Legislature(2003 - 2004)

04/24/2003 02:18 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 24, 2003                                                                                           
                         2:18 P.M.                                                                                              
                                                                                                                                
TAPE HFC 03 - 63, Side A                                                                                                        
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Williams called the House  Finance Committee meeting                                                                   
to order at 2:18 P.M.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative John Harris, Co-Chair                                                                                            
Representative Bill Williams, Co-Chair                                                                                          
Representative Kevin Meyer, Vice-Chair                                                                                          
Representative Mike Chenault                                                                                                    
Representative Eric Croft                                                                                                       
Representative Richard Foster                                                                                                   
Representative Mike Hawker                                                                                                      
Representative Carl Moses                                                                                                       
Representative Bill Stoltze                                                                                                     
Representative Jim Whitaker                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Reggie Joule                                                                                                     
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Joel Gilbertson, Commissioner,  Department of Health & Social                                                                   
Services;  Bob  Labbe,  Deputy  Commissioner,  Department  of                                                                   
Health  and   Social  Services;   Kevin  Jardell,   Assistant                                                                   
Commissioner,  Department   of  Administration;   Susan  Cox,                                                                   
Assistant   Attorney  General,   Department   of  Law;   Brad                                                                   
Thompson,   Director,   Risk    Management,   Department   of                                                                   
Administration; Paul  Grossi, Director, Division  of Workers'                                                                   
Compensation, Department of Labor & Workforce Development                                                                       
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
None                                                                                                                            
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
SB 108    An  Act   relating  to  payment  rates   under  the                                                                   
          Medicaid  program  for  health  facilities  and  to                                                                   
          budgeting,  accounting, and reporting  requirements                                                                   
          for those facilities;  abolishing the Medicaid Rate                                                                   
          Advisory   Commission;   and   providing   for   an                                                                   
          effective date.                                                                                                       
                                                                                                                                
          HCS CS SB 108 (FIN) was reported out of Committee                                                                     
          with a "do pass" recommendation and with fiscal                                                                       
          note  #1 by  the Department  of  Health and  Social                                                                   
          Services.                                                                                                             
                                                                                                                                
SB 109    An Act  repealing the statute that  sets priorities                                                                   
          for  the Department of  Health and Social  Services                                                                   
          to   apply  to   administration   of  the   medical                                                                   
          assistance  program  when  there  are  insufficient                                                                   
          funds  allocated  in  the  state  budget  for  that                                                                   
          program;  authorizing the  department to  make cost                                                                   
          containment  decisions that  may include  decisions                                                                   
          about  eligibility of  persons and availability  of                                                                   
          services under the medical  assistance program; and                                                                   
          providing for an effective date.                                                                                      
                                                                                                                                
          SB 109 was HEARD and  HELD in Committee for further                                                                   
          consideration.                                                                                                        
                                                                                                                                
SB 115    An  Act  allowing  expenses   of  the  correctional                                                                   
          industries  program that may  be financed  from the                                                                   
          correctional   industries  fund   to  include   the                                                                   
         salaries and benefits of state employees.                                                                              
                                                                                                                                
          SB 115 was SCHEDULED but not heard.  The bill was                                                                     
          POSTPONED until April  25, 2003, 9:00 A.M. meeting.                                                                   
                                                                                                                                
SB 120    An Act  relating to the state's  sovereign immunity                                                                   
          for certain  actions regarding injury,  illness, or                                                                   
          death  of  state-employed  seamen and  to  workers'                                                                   
          compensation   coverage  for   those  seamen;   and                                                                   
          providing for an effective date.                                                                                      
                                                                                                                                
          SB 120 was HEARD and HELD in Committee for further                                                                    
          consideration.                                                                                                        
                                                                                                                                
SENATE BILL NO. 108                                                                                                           
                                                                                                                                
     An  Act relating  to payment  rates  under the  Medicaid                                                                   
     program   for  health  facilities   and  to   budgeting,                                                                   
     accounting,   and  reporting   requirements  for   those                                                                   
     facilities;   abolishing  the  Medicaid   Rate  Advisory                                                                   
     Commission; and providing for an effective date.                                                                           
                                                                                                                                
Co-Chair  Harris  MOVED  to adopt  work  draft  #23-GS1125\I,                                                                   
Lauterbach, 4/23/03,  as the version  of the bill  before the                                                                   
Committee.  There being NO OBJECTION, it was adopted.                                                                           
                                                                                                                                
JOEL GILBERTSON, COMMISSIONER,  DEPARTMENT OF HEALTH & SOCIAL                                                                   
SERVICES,  commented on  the changes  made  to the  committee                                                                   
substitute.   He  stated that  the bill  would eliminate  the                                                                   
Medicaid   Rate    Advisory   Commission   and    place   the                                                                   
responsibility for  calculating and setting  Medicaid payment                                                                   
rates for health care facilities  under the general authority                                                                   
of the  Department  of Health  & Social Services.   The  bill                                                                   
would  modify   the  Alaska  Statutes  to   parallel  federal                                                                   
statutory  requirements  for   setting  facility-based  rates                                                                   
under Medicaid.   Originally,  the structure was  modified in                                                                   
1997 to  remove the Medicaid  facility payment  standards and                                                                   
place  them in  the public  process  requirements of  federal                                                                   
law.   The Alaska Statutes have  not changed to  reflect that                                                                   
modification.                                                                                                                   
                                                                                                                                
Commissioner  Gilbertson  continued,  the  legislation  would                                                                   
provide  for  the  Alaska  Statutes  to  mirror  the  federal                                                                   
statutory requirement  for rate setting.   He noted  that the                                                                   
Department  had worked  with the  Alaska  State Hospital  and                                                                   
Nursing  Home  Association  (ASHNHA)  to  provide  compromise                                                                   
language  as  adopted  in  the  committee  substitute.    The                                                                   
language  clarifies  that the  State  will continue  to  have                                                                   
rates based on  reasonable costs.  The  Administration agrees                                                                   
that there should not be "unreasonable"  costs or rates.  The                                                                   
Department  does  have  an interest  in  grouping  rates  for                                                                   
facilities.  The current structure  allows for the Department                                                                   
to only adopt  one rate setting structure and  does not allow                                                                   
differentiating  between   a  ten-bed  facility   and  a  two                                                                   
hundred-bed  facility.    The  legislation is  an  effort  to                                                                   
provide a unique methodology in grouping facilities.                                                                            
                                                                                                                                
Commissioner   Gilbertson   pointed   out  that   Section   5                                                                   
references  audits   and  are  optional  and   would  not  be                                                                   
required.   Those audits  would not happen  every year.   The                                                                   
Department  would retain  their  ability  to have  reasonable                                                                   
access to medical assistance for auditing records.                                                                              
                                                                                                                                
Representative Croft referenced  the committee substitute and                                                                   
asked if the  section regarding the reasonable  costs for the                                                                   
facility  managers  were  listed  on Page  2.    Commissioner                                                                   
Gilbertson replied that was correct.                                                                                            
                                                                                                                                
Representative  Croft  asked  if  there had  been  any  other                                                                   
changes  between  the  committee  substitute  and  the  prior                                                                   
version  of   the  legislation.     Commissioner   Gilbertson                                                                   
responded  that  there were  a  number  of small  changes  to                                                                   
accommodate  some   concerns  voiced  by   Legislative  Legal                                                                   
Services.  The  substantive changes were the  ones concerning                                                                   
the language on legal costs related to patient care.                                                                            
                                                                                                                                
Representative  Croft asked  if Section  5 would be  changed.                                                                   
Commissioner Gilbertson responded it would not.                                                                                 
                                                                                                                                
Representative  Foster MOVED to  report HCS  CS SB  108 (FIN)                                                                   
out  of Committee  with individual  recommendations and  with                                                                   
the accompanying fiscal note.                                                                                                   
                                                                                                                                
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
HCS CS SB 108 (FIN) was reported  out of Committee with a "do                                                                   
pass"  recommendation   and  with  fiscal  note   #1  by  the                                                                   
Department of Health and Social Services.                                                                                       
                                                                                                                                
SENATE BILL NO. 109                                                                                                           
                                                                                                                                
     Department  of Health  and Social  Services to  apply to                                                                   
     administration  of the medical  assistance program  when                                                                   
     there  are insufficient  funds  allocated  in the  state                                                                   
     budget for  that program; authorizing the  department to                                                                   
     make  cost   containment  decisions  that   may  include                                                                   
     decisions about eligibility  of persons and availability                                                                   
     of services  under the  medical assistance  program; and                                                                   
     providing for an effective date.                                                                                           
                                                                                                                                
JOEL GILBERTSON, COMMISSIONER,  DEPARTMENT OF HEALTH & SOCIAL                                                                   
SERVICES,  explained   that  under  current  law,   if  funds                                                                   
appropriated to  the Medicaid program are insufficient  for a                                                                   
given fiscal  year, the Department  is directed  to eliminate                                                                   
optional Medicaid  services based on a priority  list that is                                                                   
out-of-date.  He maintained that  the existing list is not an                                                                   
effective management  tool and if  used, would result  in the                                                                   
denial of necessary and cost-effective  services to Alaskans.                                                                   
                                                                                                                                
Commissioner  Gilbertson advised that  the bill would  repeal                                                                   
the options  list and replaces  it with a singular  direction                                                                   
for the Department to engage in  cost containment measures to                                                                   
achieve  the  same  level savings  to  operate  the  Medicaid                                                                   
Program within the amount appropriated by the Legislature.                                                                      
                                                                                                                                
The  proposed bill  would  replace the  obsolescent  language                                                                   
with broad general authority for  the Department to undertake                                                                   
cost containment based on three key principles:                                                                                 
                                                                                                                                
     ·    The  Department must  pursue  all other  reasonable                                                                   
          cost containment measures before eliminating any                                                                      
          eligibility groups or services;                                                                                       
     ·    The    Department   should   aggressively    pursue                                                                   
          strategies    to   maximize    federal    financial                                                                   
          participation in the Medicaid program; and                                                                            
     ·    Cost  containment  decisions should  be  made in  a                                                                   
          manner that best reflects the needs and interests                                                                     
          of eligible Medicaid recipients.                                                                                      
                                                                                                                                
Commissioner  Gilbertson  noted  that  the  current  list  in                                                                   
statute   establishes   a   very  rigid   structure.      The                                                                   
Administration  believes that  the Department  can engage  in                                                                   
similar  cost   containment  measures  within   the  Medicaid                                                                   
Program  and conduct  cost containment  in a  manner that  is                                                                   
responsive to the Legislature's  intent and responsive to the                                                                   
needs of the beneficiary population.                                                                                            
                                                                                                                                
He spoke to the fiscal note.   Commissioner Gilbertson stated                                                                   
that next year there would be  a savings.  At this point, the                                                                   
Administration   is  not   proposing   any  additional   cost                                                                   
containment in the Medicaid Program  that is not currently in                                                                   
the Governor's budget mission.                                                                                                  
                                                                                                                                
Co-Chair Harris asked about a deferred drug list.                                                                               
                                                                                                                                
Commissioner   Gilbertson  advised   that  included   in  the                                                                   
Governor's  budget submission  this year  was a proposal  for                                                                   
adopting  a  deferred  drug  list   for  the  Alaska  Medical                                                                   
Assistance  Program.    A  preferred   drug  list  is  not  a                                                                   
formulary.     That   drug  list   is   a  peered   reviewed,                                                                   
professionally  designed  list   that  establishes  preferred                                                                   
drugs within  a drug class.   These drugs would  be purchased                                                                   
at a  similar or  lower cost.   Some  other states use  these                                                                   
drug lists.  He added that at  this stage, the Department has                                                                   
not formulated their  preferred drug list and are  not in the                                                                   
process of developing  one.  Commissioner Gilbertson  did not                                                                   
believe  that the Department  would develop  their own  list.                                                                   
There are  a number  of other lists  adopted by other  states                                                                   
that  have withstood  litigation.    It is  foreseeable  that                                                                   
Alaska would take one from another  state.  That decision has                                                                   
not yet been  made.  He acknowledged that the  preferred drug                                                                   
list is contentious.                                                                                                            
                                                                                                                                
Co-Chair Harris  inquired the success rate that  other states                                                                   
have had in saving money using this system.                                                                                     
                                                                                                                                
Commissioner Gilbertson  offered to provide  that information                                                                   
to the Committee at a later date.   He added that some states                                                                   
have shown  large savings.   There is disagreement  regarding                                                                   
the  net  effect  of Medicaid  expenditures.    Most  of  the                                                                   
Medicaid  growth  now  is within  the  seniors  and  disabled                                                                   
individual  population  area.    Seniors  have  a  high  drug                                                                   
utilization cost.  The preferred  drug list would not prevent                                                                   
access  to  pharmaceutical  products   that  perform  certain                                                                   
benefits.  The  Commission would decide which  there might be                                                                   
two drugs  that serve the same  purpose, which one  should be                                                                   
clinically approved for dispensing.                                                                                             
                                                                                                                                
Co-Chair Harris  requested that Commissioner  Gilbertson work                                                                   
with Representative  Hawker and other interested  parties who                                                                   
have concerns regarding this legislation.                                                                                       
                                                                                                                                
Co-Chair  Williams recommended  that Commissioner  Gilbertson                                                                   
also  work  with  Representative  Croft,  the  maker  of  the                                                                   
proposed amendments.                                                                                                            
                                                                                                                                
Co-Chair  Williams  noted  that  SB  109  would  be  HELD  in                                                                   
Committee for further consideration.                                                                                            
                                                                                                                                
                                                                                                                                
SENATE BILL NO. 120                                                                                                           
                                                                                                                                
     An Act  relating to the  state's sovereign  immunity for                                                                   
     certain actions  regarding injury, illness,  or death of                                                                   
     state-employed  seamen  and   to  workers'  compensation                                                                   
     coverage  for   those  seamen;  and  providing   for  an                                                                   
     effective date.                                                                                                            
                                                                                                                                
KEVIN   JARDELL,   ASSISTANT  COMMISSIONER,   DEPARTMENT   OF                                                                   
ADMINISTRATION,  explained  that   SB  120  consists  of  two                                                                   
issues:                                                                                                                         
                                                                                                                                
     ·    The policy question of whether or not State                                                                           
          employed seamen should be under a worker's                                                                            
          compensation model or allowed to continue to                                                                          
          pursue the Jones Act remedy through litigation;                                                                       
     ·    The legal issue.  (He noted that the Department of                                                                    
          Law would discuss that concern.)                                                                                      
                                                                                                                                
Mr.   Jardell   stated   that   the  policy   call   of   the                                                                   
Administration  has  been  around   for  approximately  eight                                                                   
years.  During  the 1980's, the Alaska Marine  Highway System                                                                   
(AMHS)  union labor agreements  stipulated  the State  to pay                                                                   
Alaska Workers'  Compensation Act (AWCA) benefits  in lieu of                                                                   
the traditional Jones Act and  other maritime remedies.  Many                                                                   
employees  preferred   the  AWCA  as  a  more   complete  and                                                                   
immediate no-fault payment (non-taxable  wage indemnification                                                                   
rather than  a modest daily  maintenance stipend)  - avoiding                                                                   
controversy,  delays,   and  the  extra  costs   inherent  in                                                                   
protracted   civil   litigation.      A   single   employee's                                                                   
constitutional  challenge  resulted  in  the  Alaska  Supreme                                                                   
Court  System decision,  which precludes  the practice  under                                                                   
current law.                                                                                                                    
                                                                                                                                
Mr. Jardell  pointed out that  the issue has been  around for                                                                   
the past  eight years  and has finally  "come to  the table".                                                                   
The  Administration   has  determined   that  placing   State                                                                   
employees under workmen's compensation  for injuries would be                                                                   
the best  policy.  There are  several benefits to  that, most                                                                   
of  which  center around  the  benefit  to the  employee  not                                                                   
needing  to litigate  before receiving  compensation.   There                                                                   
would  be an  additional benefit  of  a cost  savings to  the                                                                   
State.                                                                                                                          
                                                                                                                                
SUSAN  COX, ASSISTANT  ATTORNEY GENERAL,  DEPARTMENT OF  LAW,                                                                   
reiterated  that   the  legislation  would  take   the  State                                                                   
employees  that  are  seamen  and put  them  into  the  State                                                                   
compensation  system.   It would  remove the  State from  the                                                                   
business  of providing  traditional  maritime remedies  under                                                                   
the Jones Act.   The legal vehicle by which the  State can do                                                                   
that is the amendment of State  statute that waives sovereign                                                                   
immunity.  The State can withdraw  the consent to be sued and                                                                   
assert our  sovereign immunity.   Or  instead, the  State can                                                                   
provide   worker's   compensation   for  the   State   seamen                                                                   
employees.                                                                                                                      
                                                                                                                                
Ms.  Cox  pointed  out  that  the  employees  affected  would                                                                   
include  the workers on  the Alaska  Marine Highway  vessels,                                                                   
additional  seamen employed  by  State agencies  who work  on                                                                   
research vessels and law enforcement  vessels.  The objective                                                                   
would be to  provide a uniform system of compensation  for on                                                                   
the job injuries for all State employees.                                                                                       
                                                                                                                                
The  Alaska Supreme  Alaska Court  System, in  a decision  in                                                                   
1990,  approved  the approach  that  the  bill takes.    That                                                                   
decision  involved  a  public  safety seaman,  the  State  of                                                                   
Alaska,  Department of  Public  Safety versus  Robert  Brown.                                                                   
The Alaska  Supreme Court  stated that  the State could  take                                                                   
this approach  if it was the  Legislature's desire.   Ms. Cox                                                                   
stated that case should not be  confused with the disapproved                                                                   
collective bargaining which involved Dale Brown.                                                                                
                                                                                                                                
Ms. Cox  noted that  this approach  has been  taken by  other                                                                   
jurisdictions  in other  states.   She  emphasized that  this                                                                   
will not affect the rights of seaman in the private sector.                                                                     
                                                                                                                                
Ms. Cox pointed out that the idea  has been a remedy that was                                                                   
in effect  for an  eight-year period until  1991.   There was                                                                   
legal  disagreement some  years  ago whether  the bill  would                                                                   
work  as a  matter of  federal  law that  could override  the                                                                   
State sovereign  immunity even if  the State choose  to amend                                                                   
the  statute.     Given  the  Alaska  Supreme   Court  System                                                                   
decisions of  the last five  years, the proposed  approach is                                                                   
legally viable.                                                                                                                 
                                                                                                                                
Ms. Cox advised  that it is expected that this  approach will                                                                   
save  the State  money in  litigation  costs.   Additionally,                                                                   
there would not  be the same types of damages  available in a                                                                   
worker's compensation remedy that  is available in a lawsuit.                                                                   
Another significant savings would  be in the area of illness.                                                                   
Currently,  an employee that  becomes ill  on the vessel  can                                                                   
leave work and be paid their unearned  wages until the end of                                                                   
the  voyage without  docking  their sick  leave.   Under  the                                                                   
worker's  compensation  plan,  unless  they  suffer  from  an                                                                   
occupational disease,  they would not be receiving  a similar                                                                   
amount  of maintenance  payments.   Those  expenses would  be                                                                   
transferred into their sick leave  account.  She acknowledged                                                                   
that  the system  handling illness  claims  would be  changed                                                                   
dramatically.                                                                                                                   
                                                                                                                                
Ms. Cox added  that the effective date provision  states that                                                                   
                                                   st,                                                                          
the change in the  law would go into affect July  12003   and                                                                   
would address new injuries and  illnesses arriving after that                                                                   
date.   There  is  a  three-year  statute of  limitation  for                                                                   
maritime lawsuits.   The Department  will continue  to handle                                                                   
litigation  for a  couple  years into  the  future for  those                                                                   
injuries which  occurred prior to  the effective date  of the                                                                   
legislation.                                                                                                                    
                                                                                                                                
BRAD  THOMPSON,   DIRECTOR,  DIVISION  OF   RISK  MANAGEMENT,                                                                   
DEPARTMENT  OF ADMINISTRATION,  stated  that Risk  Management                                                                   
acted as  the insurance agency  for State agencies  including                                                                   
maritime claims.   He pointed out  a zero fiscal note  in the                                                                   
packet, however, anticipated fiscal savings.                                                                                    
                                                                                                                                
Risk Management is  funded uniquely on a cash  flow basis for                                                                   
the anticipated  costs on  claims due  to be  paid back  on a                                                                   
fiscal   period.     That  appropriation   is  collected   on                                                                   
assessments  from  State  agencies  based  on  experience  in                                                                   
claims, loss  or exposure.  The  amount is calculated  on the                                                                   
actual costs incurred on a claim.   The costs are anticipated                                                                   
to decrease with the change of  remedy.  In time, the cost to                                                                   
the  Department   of  Transportation  &   Public  Facilities,                                                                   
Department  of Public Safety  and Department  of Fish  & Game                                                                   
will decrease with a cost savings  and will reflect in future                                                                   
assessments.   At this time,  Risk Management is  funded each                                                                   
year on  the anticipated State  claims and a  negative amount                                                                   
is not indicated.   It is a  reflection of a type  and method                                                                   
of funding of the Risk Management program.                                                                                      
                                                                                                                                
Mr. Thompson  pointed out the  analysis of the  Alaska Marine                                                                   
Highway  claims  as  compared  to the  other  State  employee                                                                   
claims.  He reiterated that there would be a savings.                                                                           
                                                                                                                                
                                                                                                                                
At-Ease:       2:55 P.M.                                                                                                      
                                                                                                                                
                                                                                                                                
SB 108 was HELD in Committee for further consideration.                                                                         
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 3:58 P.M.                                                                                          
                                                                                                                                

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