Legislature(2007 - 2008)Anch LIO Conf Rm


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01:33:26 PM Start
01:35:25 PM SB160
04:15:39 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Time and Location Change --
-- Joint with Senate Labor & Commerce --
Heard & Held
Presentation and Discussion Only
             SB 160-MANDATORY UNIVERSAL HEALTH CARE                                                                         
CHAIR JOHNNY ELLIS announced the consideration of SB 160.                                                                       
1:35:25 PM                                                                                                                    
SENATOR  FRENCH  introduced  SB  160  with  an  overview  of  the                                                               
problem, an  overview of  the bill,  and a review  of a  web site                                                               
created as a guide for Alaskans.                                                                                                
The Problem:                                                                                                                    
Fifteen percent or 100,000 Alaskans  do not have health insurance                                                               
yet 60,000  of that uninsured  population do have jobs.  They are                                                               
simply working for  employers that can't afford or  choose not to                                                               
provide  health  insurance.  The  uninsured  do  not  go  without                                                               
medical care.  They simply pay  out of  pocket for what  they can                                                               
afford and  what they can't  afford is  passed on to  someone who                                                               
can  pay. To  help cover  the  cost of  that uncompensated  care,                                                               
Alaskans who do  have health insurance pay what  is essentially a                                                               
14 percent tax  on their policies. Every year  that translates to                                                               
increased medical premiums  of about $1,000 for a  family of four                                                               
and $19 million for the State of Alaska.                                                                                        
SENATOR FRENCH  reminded members of  the speech Mark  Foster from                                                               
the  Institute of  Social and  Economic Research  made about  the                                                               
disadvantages Alaska  faces when competing with  other states and                                                               
nations  for health  care business  because of  the high  cost of                                                               
medical care  here. Part of  the overspending for health  care is                                                               
due to the large uninsured population in the state.                                                                             
1:38:36 PM                                                                                                                    
The Overview:                                                                                                                   
SENATOR FRENCH  explained that SB  160 is roughly modeled  on the                                                               
Massachusetts plan. It  is not socialized medicine and  it is not                                                               
single payer, both  of which are usually  features of government-                                                               
run health systems.  Rather, SB 160 embraces  the American values                                                               
of competition  and individual  responsibility. It  would require                                                               
Alaskans who do not have insurance  to get a policy that would be                                                               
affordable due to a combination  of market reforms and subsidies.                                                               
Those who are currently covered  by an insurance policy would not                                                               
be affected  other than  to potentially see  a decrease  in their                                                               
SENATOR FRENCH  outlined three key  features in SB 160.  It would                                                               
create the Alaska Health Care  Board, which would be comprised of                                                               
11 members  who are  appointed by the  governor and  confirmed by                                                               
the  legislature. The  board would  define essential  health care                                                               
services and certify private insurance  plans that meet the basic                                                               
criteria  that the  board sets  out.  The second  feature is  the                                                               
Alaska  Health  Care Fund,  which  would  be  made up  of  state,                                                               
federal,  and   employer  contributions.  The  fund   will  issue                                                               
vouchers to  assist qualified individuals in  purchasing a health                                                               
insurance policy. The  third feature is the  health care clearing                                                               
house, which  is where individuals  would take their  vouchers to                                                               
select an  insurance policy. Essentially it's  a marketplace that                                                               
efficiently  matches   buyers  of   insurance  with   sellers  of                                                               
SENATOR FRENCH referenced a chart  dividing the uninsured Alaskan                                                               
population into three categories:  those whose income falls below                                                               
100  percent of  the  federal poverty  line;  those whose  income                                                               
falls between  100 and 300  percent of the federal  poverty line;                                                               
and  those whose  income falls  above the  federal poverty  line.                                                               
Alaskans who  are below 100  percent of the federal  poverty line                                                               
and are not covered by Medicaid  would qualify for a voucher from                                                               
the health care fund to take  to the clearinghouse and purchase a                                                               
health insurance  policy. Alaskans  who are  between 100  and 300                                                               
percent of the  federal poverty line would be on  a sliding scale                                                               
where the fund would issue a  voucher for part of the policy cost                                                               
and the rest would come  out-of-pocket. Alaskans who are over 300                                                               
percent of the federal poverty line  would be on their own to buy                                                               
a  policy.  They  could  receive   a  beneficiary  fund  that  is                                                               
deposited by employers, he added.                                                                                               
SENATOR FRENCH gave a brief overview  of the web site that, among                                                               
other things, has  a calculator that uses  the Massachusetts plan                                                               
to  help  individuals determine  their  expected  monthly out  of                                                               
pocket costs  for a policy. For  example, a family of  three that                                                               
has no  health insurance  and has  a gross  income of  $3,000 per                                                               
month would pay about $120.                                                                                                     
1:46:25 PM                                                                                                                    
SENATOR CON  BUNDE asked the  following: 1) if the  board members                                                               
would be state  employees or similar to the Board  of Regents who                                                               
are reimbursed for  expenses, 2) how essential  services would be                                                               
defined,  and  3)  if  there   would  be  credit  for  a  healthy                                                               
SENATOR  FRENCH responded:  1)  the members  would  be more  like                                                               
Board  of  Regents  members,  2)  rationing  is  not  anticipated                                                               
because  the  bill  doesn't use  socialized  medicine  or  single                                                               
payer, and 3) healthy lifestyles should be rewarded.                                                                            
SENATOR COWDRY  mentioned prescription  drugs and  litigation and                                                               
asked what's caused the increase in cost for medical care.                                                                      
SENATOR FRENCH said he didn't  have a short answer, but Americans                                                               
do enjoy some of the best medical  care in the world and they pay                                                               
for it.                                                                                                                         
1:49:53 PM                                                                                                                    
MICHAEL TANNER, Director of Health  and Welfare Studies, The Cato                                                               
Institute, noted  that he had  submitted written  testimony. [See                                                               
the bill file.] He said  that when considering health reform it's                                                               
important to recognize  that the United States  provides the best                                                               
health care  in the  world and  in large  part the  quality stems                                                               
from the free market health  care system. He cautioned members to                                                               
take  care and  not damage  the high  quality system  when making                                                               
reforms. Just  deal with the  real problems such as  cost, number                                                               
of  uninsured, and  uneven quality.  In  many ways  we should  be                                                               
guided by the Hippocratic Oath, which is to do no harm, he said.                                                                
MR. TANNER said that SB 160  takes good steps and is particularly                                                               
valuable  because it  is not  a  single payer  or government  run                                                               
health  care system.  Every government  run system  in the  world                                                               
rations  and denies  care, which  has a  cost in  terms of  human                                                               
lives. In  2005 the  Canadian Supreme Court  struck down  part of                                                               
its health  care system stating  that many of the  800,000 people                                                               
on the  Canadian waiting list  would live in chronic  pain and/or                                                               
die while waiting for care. "That  is not the type of system that                                                               
you want to bring to Alaska," he said.                                                                                          
1:52:51 PM                                                                                                                    
MR.  TANNER  said he  has  serious  concerns about  the  employer                                                               
mandate  called  for in  the  bill.  As  a matter  of  economics,                                                               
employers  are  indifferent  to the  type  of  compensation  they                                                               
provide their workers, he said.  It doesn't matter if it's wages,                                                               
health  insurance, or  retirement benefits;  the employer  simply                                                               
pays a certain  sum per worker. If the cost  per worker increases                                                               
and productivity  does not, the  employer will have to  find some                                                               
way  of reducing  the cost.  That can  be done  by cutting  other                                                               
benefits, not paying as much  into retirement, lowering wages, or                                                               
reducing the number of employees.  Ultimately, the increased cost                                                               
to the employer will be borne by the employee, he said.                                                                         
MR.  TANNER  said   he  also  has  serious   concerns  about  the                                                               
individual   mandate  because   it's  a   serious  intrusion   on                                                               
individual liberty and  decision making. The 47  states that have                                                               
mandatory auto  insurance haven't found  it to be  very effective                                                               
even  though  it's  relatively  easy  to  enforce.  Enforcing  an                                                               
individual  mandate  for  health  insurance would  not  be  easy.                                                               
Inevitably it would  require a series of  new regulations leading                                                               
to greater  government control and  involvement. Although  SB 160                                                               
establishes  a   board  that  will  determine   what  constitutes                                                               
essential health  services, he  guaranteed that  special interest                                                               
groups would descend asking for  inclusion. As a result, the cost                                                               
of  that health  care product  will rise  and either  the subsidy                                                               
will need  to be increased  or premiums  will need to  be capped.                                                               
Capping premiums leads to rationing care, he stated.                                                                            
MR. TANNER said he also has  trouble with the subsidy level going                                                               
up to 300  percent of the federal poverty level.  That amounts to                                                               
about $62,000  for a family  of four,  which is above  the median                                                               
income in Alaska. Essentially that  expands welfare well into the                                                               
middle class. "Doing  so you create an  enormous constituency for                                                               
people  who want  ever  more subsidies."  Citing  Medicaid as  an                                                               
example, he said there's a  "crowd out" effect when subsidies are                                                               
moved  to that  level.  People  who buy  their  own insurance  or                                                               
employers who offer  health insurance to low  wage workers simply                                                               
stop doing so.                                                                                                                  
MR. TANNER  described the  proposed health care  board as  a huge                                                               
regulatory  agency, which  will  ultimately add  to  the cost  of                                                               
insurance. It  would be similar  to the Massachusetts  board that                                                               
has already used  its regulatory power to require  that all state                                                               
health insurance  offer prescription  drug benefits. It  has also                                                               
prohibited health insurance from  offering high dollar deductible                                                               
plans, which is  the type of insurance people  should really buy,                                                               
he stated.                                                                                                                      
MR. TANNER  said although  the problem  with health  insurance is                                                               
real,  most  of what  state  government  can  do would  make  the                                                               
problem  worse. The  problem should  be  addressed in  Washington                                                               
D.C. with changes  to the federal tax code  and federal antitrust                                                               
laws. He  suggested that what  Alaska can do is:  repeal mandates                                                               
rather than add  them; make the purchase of  insurance across the                                                               
boarder legal;  allow associated groups  to band together  to get                                                               
benefits available to large employers;  and try to bring down the                                                               
cost of insurance.                                                                                                              
MR. TANNER said that the  reason most people don't have insurance                                                               
is  because they  can't  afford  it and  the  mandates and  other                                                               
regulations that states add make health care policies expensive.                                                                
2:03:39 PM                                                                                                                    
REPRESENTATIVE CARL  GATTO asked  how preexisting  conditions are                                                               
handled and if  it's correct that about 90 percent  of a person's                                                               
lifetime health expenses occur in the last year of life.                                                                        
MR. TANNER  said the  figure is actually  about 50  percent. With                                                               
regard to preexisting conditions, he  said there are two answers.                                                               
First, you  want people to  buy insurance when they're  young and                                                               
healthy  so that  they'll  have  it when  they're  old and  sick.                                                               
However, the  young healthy population  won't be inclined  to buy                                                               
health  insurance  if  it's  expensive  so  make  it  affordable.                                                               
Second,  take  the  small  number of  people  who  are  medically                                                               
uninsurable  out  of  the  insurance   pool  and  subsidize  them                                                               
SENATOR BUNDE asked if he's endorsing a health savings plan.                                                                    
MR. TANNER  said partially, but  in essence he's saying  that you                                                               
must recognize that insurance is  supposed to spread catastrophic                                                               
risk. Today we  expect health insurance to pay  for routine costs                                                               
and  that  needs  to  be   turned  around  so  that  catastrophic                                                               
insurance  is at  the top  of the  scale and  routine low  dollar                                                               
expenses  are paid  out of  pocket.  We don't  currently do  that                                                               
because  of the  tax code,  which rewards  first-dollar insurance                                                               
coverage and  penalizes those who  pay out-of-pocket. HSAs  are a                                                               
way to equalize the tax burden, he said.                                                                                        
2:08:23 PM                                                                                                                    
EDMUND F.  HAISLMAIER, Senior Research Fellow,  Center for Health                                                               
Policy  Studies,  The   Heritage  Foundation,  commended  Senator                                                               
French  and  the  committee  for  considering  consumer  directed                                                               
healthcare and  warned against looking at  the Massachusetts Plan                                                               
as   a  detailed   template.  Alaska   is  very   different  from                                                               
Massachusetts and its problems are very different, he said.                                                                     
MR. HAISLMAIER  said the basic concept  outlined in SB 160  is to                                                               
shift  from  a  payer-centered   system  to  a  consumer-centered                                                               
system.  The  hierarchy  of  a   payer-centered  system  has  the                                                               
employer or payer on top. The  payer may or may not interact with                                                               
an  insurer that  may or  may not  interact with  a provider.  In                                                               
theory this is done for the  consumer but they aren't in control.                                                               
Single-payer  systems are  payer-centered where  the consumer  is                                                               
off to the side  and in no more control than a  dog that is taken                                                               
to  the vet.  Realize,  he  said, to  make  a  real difference  a                                                               
fundamental shift in the system  is necessary. Simply cutting the                                                               
number of payers to one doesn't change the dynamic.                                                                             
MR. HAISLMAIER  explained that in a  consumer-centered system the                                                               
consumer  is in  control. The  payers help  with the  funding but                                                               
they don't  run the  system. He  said there  are two  reasons the                                                               
state might  look to this  type of  model. First, it  changes the                                                               
incentives because  everyone would  be working for  the consumer.                                                               
Second,  it  introduces  the  concept  of  value,  which  is  the                                                               
relationship  between   cost  and  benefit.  Although   value  is                                                               
inherently  subjective, everyone  can  probably  agree that  they                                                               
aren't getting very good value  out of today's health care system                                                               
either  as individuals  or collectively.  "Either  we feel  we're                                                               
paying  too much  for what  we're  getting or  we're not  getting                                                               
enough for what we're paying." Ideally  we'd like to pay less and                                                               
get more,  but the real question  is how to devise  a system that                                                               
rewards  people   for  delivering   better  and   cheaper  health                                                               
insurance. The easiest  way to control cost is  not treat people,                                                               
but that doesn't deliver value. The  second easiest way is to cut                                                               
payments to the provider, but that doesn't produce value.                                                                       
MR.  HAISLMAIER said  the  most  important reason  to  move to  a                                                               
consumer-centered system  is to create  incentives to  seek value                                                               
and  reward doctors  or insurance  companies that  provide value.                                                               
Also,  consumer-centered systems  make it  easier to  accommodate                                                               
economic realities.  People no longer  work for the  same company                                                               
throughout  their  entire working  career.  In  Alaska there  are                                                               
part-time workers, seasonal employees,  people with more than one                                                               
job,  and  people moving  jobs.  That's  a  dynamic part  of  the                                                               
economy and  as legislators  you want  to encourage  that because                                                               
that's  where job  growth and  economic vitality  lies. A  system                                                               
where insurance moves with the person deals with that, he said.                                                                 
MR. HAISLMAIER said that the  national data on the uninsured over                                                               
a four-year  period shows that  few people are uninsured  all the                                                               
time. Indications  are that  if insurance  moves with  the person                                                               
instead  of  sticking  to  the  job, about  40  percent  of  that                                                               
uninsured problem  might go away.  It's intuitively  obvious that                                                               
when  people  stop  losing  their   insurance  we  stop  creating                                                               
uninsured people, he said.                                                                                                      
2:21:34 PM                                                                                                                    
MR. HAISLMAIER  suggested several  revisions to the  bill. First,                                                               
he warned  against regulating employers because  it's contrary to                                                               
federal law.  Although the Massachusetts Plan  requires employers                                                               
to  do certain  things,  "they  were artfully  designed  to be  a                                                               
political  compromise   that  had  no  meaningful   effect  on  a                                                               
business."  Second,  he  said  that with  regard  to  low  income                                                               
premium support  it's important to  remember that this is  not an                                                               
entitlement approach;  it's a defined  amount of money.  The idea                                                               
is to  take that  pot of money,  identify the  target population,                                                               
and figure  out how  the money  can go  the farthest.  Third, the                                                               
health  plan standards  should be  set, at  a minimum,  to comply                                                               
with federal  law. State  government already  regulates insurance                                                               
so there's no need to duplicate that.                                                                                           
2:26:06 PM                                                                                                                    
MR. HAISLMAIER  said there's a sort  of logic to asking  what you                                                               
want the  insurance market  to look  like in  a consumer-centered                                                               
system. Today  there's a  group market  and an  individual market                                                               
and creating a hybrid would take  the best of each. This would be                                                               
offered  to employers  through  an exchange  that's  much like  a                                                               
large human resources department. An  advantage is that the state                                                               
would have  one place to  send extra money  as a subsidy,  but it                                                               
wouldn't have to design and run a plan.                                                                                         
2:29:37 PM                                                                                                                    
SENATOR FRENCH  asked him  to expand  on Governor  Romney's point                                                               
that allowing  people to  go without  health insurance  when they                                                               
can expect someone  else to pay the bill for  their treatment, is                                                               
essentially a de facto mandate on providers and tax payers.                                                                     
MR.  HAISLMAIER  explained  Governor  Romney's  approach  was  to                                                               
address the  mandates last. His  first point  was to say  that he                                                               
was  going to  make insurance  more affordable  for middle  class                                                               
people. Second, insurance  was going to be easier  to get. Third,                                                               
it  would be  subsidized with  money  that was  already going  to                                                               
hospitals but with no accountability.  The people that were being                                                               
treated would be identified and  they would receive a subsidy for                                                               
their treatment.  Governor Romney said  that at that  point there                                                               
wasn't  any  excuse for  people  not  to have  health  insurance.                                                               
Although he  didn't require  compliance, he  wanted to  make sure                                                               
that the people  receiving treatment paid their bill  so they had                                                               
to either  put up a  bond or put money  in an escrow  account. If                                                               
they  didn't do  that, their  state income  tax refunds  would be                                                               
held back  until the escrow  account was filled.  Plan provisions                                                               
also made it easier for  providers to collect by providing things                                                               
such  as  automatic  wage  garnishments.  The  state  legislature                                                               
didn't  agree and  instead  said  that people  who  didn't buy  a                                                               
policy would  get an income tax  fine equal to half  the value of                                                               
an average policy. That requirement  will be phased in next year,                                                               
he stated.                                                                                                                      
MR. HAISLMAIER said  that his point is that there  is an inherent                                                               
tradeoff between  the parameters  you set  for the  insurance and                                                               
the need  for the mandate.  If the  insurance that's sold  is age                                                               
and  geography adjusted  then  it's a  better  value for  younger                                                               
healthier people to  buy and therefore the need for  a mandate is                                                               
reduced. The tradeoff is that  you will need separate legislation                                                               
for reinsurance to  address concerns that insurers  have with the                                                               
high risk population.                                                                                                           
MR. HAISLMAIER  said Massachusetts has community  rating and that                                                               
isn't going to change. He  wouldn't recommend that though because                                                               
it  artificially overprices  the  product  for younger  healthier                                                               
people.  He prefers  age-adjusted  ratings  with an  accompanying                                                               
risk transfer  pool to  address the  concerns that  insurers have                                                               
about getting  stuck with a disproportionate  share of diabetics,                                                               
for example, once people can pick  and choose. "At the end of the                                                               
day,  that kind  of  selection in  the  properly designed  market                                                               
might actually be  a good thing. If you're an  insurer and you're                                                               
really good  at getting the  best results  at the best  price for                                                               
cancer care,  it would  be a  good thing if  all the  people with                                                               
cancer went to you."                                                                                                            
CHAIR  ELLIS  asked  if  it   is  government's  role  to  educate                                                               
consumers about which  provider is the most  reasonable. He noted                                                               
that in Alaska there isn't  much opportunity to shop around. "For                                                               
most of us, flying to Seattle is the cheap option."                                                                             
MR. HAISLMAIER  agreed that people  in Alaska already  fly places                                                               
for treatment so the question is  whether or not you're flying to                                                               
the  right place  for that  treatment. The  second point  is that                                                               
simply  creating the  ability for  people to  choose changes  the                                                               
market dynamic  from seller-driven  to buyer-driven.  Making that                                                               
fundamental change  creates a demand  because the  consumer makes                                                               
the choice about  which plan to pick and which  provider to go to                                                               
for treatment. There's  still a role out there  for those experts                                                               
to  help  the   consumer  make  those  decisions.   "We  do  have                                                               
experience in  this area," he  said. The Federal  Employee Health                                                               
Benefits  Program has  run that  way since  1960. The  government                                                               
invites  carriers  in  and  people make  selections  aided  by  a                                                               
variety of private entities.                                                                                                    
MR.  HAISLMAIER  said  his  final   advice  is  to  forget  about                                                               
designing  the  ideal  system  at the  onset.  Instead,  put  the                                                               
information you have out there  and invite interested entities to                                                               
suggest improvements.                                                                                                           
2:43:17 PM                                                                                                                    
JEFF RANF,  President, Alaska Association of  Health Underwriters                                                               
(AAHU) and Broker, Wallace Group  Services, said SB 160 addresses                                                               
a  true need  in the  state, but  unlike Mr.  Tanner, he  doesn't                                                               
believe  that the  solution lies  in Washington  D.C.. He  opined                                                               
that  Alaska is  a  diverse state  with needs  that  can only  be                                                               
answered by Alaska citizens.                                                                                                    
MR.  RANF said  AAHU  agrees that  monitoring  the insurers  will                                                               
bring forth  quality and affordable  products. The  Alaska Health                                                               
Care Board  is a crucial element  for the success of  SB 160, but                                                               
it  must have  the authority  to make  hard decisions  along with                                                               
solid  recommendations.  It  would  need  to  include  employers,                                                               
providers,  federally  funded  program officials,  public  health                                                               
officials,  state  chamber  officials,  the  insurance  industry,                                                               
legislative  members, and  executive branch  members. Furthermore                                                               
it  must  have a  clear  and  concise  agenda capable  of  making                                                               
unbiased decisions  based on the true  needs of the state.  A big                                                               
problem in our health care  system is that everyone is protecting                                                               
their  own  turf  so  we're   going  in  a  number  of  different                                                               
directions rather than just one, he said.                                                                                       
MR.  RANF said  that  as  a society  we  really don't  understand                                                               
what's  driving  up  the  cost  of  health  care.  The  uninsured                                                               
population is just the beginning.  Other factors include an aging                                                               
population,  increased  longevity, rising  pharmaceutical  costs,                                                               
increased technology  spending, the cost of  medical malpractice,                                                               
and  a lack  of managed  care in  the state.  Once we  understand                                                               
what's  driving costs  it'll be  easier to  determine what  it'll                                                               
cost to  cover the uninsured,  but don't kid yourself  that it'll                                                               
be moderate, he said.                                                                                                           
MR. RANF said that funding is  the largest concern and he doesn't                                                               
believe that  there will be a  decrease in premiums if  this bill                                                               
passes. However,  if premiums increase moderately  instead of the                                                               
steady 15  percent trend we've seen  it'll be a huge  step in the                                                               
right direction.                                                                                                                
2:50:59 PM                                                                                                                    
CHAIR   ELLIS  said   it's  gratifying   to  have   a  productive                                                               
conversation because he  remembers working on this  same issue 18                                                               
years  ago  when  the  insurance  industry  opposed  every  step.                                                               
"You've  been  a  constructive  positive voice  and  we  want  to                                                               
continue that with you," he said.                                                                                               
REPRESENTATIVE  GATTO   asked  about  a  system   where  everyone                                                               
receives 100 percent cost coverage  for any kind of treatment. He                                                               
asked  if  that would  be  devastating  to  a  state or  if  it's                                                               
something like what is done now.                                                                                                
MR. RANF said right now people  who want treatment but don't have                                                               
insurance go to the emergency room  and the cost for that is very                                                               
high. However,  covering the uninsured  isn't going to  be cheap.                                                               
"Once everyone  has coverage,  the costs are  going to  be high."                                                               
The  reason health  care is  so  expensive isn't  because of  the                                                               
system, it's  because we're not  healthy as a nation.  "We're not                                                               
as  healthy  as other  nations  are  and  I thing  that's  what's                                                               
driving a lot of this," he said.                                                                                                
2:53:40 PM                                                                                                                    
CHAIR ELLIS said  he looks forward to working  with the executive                                                               
branch on health care issues.                                                                                                   
2:54:53 PM                                                                                                                    
KARLENE JACKSON,  Commissioner, Department  of Health  and Social                                                               
Services, said that the department  is grateful to Senator French                                                               
for bringing the  issue forward. Although she  wasn't prepared to                                                               
take  a position  on  actual points  in the  bill,  she did  have                                                               
several  comments.  She  said she  particularly  appreciated  the                                                               
discussion about  value in  terms of  cost/benefits and  that the                                                               
department will  be focus on  that carefully. She noted  that the                                                               
governor's health council  is also working to  identify short and                                                               
long-term strategies to  balance the health care  system in terms                                                               
of access, cost, and quality.  When the council finishes its work                                                               
in January it may help this and other bills on the same topic.                                                                  
COMMISSIONER JACKSON advised that  DHSS and other departments are                                                               
doing  fiscal analyses  on the  fiscal  note. We  expect to  have                                                               
future conversations when those are complete, she said.                                                                         
COMMISSIONER JACKSON  said previous  speakers raised some  of the                                                               
same  questions she  had including  the  employee and  individual                                                               
mandates.  Those are  concerns that  need further  conversations,                                                               
she said.  She said  she agrees  that Alaska  is unique  and that                                                               
it's important to  craft a program that works  for Alaska. Noting                                                               
that  the department  isn't  too reliant  on  federal funding  or                                                               
federal  policies,  she  said  that   Congress  is  still  making                                                               
decisions  on  the  SCHIP   [State  Children's  Health  Insurance                                                               
Program] and  that that will  certainly impact SB 160.  Also, she                                                               
asked  the  committee to  ensure  that  access  is more  than  an                                                               
insurance card. Make  sure it's actual access to  health care for                                                               
Alaskans. Finally,  she asked the committee  to consider changing                                                               
the  structure of  the  health  care board.  The  bill places  it                                                               
within DHSS  as a division  and she suggested the  committee look                                                               
at  the Mental  Health  Trust Authority  model  instead. This  is                                                               
particularly   important    given   that   the    Department   of                                                               
Administration  has   the  Division  of  Insurance   as  well  as                                                               
responsibilities for the state health benefit plan, she said.                                                                   
2:58:37 PM                                                                                                                    
DR. JAY BUTLER,  Chief Medical Officer, Department  of Health and                                                               
Social  Services, said  he  has two  comments.  First, he  hadn't                                                               
heard  any discussion  about what  perspective a  physician might                                                               
bring. He  noted that the  American Medical  Association recently                                                               
published criteria for a well-functioning  health care system. It                                                               
provided  that   there  should  be  care   for  all,  responsible                                                               
stewardship of community  resources, and personal responsibility.                                                               
Second, he  said it will  probably be impossible to  reduce costs                                                               
and improve health for Alaskans unless prevention is addressed.                                                                 
2:59:52 PM                                                                                                                    
REPRESENTATIVE  GATTO commented  on  the  shortage of  healthcare                                                               
providers  in Alaska  and said  they  can't be  penalized or  the                                                               
situation will  get worse. He  asked if that doesn't  figure into                                                               
the formula for apportioning health care.                                                                                       
DR. BUTLER said that there  is a profound and escalating shortage                                                               
of  health  care  providers  in  Alaska and  there  are  no  easy                                                               
answers. Current  data suggests that physicians  take up practice                                                               
close  to  where  they completed  residency  training.  Currently                                                               
there's only one such program in Alaska and that's in Anchorage.                                                                
3:02:00 PM                                                                                                                    
DUANE  HEYMAN,  Executive  Director,  Commonwealth  North  Alaska                                                               
Health Care  Roundtable, said the  "Roundtable" has  been working                                                               
on these  issues for two  years now and the  hope is that  SB 160                                                               
will be a catalyst to focus  attention on the health of Alaskans,                                                               
how it  can be improved, and  how affordable quality care  can be                                                               
offered to all Alaskans. He  highlighted the handout "Principles,                                                               
Elements and  Specific Steps" as  a good resource. [Copy  in bill                                                               
MR. HEYMAN  urged members to keep  two points in mind.  First, do                                                               
no  harm. Significant  reforms are  needed, but  don't jeopardize                                                               
those  who already  have  reasonable access  to  health care,  he                                                               
said.  Second, the  real goal  is healthy  Alaskans and  not just                                                               
insurance coverage. Improving the health of Alaskans is a long-                                                                 
term  many faceted  situation. Insurance  is  just one  important                                                               
3:05:23 PM                                                                                                                    
SENATOR FRENCH  asked which approaches  have consensus  among the                                                               
Roundtable members.                                                                                                             
MR. HEYMAN said the Roundtable  favors universal access to health                                                               
care, but  there are many  parts to consider.  Insurance, access,                                                               
knowledge, accessibility,  and maintaining a  healthier lifestyle                                                               
all play  a part. "Prevention ultimately  is the best way  to try                                                               
and stem the increase in costs."                                                                                                
CHAIR  ELLIS said  he's pleased  that the  business community  is                                                               
interested in  the issue  because that wasn't  the case  20 years                                                               
ago. He said he appreciates the leadership.                                                                                     
3:07:50 PM                                                                                                                    
LAILE FAIRBAIRN,  Managing Partner, Snow City  Café in Anchorage,                                                               
said  SB 160  is a  promising solution  to a  significant problem                                                               
facing  many small  Alaskan  businesses. She  said  she has  been                                                               
trying to get health insurance for  her employees for a number of                                                               
years,  but it  remains far  out of  reach. She  related specific                                                               
difficulties she's  faced and  noted that  many of  her employees                                                               
are young  and believe  they'll never get  sick so  when premiums                                                               
doubled, they either couldn't or wouldn't pay the increase.                                                                     
JESSE COLLENS, Employee, Snow City  Café, related the health care                                                               
problems he's had as a diabetic.                                                                                                
MS. FAIRBAIRN  added that the café  would be very happy  to pay a                                                               
percentage of its payroll to  help fund the proposed program. "It                                                               
would  be  far less  than  any  health  insurance that  we  could                                                               
purchase right now."  This bill is an  incredible opportunity for                                                               
our state, she stated.                                                                                                          
CO-CHAIR  DAVIS expressed  appreciation  that  Ms Fairbairn  came                                                               
forward  and  congratulated  her  on   the  care  she  shows  her                                                               
CHAIR ELLIS  said it would be  helpful if she were  to spread the                                                               
word and talk to Rotary clubs and other local organizations.                                                                    
3:15:43 PM                                                                                                                    
SENATOR FRENCH stated that small  businesses and young people are                                                               
particularly  difficult to  cover, but  he and  the sponsors  are                                                               
looking for a workable solution.                                                                                                
CO-CHAIR  DAVIS suggested  that a  bill that  she had  introduced                                                               
might be  of interest to Mr.  Collens because it extends  the age                                                               
that young people can be covered by a parent's policy                                                                           
3:17:42 PM                                                                                                                    
JOEL GILBERTSON,  Regional Director  for Strategic  Development &                                                               
Administration, Providence  Health Systems Alaska,  applauded the                                                               
sponsors  for   starting  the  dialogue.  This   along  with  the                                                               
governor's  strategy  council  has  started to  put  health  care                                                               
reform back  on the radar.  He mused  that the system  has become                                                               
extremely complex since 1902 when  the Sisters of Providence came                                                               
to Alaska and established a hospital in Nome.                                                                                   
MR.  GILBERTSON said  that  Providence  Hospital's commitment  to                                                               
improve  health care  in Alaska  hasn't changed  in the  last 105                                                               
years.  Referencing  the  comment  about flying  to  Seattle  for                                                               
treatment, he said  it's important to remember that  20 years ago                                                               
that was  the norm for  many procedures. Now there  are excellent                                                               
cardiac  and  neonatal  services   available  in  Anchorage.  The                                                               
benefits to the patients and  their families are obvious, but the                                                               
challenge  is that  of  production. "At  the end  of  the day  it                                                               
always comes down  to production." In Alaska it will  always be a                                                               
challenge  to decide  which  services to  offer  in state.  Those                                                               
value judgments always have to be  made so it's difficult to make                                                               
a bright line  comparison between out of state and  in state care                                                               
because of the volume issue, he stated.                                                                                         
MR.  GILBERTSON   reported  that   Providence  had   over  70,000                                                               
emergency room  visits last year,  a large portion of  which were                                                               
self pay or  uninsured. He noted that the volume  of self pay has                                                               
grown rapidly  on an annual  basis, but something  expedited that                                                               
in the last 24 months. Those who  are unable to pay still get the                                                               
care, but it's just not in the most efficient manner, he said.                                                                  
MR. GILBERTSON  said when you look  at the payer side,  there are                                                               
only three  groups of  people who  receive health  care services:                                                               
there  are  the uninsured;  there  are  those with  a  government                                                               
benefit  such as  Medicare,  Medicaid, or  Denali  Kid Care;  and                                                               
there are  those that  have commercial  insurance. The  first two                                                               
groups are growing on an  annual basis while commercial insurance                                                               
is  shrinking,  but  the  cost  of  the  health  care  system  is                                                               
constantly being pushed onto that third  piece of the pie to keep                                                               
the  entire system  afloat. Obviously  it's  not sustainable,  he                                                               
MR. GILBERTSON  stated agreement  with Commissioner  Jackson that                                                               
the  largest  public  health  threat in  Alaska  is  limited  and                                                               
inappropriate  access to  health care  services. Therefore,  when                                                               
talking  about  reform,  focusing  on access  is  key;  it's  not                                                               
coverage. People  can be covered,  but if there isn't  a provider                                                               
willing to provide the care or  there isn't a provider willing to                                                               
accept the insurance, the coverage isn't worth too much.                                                                        
MR.  GILBERTSON pointed  out that  health care  reform is  in its                                                               
infancy and  that some mistakes and  particular challenges should                                                               
be   expected.   He   said  that   state-specific   reforms   are                                                               
overwhelmingly focused on access  or coverage expansion, but cost                                                               
control  needs  equal  attention.  Noting that  many  states  are                                                               
holding themselves hostage to federal  action, he said he doesn't                                                               
agree that  it's a federal  issue. Furthermore, each state  has a                                                               
different starting  point and a  different set  of circumstances.                                                               
It's a  matter of being  mindful of  where the resources  are and                                                               
making sure  that the proposals  are right-sized for  each state,                                                               
he said.                                                                                                                        
MR. GILBERTSON said  that the solution will  be multi-faceted. It                                                               
will  require  an  engaged   citizenry;  require  adequately  and                                                               
appropriately  scaled access  sites; promote  sustainable primary                                                               
care;  raise the  bar on  clinical  quality; increase  individual                                                               
responsibility; address workforce  issues. Successful change here                                                               
in Alaska will depend on whether  or not the different groups can                                                               
compromise.   "Ultimately,  cost   improvement  will   come  from                                                               
decreased utilization and…focusing  on ways in which  we get more                                                               
preventative  services in  the state…will  make legislation  like                                                               
this ultimately successful."                                                                                                    
3:27:09 PM                                                                                                                    
SENATOR  FRENCH asked  what percentage  of  the 70,000  emergency                                                               
room visits is self pay.                                                                                                        
MR. GILBERTSON said he didn't  have that information, but for the                                                               
entire hospital about  7 percent of the charges  are budgeted for                                                               
self pay individuals. He noted  that on the inpatient side, about                                                               
3 cents on  the dollar is collected for self  pay. This year self                                                               
pay  is running  well over  9 percent  and each  percentage point                                                               
change  adds about  $9  million in  uncompensated  care into  the                                                               
system.  "We have  normally run  at about  $65-$70 million.  This                                                               
year we're  running at a  rate that  we'll probably be  well over                                                               
$90 million."                                                                                                                   
SENATOR  FRENCH  asked how  much  of  the uncompensated  care  is                                                               
reimbursed by the federal government.                                                                                           
MR.  GILBERTSON said  he  didn't have  the  information but  that                                                               
Providence does receive funding  for services. Providence doesn't                                                               
receive any federal DISH  (disproportionate share hospital) funds                                                               
for Medicaid or Medicare, he said.                                                                                              
CO-CHAIR  DAVIS   asked  if  the   hospital  can   identify  what                                                               
percentage of  the uncompensated care  is for services  to people                                                               
who have  insurance but  don't use it  because they  can't afford                                                               
the co-pay.                                                                                                                     
MR.  GILBERTSON said  there's no  central database  to see  if an                                                               
individual actually has insurance or not.                                                                                       
CHAIR  ELLIS asked  if Providence  makes the  distinction between                                                               
bad debt and uncompensated care.                                                                                                
MR. GILBERTSON  explained that it's  broken down as  charity care                                                               
and  bad  debt.  The  total   represents  charges  that  are  not                                                               
3:31:29 PM                                                                                                                    
PATRICK HIGGINS, Human Resources  Director, North Star Behavioral                                                               
Health System,  said he  had several points  to make.  First, the                                                               
impetus  is  recognizing that  the  three  groups out  there  are                                                               
individuals with government-provided  health care, individuals in                                                               
the insurance group,  and individuals who self pay.  The self pay                                                               
group has people who aren't getting  help. In large part they are                                                               
people  who are  working  but can't  afford  insurance. They  are                                                               
delaying health  care and  when they do  finally receive  care it                                                               
costs more. Obviously, that impacts  society in a number of ways,                                                               
he said.                                                                                                                        
MR. HIGGINS cautioned that the  impact on insurance for employers                                                               
and being  competitive goes  beyond the  small employer.  As more                                                               
and more  employers drop health insurance  coverage the insurance                                                               
pool shrinks and it costs  everyone more. When cost estimates for                                                               
implementing this  program are  made, he hopes  that the  cost of                                                               
insurance to  state and local  employees and the  growing numbers                                                               
in Medicaid are  taken into account. Look at  the balance between                                                               
what's out  there now,  the cost  of this  program, and  the cost                                                               
consequences if nothing is done, he  said. This is vital work for                                                               
Alaskans and for  the country. Something must be  done as quickly                                                               
as possible.                                                                                                                    
3:35:30 PM                                                                                                                    
KAREN RHOADES, Owner/Operator, Northern  Living Centers, said she                                                               
is  a  stakeholder  on  several  levels. She  is  a  health  care                                                               
provider, an  employer, and a  working Alaskan who  is uninsured.                                                               
She encouraged members  not to be afraid of the  mandate. If it's                                                               
reasonable, people  won't object, she  opined. She cited  a study                                                               
indicating  that people  are willing  to pay  into a  health care                                                               
plan if the  cost is reasonable. As an employer  she isn't afraid                                                               
of the mandate, but she would  suggest placing a cap. She related                                                               
her particular  recruitment and  retention difficulties  and said                                                               
that  if  the  state  is  going  to  make  it  impossible  to  be                                                               
competitive then  it has an  obligation to  help her as  a health                                                               
care  provider. She  encouraged  the committee  to  use the  good                                                               
framework provided in SB 160 and pass the bill.                                                                                 
3:42:19 PM                                                                                                                    
WAYNE STEVENS, President, Alaska  State Chamber of Commerce, said                                                               
the state  chamber looks  forward to  working with  the committee                                                               
for workable  solutions that don't place  undue financial burdens                                                               
on employers  or employees.  Health care is  a major  concern for                                                               
businesses and the primary concern  is cost and affordability. He                                                               
related that the  state chamber has been  unsuccessful in putting                                                               
together simple  health care plans  over the last  several years.                                                               
Essentially,  the program  that's available  isn't acceptable  to                                                               
the  consumer he  said.  What was  offered was  a  menu of  items                                                               
including  routine  check  ups,  dental care,  vision  care,  and                                                               
catastrophic   coverage.  Health   savings  accounts   were  also                                                               
encouraged. However, consumers wanted  the Cadillac coverage that                                                               
is offered to state employees.  Clearly, health care issues force                                                               
businesses to make  hard decisions about how  to provide benefits                                                               
to  employees  while remaining  competitive  in  the market.  The                                                               
fundamental problems are cost, quality, and access.                                                                             
MR. STEVENS  encouraged the committee  to look at all  the issues                                                               
across the  spectrum: tort reform;  medical malpractice;  the use                                                               
of emergency rooms as the primary  point of entry to health care;                                                               
competitive  issues;   rapidly  rising  costs  of   Medicare  and                                                               
Medicaid;  cost  shifting;  personal responsibility;  and  health                                                               
savings accounts.  Encouraging the use of  HSAs is a key  part in                                                               
restoring market discipline,  he said. He urged  the committee to                                                               
use caution as it moves  through the process and finds solutions.                                                               
Don't  force  something on  the  system  that doesn't  solve  the                                                               
problem, he said.                                                                                                               
MR. STEVENS  said that  an aggressive  public/private partnership                                                               
is needed to craft a fix and  business needs a seat at the table.                                                               
"Health  is  a  personal  choice  and  no  amount  of  government                                                               
intervention will fix this portion  of the problem." He cautioned                                                               
that any  mandated health insurance  needs to raise  enough money                                                               
in   new  premiums   or  penalties   to  justify   the  cost   of                                                               
investigating  employers,   determining  eligibility,  overseeing                                                               
premium  collection, and  identifying  collecting penalties  from                                                               
the  uninsured. Make  sure  that out  year  costs don't  increase                                                               
unchecked, he said.                                                                                                             
3:47:22 PM                                                                                                                    
VINCE  BELTRAMI, Executive  President, Alaska  AFL-CIO, presented                                                               
data  showing the  critical state  of health  care in  Alaska. He                                                               
said that  while nearly  all of the  affiliate members  of Alaska                                                               
AFL-CIO  have some  sort of  health  insurance, the  organization                                                               
also speaks  on behalf of  other working Alaskans who  are either                                                               
without  a union  or  without basic  health  insurance. They  are                                                               
subsidized by those who do have insurance, he said.                                                                             
MR. BELTRAMI  related that  when he  served as  a trustee  on the                                                               
IBEW  NECA  Health   and  Welfare  Plan,  he   saw  double  digit                                                               
percentage  increases  in   premiums  with  decreasing  benefits.                                                               
According  to recent  statistics, retiring  elderly couples  will                                                               
need  $200,000 in  savings to  pay for  their most  basic medical                                                               
coverage. He  emphasized the  one thing  is certain  and everyone                                                               
agrees,   health  care   costs   must   be  controlled.   There's                                                               
disagreement about the  approach to take in  solving the problem,                                                               
but what is known is that  if the rate of escalation continues at                                                               
current  trends,  the cost  of  inaction  will affect  employers'                                                               
bottom lines and consumers' pocketbooks.                                                                                        
MR. BELTROMI  said he believes  that the biggest challenge  is to                                                               
de-politicize the  issue. Regardless of  which side of  the aisle                                                               
you sit on, health care issues are  killing all of us. He said he                                                               
looks forward to being part of the solution.                                                                                    
CHAIR ELLIS said he's always  admired the AFL-CIO for sticking up                                                               
for  the people  who are  doing  without because  it's the  right                                                               
thing to do.                                                                                                                    
3:54:02 PM                                                                                                                    
PAT  SENNER, MS,  RN, ANP,  Alaska Nurses  Association, expressed                                                               
general support  for a bill that  shares the cost of  health care                                                               
between  government,  employers,  and individuals.  Throwing  out                                                               
what she  called a  radical suggestion,  she said  perhaps people                                                               
should be rewarded for living a healthy lifestyle.                                                                              
MS. SENNER  said that  the primary  concern she  has with  SB 160                                                               
relates to  the makeup of  the proposed  board because it  is not                                                               
consumer-driven.  As proposed,  the board  would have  11 members                                                               
and just  two members would  be consumers. All the  other members                                                               
have a  vested financial interest  in the health care  system. We                                                               
need  to look  at improving  that mix  or giving  the board  less                                                               
power, she said.                                                                                                                
MS.  SENNER said  it's  not  clear if  active  and retired  state                                                               
employees, Medicaid,  and Denali  Kid Care  would be  merged into                                                               
the  system, but  if that's  the case,  it would  represent about                                                               
one-forth of the  population in this state. That would  be a huge                                                               
system  that  would  drive  what's  provided  to  everyone  else.                                                               
Furthermore, the board would wield a tremendous amount of power.                                                                
MS. SENNER  noted that nurses  are not included and  advised that                                                               
they  provide   about  850,000  patient  visits   per  year.  She                                                               
mentioned  access  to  care  and  suggested  the  committee  look                                                               
outside the  box and  think about  contracting with  primary care                                                               
providers to  address the  issue of  billing. She  reiterated her                                                               
request that nurses be included.                                                                                                
CHAIR ELLIS  asked Mr.  Tanner and Mr.  Haislmaier if  they would                                                               
like to respond to any of the comments that had been made.                                                                      
3:59:38 PM                                                                                                                    
MR.  TANNER  issued  a   caution  about  differentiating  between                                                               
charges  and  actual   cost  when  talking  about   the  cost  of                                                               
uncompensated care.  Charges really have  nothing to do  with the                                                               
actual cost  that the hospital  has incurred and they  aren't the                                                               
same as  the uncompensated care  cost. He also  cautioned against                                                               
saying  that  more  preventative  care will  save  money  because                                                               
preventative care doesn't  save money even though  it's very good                                                               
for the individual. Third, he  said he agrees with Mr. Haislmaier                                                               
that  an  employer  mandated  system  is  problematic  and  won't                                                               
survive  a  court  challenge.  Finally  he  urged  caution  about                                                               
overusing  the  argument  that   people  who  don't  have  health                                                               
insurance cost everyone money. It's  undoubtedly true, but if you                                                               
go too far down that  road you'll be mandating certain behaviors,                                                               
he said.                                                                                                                        
4:04:16 PM                                                                                                                    
MR.  HAISLMAIER said  he believes  the bill  sponsors are  really                                                               
working on  single market reform  rather than single  payer. It's                                                               
moving away  from trying to get  a better deal at  someone else's                                                               
expense  and from  the  government  using its  clout  to get  the                                                               
providers to take  a lower rate and then passing  it along to the                                                               
private sector.                                                                                                                 
MR.  HAISLMAIER   presented  national  data  on   emergency  room                                                               
utilization that indicates that  the Medicaid population is using                                                               
ERs nationally  at twice  the rate as  the uninsured  and elderly                                                               
and five times  the rate of the privately  insured. That suggests                                                               
that if  you move more of  those people to the  privately insured                                                               
with  premium  support you  may  start  to  see some  changes  in                                                               
behavior.  It also  suggests something  about a  state's Medicaid                                                               
policy when  the population  is using  the ER  at that  level. He                                                               
explained that  when states are  faced with a budget  crisis they                                                               
have three  options on the table.  They can throw people  off the                                                               
rolls, they can  cut the benefits, or they can  pay the providers                                                               
less. None  of those solutions  is good but paying  the providers                                                               
less is  the least  ugly, he  said. So if  the situation  is that                                                               
providers  are paid  less and  they get  to the  point that  they                                                               
won't accept or  can't afford to accept those  patients, then the                                                               
patients go to  the ER. "So my message in  some states-maybe here                                                               
maybe not-is,  are you really  saving any money in  your Medicaid                                                               
program if that's what's happening?"                                                                                            
MR. HAISLMAIER said  one more point is that  the Federal Employee                                                               
Health  Benefits Program  is the  closest thing  there is  to the                                                               
consumer choice  market and that  system has  consistently turned                                                               
in cost  control better than  the large employer plans  even when                                                               
adjusted for benefits.                                                                                                          
MR. HAISLMAIER  said he enjoys  being an itinerant  consultant to                                                               
state legislatures  because he gets  an opportunity to  listen to                                                               
different  stories. When  he does  that  he asks  himself if  the                                                               
person would  be taken care  of in the  design and the  answer is                                                               
yes. The  young man who  has diabetes would be  covered. Finally,                                                               
he said  that when he  listened to  Mr. Beltromi he  was reminded                                                               
that  some of  the most  popular  plans in  the federal  employee                                                               
health benefits plans are sponsored by unions.                                                                                  
4:13:32 PM                                                                                                                    
CHAIR ELLIS announced  that open public testimony  would be taken                                                               
during  subsequent hearings  and  that all  written testimony  is                                                               
welcome.  He  thanked  all  the  presenters  and  noted  that  11                                                               
legislators  were in  and out  of the  hearing, which  is a  good                                                               
CO-CHAIR  DAVIS said  this has  been a  helpful and  it sets  the                                                               
stage for when the committee returns to Juneau                                                                                  
REPRESENTATIVE  PEGGY  WILSON   expressed  appreciation  for  the                                                               
SENATOR KIM ELTON said the hearing was most helpful.                                                                            
There being no further business to come before the committee,                                                                   
Chair Ellis adjourned the meeting at 4:15:39 PM.                                                                              

Document Name Date/Time Subjects