Legislature(2005 - 2006)BUTROVICH 205


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01:28:28 PM Start
01:33:32 PM Overview: Medicare Prescription Drugs - Department of Health and Social Services
01:56:11 PM SB250
02:32:37 PM SB299
03:17:50 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overview: Medicare Prescription Drugs - TELECONFERENCED
Department of Health & Social Services
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
Heard & Held
         SB 299-NONDISCRIMINATION HEALTH CARE PROVIDERS                                                                     
2:32:37 PM                                                                                                                    
CHAIR FRED DYSON announced SB 299 to be up for consideration.                                                                   
SENATOR RALPH  SEEKINS, Alaska State Legislature,  sponsor, began                                                               
by paraphrasing the full title, which read:                                                                                     
     An  Act relating  to  preventing unfair  discrimination                                                                    
     against a health  care provider who is  willing to meet                                                                    
     a   health   insurer's   terms   and   conditions   for                                                                    
     participation  in   the  insurer's  plan,   policy,  or                                                                    
     contract  for   health  care  services;   amending  the                                                                    
     definition of  'provider' as  it relates  to authorized                                                                    
     collective  negotiations  by physicians  affecting  the                                                                    
     rights  of providers  under health  benefit plans;  and                                                                    
     providing for an effective date.                                                                                           
He  said  AS  21.36.090(d)   pertains  to  unfair  discrimination                                                               
against  a person  who provides  services covered  under a  group                                                               
health insurance plan.   It comes into play as  a function of the                                                               
relationship between health care  providers and group health care                                                               
systems.   Recently,  the U.S.  Supreme  Court upheld  Kentucky's                                                               
"any  willing provider"  (AWP) law,  which offers  a more  robust                                                               
alternative to Alaska's  current law.  Thus SB  299 would replace                                                               
AS 21.36.090(d)  with case-tested  AWP language,  Senator Seekins                                                               
told members.                                                                                                                   
He  noted that  the move  towards  AWP language  also required  a                                                               
change   to   the   definition   of   "health   care   provider."                                                               
Consequently, the original definition as  used in Title 23 had to                                                               
be restored.   This is found in  Section 2 of the  bill.  Senator                                                               
Seekins said  the AWP concept  promotes the  individual's ability                                                               
to choose  a health  care provider.   The AWP  law says  a health                                                               
insurer cannot discriminate against  any provider that is willing                                                               
to meet  the terms and  conditions for  participation established                                                               
by the  health insurer, assuming  the provider is  located within                                                               
the geographic coverage area of the health benefit plan.                                                                        
He  explained  that  this  is   especially  pertinent  when,  for                                                               
example, a  woman in  the second  trimester of  pregnancy changes                                                               
jobs and  may be forced  to change  health care providers  if her                                                               
current  provider isn't  recognized by  her new  health insurance                                                               
plan.   If  the  patient's non-network  physician  is willing  to                                                               
accept  the  network  fee  schedule -  and  meets  the  insurance                                                               
company's  licensing and  credentialing standards  - the  patient                                                               
should be able to continue to see the known and trusted doctor.                                                                 
He concluded  by saying SB  299 adopts  into Alaska law  the "any                                                               
willing  provider"  concept,  thereby  promoting  and  preserving                                                               
Alaskans'  ability to  choose their  own  health care  providers.                                                               
Senator Seekins informed  the committee that a  number of experts                                                               
were present to testify and offer examples.                                                                                     
2:36:13 PM                                                                                                                    
SENATOR SEEKINS,  in response to  Senator Wilken, said  there was                                                               
no fiscal note that he knew of.                                                                                                 
SENATOR OLSON  asked how  the "638"  contractors in  rural Alaska                                                               
would be affected.  He explained  that this relates to Public Law                                                               
638, which  applies to  health corporations  in Bush  Alaska that                                                               
receive federal funds.                                                                                                          
SENATOR SEEKINS deferred to one of the experts.                                                                                 
2:38:09 PM                                                                                                                    
GEORGE  RHYNEER, MD,  Alaska  Physicians  and Surgeons,  informed                                                               
members that he  is a cardiologist from Eagle  River, in practice                                                               
in Alaska  for 35  years.   He noted  that Alaska  Physicians and                                                               
Surgeons is  a Southcentral physician  group that, in  this case,                                                               
is representing its patients.                                                                                                   
He suggested all patients would  support this because it provides                                                               
freedom of choice.   He gave examples.  For  instance, he prefers                                                               
to refer  patients to a  certain endocrinologist, but  finds some                                                               
cannot  see  that doctor  because  they'd  be severely  penalized                                                               
economically by the insurance company.   Furthermore, people with                                                               
life-threatening   illnesses   aren't  benefited   by   switching                                                               
physicians.    Not  having  the   ability  to  choose  one's  own                                                               
physician is counter-therapeutic.  For  best outcomes in illness,                                                               
Dr.  Rhyneer said,  it's imperative  that the  patient trust  the                                                               
physician and have choice.                                                                                                      
He also  talked about the  economic effect on physicians  when an                                                               
insurance company  can select  or deselect doctors  to be  on the                                                               
panel.   He  said it  makes  it especially  difficult to  recruit                                                               
physicians to come  to Alaska if, after they set  up business and                                                               
establish   patients,   an   insurance   company   can   threaten                                                               
deselection  unless the  doctor  kowtows to  an onerous  economic                                                               
relationship.    Dr.  Rhyneer   concluded  by  saying  there  are                                                               
innumerable good reasons for having this legislation.                                                                           
2:42:51 PM                                                                                                                    
CHAIR  DYSON   asked  about   the  relationship   between  Alaska                                                               
Physicians   and   Surgeons   Group  and   the   Alaska   Medical                                                               
DR.  RHYNEER   explained  that  the  latter   is  a  professional                                                               
organization,  partnered with  the American  Medical Association.                                                               
The  first organization  was started  six or  seven years  ago as                                                               
more  of a  business and  legislative group.   They  are separate                                                               
organizations, although many members of one belong to the other.                                                                
CHAIR  DYSON  referred  to unspecified  documentation  he'd  been                                                               
given that  says passage  of this  law will drive  up costs.   He                                                               
offered  his  understanding  that   the  bill  says  whoever  the                                                               
provider is must agree to the fee schedule offered by the third-                                                                
party  payer.     He   asked  whether   that  is   Dr.  Rhyneer's                                                               
understanding of what is being done.                                                                                            
DR. RHYNEER affirmed that.                                                                                                      
CHAIR  DYSON asked  Dr.  Rhyneer to  clarify  his statement  that                                                               
doctors would have to agree to an onerous remuneration schedule.                                                                
DR. RHYNEER explained that when  an insurance company has a large                                                               
share of the business in a  community and can direct its patients                                                               
from  one group  of  physicians to  another -  by  having or  not                                                               
having them  on its  panel -  then it's hard  for a  physician to                                                               
refuse the  offered pay  scale, even if  it's less  than overhead                                                               
costs, because all those patients could be sent elsewhere.                                                                      
CHAIR DYSON related his understanding  that in this bill a doctor                                                               
would give a  group discount for having all those  referrals.  If                                                               
one patient  decided to  stick to  another doctor,  however, then                                                               
the other  doctor would have  to agree to this  discount schedule                                                               
in order to be paid by the third-party payer.                                                                                   
DR. RHYNEER  affirmed that.   He suggested in  larger communities                                                               
such as  New York  City or Chicago,  with thousands  of physician                                                               
groups and perhaps  hundreds of hospitals, it's  easier to defend                                                               
that kind of predatory activity by insurance companies.                                                                         
2:46:40 PM                                                                                                                    
SENATOR ELTON  said it  seems if an  employer cannot  negotiate a                                                               
price break  on health  care, then  either the  employer's health                                                               
care  costs could  rise or  changes could  be made  to employees'                                                               
DR. RHYNEER responded that in  other jurisdictions there has been                                                               
no  apparent change  in the  cost  to companies  or providers  of                                                               
insurance,  through  their  premiums,  when AWP  laws  have  been                                                               
established;  it appears,  from "observations  and measurements,"                                                               
that AWP has no deleterious effect on that relationship.                                                                        
SENATOR  ELTON expressed  interest in  the observations  cited by                                                               
Dr.  Rhyneer.   He  noted  that  others have  cited  observations                                                               
pointing to the opposite conclusion.                                                                                            
DR. RHYNEER said in Alaska almost  all money spent on health care                                                               
remains in  Alaska.  It  goes towards improving  care, machinery,                                                               
modernization and  the availability  of nurses; very  little goes                                                               
elsewhere to shareholders and so forth.  He pointed out that so-                                                                
called   managed  care   has  had   a  serious   effect  on   the                                                               
availability, and probably the quality,  of health care delivered                                                               
outside of Alaska.                                                                                                              
SENATOR ELTON reiterated that data would be helpful.                                                                            
SENATOR  OLSON remarked  that he  thought  money from  Providence                                                               
Alaska Medical Center  went back to the main  offices outside the                                                               
state, which  helped to  ensure that  other health  care ventures                                                               
were put in place.                                                                                                              
DR. RHYNEER  replied that he  has heard  that rumor, both  in the                                                               
past  and  recently.   However,  he  is  on  the board  for  that                                                               
institution, and every month they  get a rundown of the finances.                                                               
He said he  has never seen evidence that money  is transferred to                                                               
the  Seattle office,  which  is  an owner.    He  added that  the                                                               
corporation  does  require  remuneration   for  the  services  it                                                               
provides to the  local hospitals - the  outsourcing, the billing,                                                               
and so forth,  which are done in Seattle.   However, the majority                                                               
of the "margin" money is used for capital improvements.                                                                         
SENATOR OLSON  expressed concern for owners  of small businesses,                                                               
who often have trouble affording health insurance for employees.                                                                
DR.  RHYNEER said  he  believes  there is  a  far more  elaborate                                                               
answer than he could provide.   "I think this, from observations,                                                               
plays a very small part in that issue," he added.                                                                               
SENATOR  OLSON  asked whether  the  concept  in this  bill  works                                                               
against that, however.                                                                                                          
DR. RHYNEER replied that there is no evidence it does.                                                                          
SENATOR SEEKINS returned to earlier  discussion, saying, "I think                                                               
the answer to  your question about whether or  not your physician                                                               
has to  accept that fee  is correct, but you  get to go  and say,                                                               
'Will you do this for me?'  It's  not that you have to accept the                                                               
entire panel of people that you send to that physician."                                                                        
2:53:12 PM                                                                                                                    
SENATOR WILKEN  asked whether this legislation  will help attract                                                               
physicians to Alaska or will deter them.                                                                                        
SENATOR SEEKINS opined that it  will help, expanding the universe                                                               
of available physicians.                                                                                                        
2:54:15 PM                                                                                                                    
MIKE HOGAN,  Executive Director, Alaska Physicians  and Surgeons,                                                               
noted that  his organization is  a 170-member physician  group in                                                               
Anchorage.  He  spoke in strong support of SB 299.   In answer to                                                               
Senator Wilken's  question, he  said his  group has  been working                                                               
with  other entities  to create  the most  favorable health  care                                                               
environment in Alaska to attract new  physicians - this is one of                                                               
their  chief goals,  and this  bill  is one  piece among  several                                                               
pieces  of  legislation over  the  years.    He said  the  likely                                                               
relationship with  insurance carriers  is one criterion  that new                                                               
doctors will  look at.   Now that  the Supreme Court  has cleared                                                               
the  AWP  idea,  he  surmised   there  will  be  an  increase  in                                                               
legislation in  other states.   He offered  his belief  that this                                                               
will attract new physicians and be good for patients.                                                                           
SENATOR ELTON  pointed out an  element not being discussed:   the                                                               
ability  of employers  of large  numbers of  people to  negotiate                                                               
health care  costs, which also  would benefit patients.   He said                                                               
it seems the  AWP system will give less incentive  for any health                                                               
care provider  to negotiate  a fairly  significant break  for the                                                               
employer - and thus for the employee.                                                                                           
MR.   HOGAN  referred   to  the   group-discount  model,   called                                                               
"steerage,"  saying  it  works  much better  in  states  with  an                                                               
overabundance of  physicians.  The state  medical association has                                                               
calculated Alaska  to be 400  physicians short, out of  a private                                                               
physician population of about 1,200.   Some plans other than Blue                                                               
Cross have  had trouble establishing  significant panels  in this                                                               
state.  He asked Senator Elton to elaborate on his concern.                                                                     
SENATOR  ELTON  explained  that he  understands  the  benefit  of                                                               
patients' ability  to choose their  doctors.  However,  this also                                                               
reduces  employers' ability  to negotiate  lower rates,  and that                                                               
ability would  benefit patients through  either lower costs  or a                                                               
broader menu of health care options.                                                                                            
MR. HOGAN  reported that  Kentucky has looked  at this  issue and                                                               
costs for the last ten years;  he indicated he could provide that                                                               
information,  and   said  the  state  contends   that  it  hasn't                                                               
significantly  affected costs.    Acknowledging that  legislators                                                               
will  have to  weigh the  argument  posed by  Senator Elton  when                                                               
deliberating,  he nonetheless  emphasized  focusing on  patients'                                                               
ability to choose their health care providers.                                                                                  
SENATOR ELTON  requested that Mr.  Hogan provide  the information                                                               
from Kentucky.                                                                                                                  
CHAIR DYSON pointed  out that when there is  are negotiated lower                                                               
prices for  one group of  employees, it works against  people who                                                               
don't have insurance and thus pay their own way.                                                                                
3:00:12 PM                                                                                                                    
SENATOR  OLSON  asked  how  this  bill  would  affect  the  "638"                                                               
MR. HOGAN said he didn't know, but could provide an answer.                                                                     
CHAIR  DYSON asked  to  hear  from any  testifiers  who had  time                                                               
constraints or wouldn't be available the following Wednesday.                                                                   
3:01:12 PM                                                                                                                    
GREG LOUDON, Health  Care Consultant, Willis of  Alaska, spoke in                                                               
opposition to SB  299.  He began by  discussing cost containment,                                                               
a broad term for a toolbox  of methods to reduce costs for health                                                               
plans.  He  said contracting with a select group  of providers is                                                               
one of the best methods  his organization has for limiting costs.                                                               
They can't expect discounts from  providers without offering them                                                               
directed health care dollars in exchange.  He related examples.                                                                 
He explained that contracting is  key to offering and using cost-                                                               
containment  methods; he  mentioned the  quality of  the provider                                                               
and ongoing  care.   Mr. Loudon  said it isn't  just a  matter of                                                               
price.   When  choosing  health care  providers,  they check  the                                                               
background  and experience  as well  as any  complaints.   Health                                                               
plan  members  know there  has  been  a  basic level  of  quality                                                               
assurance, and  can choose  providers outside  of the  contract -                                                               
but at a lower reimbursement level.                                                                                             
He  said   health  savings  accounts  and   health  reimbursement                                                               
accounts are dependent on getting  good data, including price and                                                               
quality  data.     The  contracts  provide  good   data.    These                                                               
management  programs  are  another   way  to  contain  costs,  he                                                               
suggested, and should  work with the contractor  providers to try                                                               
to  improve the  quality of  care  and decrease  the time  people                                                               
spend in hospitals or other high-cost treatment options.                                                                        
3:04:13 PM                                                                                                                    
SENATOR   OLSON   asked   how  to   ensure   health   maintenance                                                               
organizations  (HMO)  don't  become  a  predominant  provider  of                                                               
health care in Alaska.                                                                                                          
MR.  LOUDON replied  that  he  doesn't see  how  this bill  would                                                               
prevent  that.   He  offered his  understanding  that the  reason                                                               
Alaska  doesn't have  HMOs is  that any  provider which  wants to                                                               
take risks is required to file  as an insurance company.  He said                                                               
there are lots  of hoops to jump through  besides the contracting                                                               
issue this bill addresses.                                                                                                      
3:05:10 PM                                                                                                                    
COLLEEN  SAVOIE, Willis  of Alaska,  noted that  her organization                                                               
represents  a  number  of  insured   plans  and  large  (indisc.)                                                               
entities.   She spoke in  opposition to  SB 299 because  it would                                                               
result  in  increased  medical  costs.    She  pointed  out  that                                                               
employers are struggling with the  increased cost of health care.                                                               
They are reducing benefits,  increasing the employee contribution                                                               
rate or  eliminating it altogether.   Using a  preferred provider                                                               
network has  been very  successful so far  in helping  to control                                                               
health care costs, Ms. Savoie said.   She gave an example, noting                                                               
that SB 299 would include hospitals as well as other providers.                                                                 
She asserted  that AWP-type legislation  will affect costs.   She                                                               
cited a 2001  study published in the Journal  of Health Economics                                                             
as  saying  health expenditures  are  higher  when AWP  laws  are                                                               
enacted.  Ms. Savoie also  noted that the National Association of                                                               
Health  Underwriters  in 2003  identified  AWP  legislation as  a                                                               
threat to market stability.                                                                                                     
She told members  the Federal Trade Commission  (FTC) opposes AWP                                                               
legislation.  Directing attention to a  report by the FTC and the                                                               
Department  of  Justice,  published  in  July  2004,  Ms.  Savoie                                                               
encouraged  members to  review this  report.   She noted  that it                                                               
says  AWP  laws  have  anti-competitive  effects;  make  provider                                                               
discounts  less  likely;  and  restrict  the  ability  of  health                                                               
insurers and plans to structure  offerings with varying levels of                                                               
choice.  Thus they actually reduce the options.                                                                                 
3:09:58 PM                                                                                                                    
SENATOR ELTON  requested copies  for the  committee of  the 2001,                                                               
2003 and 2004 reports Ms. Savoie had referenced.                                                                                
JACK  McRAE, Senior  Vice President,  Blue Cross  Blue Shield  of                                                               
Alaska (Blue Cross), informed the  committee that his company has                                                               
about  50 percent  of Alaska's  physicians on  contract now,  and                                                               
believes  this  saves the  membership  hundreds  of thousands  of                                                               
dollars.   With the contracts,  the company is able  to negotiate                                                               
with the physicians.                                                                                                            
He emphasized  that his company does  pay when people go  to non-                                                               
contracted  physicians, though  it  may pay  less.   Furthermore,                                                               
regarding   continuity  of   care,   Mr.   McRae  said   Alaska's                                                               
legislature addressed  the issue in  2000 by passing  a so-called                                                               
patients'  bill of  rights, which  Blue Cross  supported.   Under                                                               
that,  a patient  continues to  be  seen by  the physician  until                                                               
treatment is completed,  and Mr. McRae said  Blue Cross continues                                                               
to  pay the  bills  as before;  he gave  an  example.   Mr. McRae                                                               
mentioned  the FTC  study and  concluded by  highlighting another                                                               
study  by  Arthur Andersen  (ph),  completed  for 1998-2002  that                                                               
showed AWP legislation would increase costs by 12 percent.                                                                      
3:12:57 PM                                                                                                                    
WILLIAM  PFEIFER,  D.C.,  Alaska  Chiropractic  Society,  thanked                                                               
Senator  Seekins and  the committee  for bringing  up this  bill,                                                               
which he believes  is needed in Alaska.  However,  he pointed out                                                               
language concerns  that he  hadn't yet had  time to  address with                                                               
the sponsor.                                                                                                                    
He referred  to page 1,  line 12, through  page 2, line  1, which                                                               
read, "This  subsection does not affect  different reimbursements                                                               
to different types  of health care providers, nor  does if affect                                                               
coverage  for the  service of  a particular  type of  health care                                                               
provider."    Saying  it  seems  to reverse  the  intent  of  the                                                               
legislation,  Dr. Pfeifer  proposed exploring  that further  with                                                               
the sponsor in order to clarify it or have it deleted.                                                                          
He referred  to page 2, line  9, "(B) does not  include insurance                                                               
under the  Alaska Workers' Compensation  Act, AS 23.30.   He said                                                               
there may be  some good rationale for that.   However, having sat                                                               
on   the  medical   services   review   committee  for   workers'                                                               
compensation  this  last  year,  he'd  filed  a  minority  report                                                               
because the recommendation was to  allow the insurance company or                                                               
employer to choose  the treating physician of  an injured worker.                                                               
Dr. Pfeifer  expressed concern  that the  aforementioned language                                                               
might have some other meanings, and requested clarification.                                                                    
He also  voiced concern  about the  redefinition of  "health care                                                               
provider", which includes facilities.   Dr. Pfeifer said it's not                                                               
that he thinks hospitals and  such should be protected under AWP.                                                               
However,  classifying  them  as providers  removes  the  existing                                                               
language  that says  (indisc.).   Dr.  Pfeifer  pointed out  that                                                               
facilities don't have an occupation  or a license, and said there                                                               
is  no reference  back  to that.    He cited  the  example of  an                                                               
insurance company that  contracts with a hospital  for x-rays; he                                                               
expressed concern about excluding  small facilities (indisc.) and                                                               
mentioned financial  agreements and absorption by  broader bases.                                                               
Dr. Pfeifer expressed hope that  he'd have an opportunity to work                                                               
with the sponsor before the bill moved forward.                                                                                 
CHAIR  DYSON requested  that Dr.  Pfeifer work  with the  sponsor                                                               
before  next  week,   when  the  bill  would   likely  move  from                                                               
3:16:50 PM                                                                                                                    
ROSE KALAMARIDES, Administrator,  Alaska Teamster-Employer Trust,                                                               
spoke briefly in opposition, saying  Mr. Loudon and Ms. Savoie of                                                               
Willis of Alaska had summed up her organization's position.                                                                     
CHAIR DYSON thanked participants.  He held SB 299 in committee.                                                                 

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