and providing  for an effective  date."                                                              
[Version O was before the committee.]                                                                                           
3:46:28 PM                                                                                                                    
ANNA  LATHAM,  Staff,  Representative  Kurt  Olson,  Alaska  State                                                              
Legislature,  stated that  HB 316  changes the  fee schedules  for                                                              
workers'  compensation from  a  usual, customary,  and  reasonable                                                              
schedule (UCR),  which the state has  used for the past  10 years,                                                              
to  a  resource-based  relative   value  scale  (RBRVS)  based  on                                                              
Centers  for Medicaid  (CMS)  and Medicare  services  rate with  a                                                              
conversion  factor  that is  set  by workers'  compensation  board                                                              
(WCB)  under  the  advisement  of   the  medical  services  review                                                              
committee (MSRC).                                                                                                               
3:47:44 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON  recalled 90 percent of  the UCR schedule                                                              
has been discussed.  He asked for her view of the 90 percent.                                                                   
MS. LATHAM  said that  the target  and goal  of HB  316 is  to set                                                              
fees  at a  reasonable and  fair  amount that  allows the  medical                                                              
community  to make a  fair profit,  but to  align fees  with group                                                              
health and  not allow  specific procedures to  be inflated  at the                                                              
400 to 800 percentile.                                                                                                          
CHAIR OLSON  referred to members'  packets to a comparison  of the                                                              
top  25   workers'  compensation   procedures  in  comparison   to                                                              
Washington and other  states.  He noted that there  wouldn't be an                                                              
easy  answer.   He recalled  that  Alaska's costs  are over  1,000                                                              
percent for some workers' compensation medical procedures.                                                                      
3:48:41 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON recalled  previous testimony  by Premera                                                              
Blue  Cross  Blue   Shield  in  which  Mr.  Sorrin   related  that                                                              
specialty  services for  muscular skeletal  or cardiovascular  are                                                              
600 to 700 percent of Medicare rates.                                                                                           
MS. LATHAM noted that testimony was on HB 203 and not HB 316.                                                                   
REPRESENTATIVE JOSEPHSON  acknowledged that  point.  He  asked how                                                              
workers'  compensation  patients  could  get  coverage  for  those                                                              
specialties unless  there is sufficient compensation  to match the                                                              
MS.  LATHAM agreed  that it  made  perfect sense.   She  explained                                                              
that the intent  of HB 316 is  to align these rates  to be similar                                                              
to  group health  rates.   She indicated  that the  aforementioned                                                              
Anchorage   rates  for  group   health  will   also  probably   be                                                              
comparable for  workers' compensation  rates.  She  reiterated the                                                              
intent  of  HB  316 is  reduce  the  extremely  inflated  workers'                                                              
compensation medical procedure rates to more reasonable rates.                                                                  
3:50:43 PM                                                                                                                    
The committee took a brief at-ease.                                                                                             
3:51:47 PM                                                                                                                    
RICK  TRAINI,   Business  Representative,  Teamsters   Local  959,                                                              
stated he  works as the negotiation  coordinator and  is currently                                                              
serving  his  second term  as  a  member  of the  Alaska  Workers'                                                              
Compensation Board  (WCB) representing labor.  He  offered support                                                              
for  HB 316,  noting  the bill  was introduced  on  behalf of  the                                                              
Alaska  WCB, who  unanimously approved  a  resolution in  December                                                              
requesting  this type  of authority.   He explained  that  the WCB                                                              
created  a special  "listening  tour"  consisting  of a  committee                                                              
with  members  from  labor  and  industry  who  toured  Anchorage,                                                              
Fairbanks,  Juneau, and  Kenai.   Over  the years,  the state  has                                                              
experienced  a  tremendous  escalation  in  medical  costs,  which                                                              
adversely  affects  premiums  paid   by  employers,  and  in  turn                                                              
reduces other benefits  to employees due to the  inflated spending                                                              
on medical bills  for injured workers.   The goal of HB  316 is to                                                              
allow the  board the authority  to set  the fee schedule  based on                                                              
this statute.   He hoped  that the rates  will be more  reflective                                                              
and result in what  the top insurers pay for the  same procedures.                                                              
Currently, Alaska  is at  the top of  the nation in  reimbursement                                                              
for fees and services  and he hopes to bring these  costs in line.                                                              
In response  to  Representative Josephson's  earlier question,  he                                                              
stated  that  each  type  of specialty  or  service  will  have  a                                                              
different conversion  rate.  He  said the bill  is set up  for the                                                              
Medical Services  Review Committee (MSRC) to be  responsive to the                                                              
medical  providers,  insurers,   and  other  participants  in  the                                                              
system  and set  the  rates similar  to  other insured  employees'                                                              
rates.   He offered  his belief that  the WCB will  be a  lot more                                                              
responsive to changing environments and fees.                                                                                   
3:54:53 PM                                                                                                                    
MR. TRANI  reported that the current  medical fees schedule  is in                                                              
its second  or third year.  Prior  to that time, the  schedule was                                                              
in  place  for  10  years  with  two  cost-of-living  adjustments.                                                              
Again,  the   WCB  would  like   the  fee  schedule  to   be  more                                                              
responsive,  and  after  public   testimony  and  input  from  the                                                              
medical  community,  to set  the  conversion  rate at  a  modifier                                                              
acceptable to them,  to the public, employers,  and employees that                                                              
use the workers' compensation system.                                                                                           
CHAIR OLSON remarked the WCB has a tough job.                                                                                   
3:55:43 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  said  the target  of  the bill  is  the                                                              
RBRVS [Resource  Based Relative  Value Scale].   He asked  whether                                                              
that  scale is  aligned to  reasonable  and fair  amounts akin  to                                                              
group health.                                                                                                                   
MR. TRANI said  that he was not  sure.  The target is  not to have                                                              
that be  the arrival point  but to be  the basis for  the starting                                                              
point before  the conversion rates  or multipliers are  applied to                                                              
the medical  services.   The  end goal  isn't to  have it use  the                                                              
numbers, he  said, but to  tailor it based  on the input  from all                                                              
of the participants, "consumers," and then arrive at a number.                                                                  
3:56:48 PM                                                                                                                    
REPRESENTATIVE  SADDLER asked  whether other  states face  similar                                                              
types of  dramatic cost  disparities; if  other states  face these                                                              
same problems.                                                                                                                  
MR.  TRANI  offered  his  belief  that  other  states  have  faced                                                              
similar  issues; however,  although  Alaska is  now ranked  number                                                              
one in  terms of workers'  compensation costs,  it has  not always                                                              
been ranked so  high.  In 2004,  the state had been  ranked in the                                                              
middle  or low  one third  of costs.   However,  the state  hasn't                                                              
enacted  any  cost  reforms  to  stay  relative  to  what  private                                                              
insurers  pay  for  employee  coverage,   but  other  states  have                                                              
addressed this.   He predicted that approximately 14  to 16 states                                                              
may have some type  of medical fee schedule based  on a derivative                                                              
of  this  method, which  represents  a  trend  to make  sure  that                                                              
patients  using  private  insurance and  patients  using  workers'                                                              
compensation are charged the same fees for doctor's visits.                                                                     
3:58:51 PM                                                                                                                    
CHAIR  OLSON,  after  first  determining  no one  else  wished  to                                                              
testify, closed public testimony on HB 316.                                                                                     
3:59:30 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON   recalled  the  workers'   compensation                                                              
costs  as being  ranked  first  in the  nation,  but  it does  not                                                              
include  the  permanent,  partial  impairment  (PPI)  ranking,  in                                                              
which the state is ranked 36th of 50.                                                                                           
MICHAEL MONAGLE,  Director, Central  Office, Division  of Workers'                                                              
Compensation,   Department  of   Labor  &  Workforce   Development                                                              
(DLWD), answered  that the state  is number one, but  being number                                                              
one in  premium stems from  a combination of  things.  He  said it                                                              
is  made up  of indemnity  costs, noting  that permanent,  partial                                                              
impairment  is part  of  the indemnity  costs,  but medical  costs                                                              
constitutes  the other  part.  The  medical portion  in Alaska  is                                                              
$0.75 on the dollar  whereas nationally it is $0.55.   The medical                                                              
costs  on a  time  loss  claim, an  indemnity  claim,  in which  a                                                              
worker  misses time  away  from  work, averages  $57,000,  whereas                                                              
nationally   it  averages   $24,000.     Thus,  Alaska's   medical                                                              
component of the  premium loss cost has been  significantly higher                                                              
than  the  rest  of  the country.    He  acknowledged  that  other                                                              
portions,  such as  indemnity benefits,  are about  in the  middle                                                              
with the  PPI being a  portion of indemnity.   He agreed  that the                                                              
state's PPI benefits nationally rank in about the lower third.                                                                  
4:00:52 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON  said he doesn't see the  goal of linking                                                              
rates  to group  health  has been  shown.   He  asked whether  the                                                              
aforementioned  is  a  goal  or  is it  just  something  that  the                                                              
Medical Services  Review Committee (MSRC) in combination  with the                                                              
WCB is expected to do.                                                                                                          
MR.  MONAGLE   suggested  that   the  general  practitioners   use                                                              
evaluation  and management  and include the  general office  visit                                                              
in line with  general health.  He acknowledged  that as previously                                                              
suggested,  specialty medicine and  specialty practitioner  rates,                                                              
including  some cardiologists  and  orthopedic physicians,  charge                                                              
significantly  higher  rates  in Alaska.    He  said that  as  Mr.                                                              
Traini  mentioned,   when  developing   conversion  factors,   the                                                              
division will examine  costs for each specialty.   He related that                                                              
a  conversion  factor   will  be  developed  for   evaluation  and                                                              
management whereas  a separate conversion factor  may be developed                                                              
for surgery  and specialty surgery.   He envisioned that  the MSRC                                                              
in conjunction  with the  WCB will adopt  conversion factors.   He                                                              
did  not think  it was  in anyone's  intent  to create  conversion                                                              
factors  that will  dissuade providers  from  treating an  injured                                                              
worker  in the  state.   He offered  his belief  that through  the                                                              
collaboration process  the division should be able to  arrive at a                                                              
conversion factor agreeable to everyone.                                                                                        
4:02:58 PM                                                                                                                    
REPRESENTATIVE  REINBOLD noted that  labor costs, oil  production,                                                              
and education  costs in  Alaska are high.   She acknowledged  that                                                              
she is sad  that workers' compensation  costs are also  high.  She                                                              
expressed an interest  in reducing costs, and she  asked if safety                                                              
prevention  in  the workplace  has  been  implemented.   She  also                                                              
noted that  the WCB  had three pages  of suggestions  [in members'                                                              
packets.]   She  further asked  whether  he was  pleased with  how                                                              
much was incorporated in the bill or if he has issues.                                                                          
MR. MONAGLE  replied that medical  costs are the "elephant  in the                                                              
room," and  they really  are the  cost driver.   If the  state can                                                              
resolve the medical  cost issues, it will also  help lower premium                                                              
costs.  Certainly,  other workers' compensation  issues definitely                                                              
need to be resolved.   He felt that the list  in [WCB's Resolution                                                              
Number  13-01] addresses  some things  related  to medical  costs,                                                              
such  as a  recommendation  for  treatment guidelines  to  address                                                              
utilization,  but other  things  such as  employment benefits  and                                                              
legal  costs could  also be addressed  to help  lower over  rates;                                                              
however, medical costs represent the biggest issue.                                                                             
4:04:37 PM                                                                                                                    
REPRESENTATIVE  REINBOLD   reiterated  that   implementing  worker                                                              
safety can also help prevent worker injuries.                                                                                   
MR.  MONAGLE offered  his  belief that  employers  currently do  a                                                              
great job  focusing on safety  issues.   From 1990 to  the current                                                              
date, employment  in Alaska has  increased over 100,000  jobs, but                                                              
during  that same  time period,  the loss  rates -  the number  of                                                              
workplace injuries  - has  been reduced from  30,000 to  less than                                                              
20,000.    Thus,  the  state  has   been  growing  employment  and                                                              
reducing  injuries,  which is  largely  due to  employers  valuing                                                              
safety programs  and being  safety conscious.   The Department  of                                                              
Labor &  Workforce Development,  Division  of Labor Standards  and                                                              
Safety, has  a safety  consultant program  in which employers  can                                                              
confidentially  consult  with  the  division  to  create  a  safer                                                              
environment yet  not be penalized  for violations.  In  fact, this                                                              
program helps  identify safety practices.   In addition,  a number                                                              
of  insurance companies  offer  premium reductions  for  voluntary                                                              
workplace  safety  programs, such  as  drug  free workplace.    He                                                              
reiterated  that insurance  companies  offer  incentives for  safe                                                              
work environments and to reduce premiums and premium discounts.                                                                 
4:06:13 PM                                                                                                                    
CHAIR OLSON  remarked that a number  of unions have  actively been                                                              
involved  in developing  their own  safety  standards, which  have                                                              
been  picked  up  and  used  by   insurance  companies  and  self-                                                              
insurers, too.   He said that the [state's] track  record is good,                                                              
but the  aging workforce contributes  to the issue  since injuries                                                              
require additional healing time and expense for older workers.                                                                  
4:06:53 PM                                                                                                                    
MR.  MONAGLE,  in response  to  Representative  Saddler's  earlier                                                              
question, acknowledged  that this issue  is one other  states also                                                              
face.    Prior  to  1990,  the   majority  of  costs  in  workers'                                                              
compensation  systems nationwide  were indemnity  costs so  states                                                              
have focused  on that  aspect of  loss costs.   At the  same time,                                                              
medical  costs   surpassed  indemnity  costs  nationwide   as  the                                                              
biggest  cost driver.    In 1990,  12  states  had fee  schedules.                                                              
Today, only six  states do not have fee schedules  so a transition                                                              
has occurred nationwide  to adopt fee schedules,  although not all                                                              
are RBRVS schedules.   However, over 32 states  have adopted RBRVS                                                              
methodology  in producing schedules.   Again,  it is a  nationwide                                                              
issue, but  a number  of states  have worked  to address  this via                                                              
practices and  adopting fee schedules  represents "a big  tool" to                                                              
help control medical costs in workers' compensation.                                                                            
CHAIR  OLSON  remarked  that  not surprisingly  all  32  of  those                                                              
states have lower rates than Alaska.                                                                                            
MR. MONAGLE agreed.                                                                                                             
4:08:12 PM                                                                                                                    
CHAIR  OLSON,  after  first  determining  no one  else  wished  to                                                              
testify, closed public testimony on HB 316.                                                                                     
[HB 316 was held over.]                                                                                                         

Document Name Date/Time Subjects
HB316 Amendment O.4.PDF HL&C 3/24/2014 3:15:00 PM
HB 316
HB316 Draft Conceptual Amendment 1.pdf HL&C 3/24/2014 3:15:00 PM
HB 316
HB60 Sectional Analysis-Draft Proposed Blank CS ver C.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Legal Services Memo regarding Changes from Ver A to Ver C.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Draft Proposed Blank CS ver C.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Supporting Documents-Testimony of Ben Orzeske.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Supporting Documents-AS 34.15.130.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Supporting Documents-Legal Memo re Changes in CS ver C 3-18-14.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Supporting Documents-Letter American Bar Association 1-14-10.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Supporting Documents-Letter American College of Real Estate Lawyers 3-31-10.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Supporting Documents-Memo re Transfer On Death States List 1-31-14.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Supporting Documents-ULC Summary of URPTODA 1-25-13.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Supporting Documents-URPTODA Draft with comments from Uniform Law Commission 9-30-09.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB230 Draft CS ver N.pdf HL&C 3/24/2014 3:15:00 PM
HB 230
HB230 Draft Proposed Amendment N.1.pdf HL&C 3/24/2014 3:15:00 PM
HB 230