Legislature(2019 - 2020)ADAMS ROOM 519
03/27/2019 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Medicaid Phase One Overview: Department of Health and Social Services | |
| Overview Response: David Teal, Director, Legislative Finance Division | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
March 27, 2019
1:32 p.m.
1:32:07 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 1:32 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Tammie Wilson, Co-Chair
Representative Jennifer Johnston, Vice-Chair
Representative Dan Ortiz, Vice-Chair
Representative Ben Carpenter
Representative Andy Josephson
Representative Gary Knopp
Representative Bart LeBon
Representative Kelly Merrick
Representative Colleen Sullivan-Leonard
Representative Cathy Tilton
MEMBERS ABSENT
None
ALSO PRESENT
Adam Crum, Commissioner, Department of Health and Social
Services; Sana Efird, Administrative Services Director,
Department of Health and Social Services, Office of
Management and Budget; Donna Steward, Deputy Commissioner,
Department of Health and Social Services; David Teal,
Director, Legislative Finance Division.
SUMMARY
MEDICAID PHASE ONE OVERVIEW:
DEPARTMENT OF HEALTH AND SOCIAL SERVICES
OVERVIEW RESPONSE:
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION
Co-Chair Foster reviewed the meeting agenda.
^MEDICAID PHASE ONE OVERVIEW: DEPARTMENT OF HEALTH AND
SOCIAL SERVICES
1:33:09 PM
Co-Chair Wilson requested to hear from the commissioner on
how the [Medicaid] changes impacted Denali KidCare and
children's programs. She noted the topic had been prevalent
at community meetings and she hoped to take care of some of
the misunderstandings.
ADAM CRUM, COMMISSIONER, DEPARTMENT OF HEALTH AND SOCIAL
SERVICES, replied that Denali KidCare was not affected by
the plan. He clarified that the Department of Health and
Social Services (DHSS) would maintain how kids were taken
care of throughout the process.
1:34:16 PM
SANA EFIRD, ADMINISTRATIVE SERVICES DIRECTOR, DEPARTMENT OF
HEALTH AND SOCIAL SERVICES, OFFICE OF MANAGEMENT AND
BUDGET, provided a PowerPoint presentation titled "FY2020
Operating Budget Overview: Department of Health and Social
Services, Medicaid Services" dated March 27, 2019 (copy on
file). She began on slide 2 and addressed the Medicaid
Services operating budget change summary from the FY 19
management plan to the governor's FY 20 amended budget. The
governor's budget would reduce undesignated general funds
(UGF) by $249,216,800 or 38 percent and federal funds by
$465,476,600, for a total reduction of $714,061,900. The
reductions consisted of a $225,000 UGF decrement in
Medicaid Services and a reduction of $8,273,600 UGF related
to the governor's proposal to eliminate the Adult Dental
Medicaid benefit. The proposal also included the fourth
year of planned UGF reductions of slightly over $15 million
resulting from the SB 74 Medicaid reform legislation [SB 74
passed the legislature in 2016]. The true reductions that
had not already been planned totaled approximately $233
million UGF.
Ms. Efird continued with slide 2. She highlighted that in
FY 19 there were four allocations to Medicaid for Health
Care Services, Behavioral Health, Senior and Disabilities,
and Adult Preventative Dental. The governor's FY 20
proposed collapsing the four allocations into one
appropriation for Medicaid Services. The change was based
on the ability to more efficiently manage the program. She
explained the change would help with processes related to
revising programs as billings came into the program and
would minimize an administrative burden. She underscored
that all of the department's reporting requirements to the
legislature and federal government would remain intact.
Co-Chair Foster recognized that Representative Carpenter
had joined the meeting.
1:37:50 PM
Vice-Chair Johnston had heard a concern from the public
about defunding an optional Medicaid service once the
allocations were collapsed into one, especially if there
was insufficient funding. She elaborated that in the past a
supplemental had been needed to fund Medicaid. She
explained it had taken time to repay. She asked if there
would be an opportunity to defund optional services under
the governor's proposal.
Ms. Efird answered that DHSS was bound by its current
contract with the Centers for Medicare and Medicaid
Services (CMS); any changes to the budget would require
state plan amendments or regulation changes. Until there
were changes giving DHSS permission to reduce or change the
proposals within the budget, DHSS was bound to pay claims
for all eligible services.
Vice-Chair Johnston asked for a description of the public
process [to make changes to regulation or issue state plan
amendments].
Ms. Efird deferred the question to a colleague.
DONNA STEWARD, DEPUTY COMMISSIONER, DEPARTMENT OF HEALTH
AND SOCIAL SERVICES, replied that whenever DHSS made an
adjustment to services, utilization, or rates, it was
required to follow the process outlined in its state plan.
She noted if the change involved a regulation, DHSS was
also required to follow the regulation change process. She
expounded that the regulatory process provided an
opportunity for public comment. The governor's proposed FY
20 budget would require the department to go through the
regulatory process (including public comment) and the state
plan amendment process, which would require CMS approval.
The department would not be able to stop funding in
perpetuity for any optional or mandatory services without
going through either of the processes.
1:40:51 PM
Vice-Chair Ortiz asked about the governor's proposal to
eliminate the adult dental Medicaid benefit ($8 million UGF
and $18.7 million in federal funds). He asked for the
number of current recipients who would no longer receive
the benefit.
Ms. Steward did not have the numbers on hand but would
follow up. She added that emergency dental services would
still be available.
Representative Josephson reported that he had heard
opposition to the governor's proposal to collapse Medicaid
into a single allocation from individuals working in the
senior and disability services sector. He thought there may
be a better Federal Medical Assistance Percentage (FMAP)
[under the current system]. He explained the individuals
believed the change would prejudice them to be part of one
appropriation.
Ms. Efird replied that the change would not prejudice the
department against paying any type of claims. She clarified
that incoming claims went through the Medicaid Management
Information System (MMIS) and had to be adjudicated
(checked for accuracy and services coverage). Additionally,
the FMAP was determined for each claim. Claims were paid
based on which services were covered through the total
Medicaid budget. She elaborated that groups covered under
Senior and Disability Services also received services in
Behavioral Health Medicaid and Health Care Medicaid; the
groups were not solely served in the Senior and Disability
Services budget. The structure had been a way to collect
information and give some reporting to the legislature on
groupings.
Ms. Efird stated that DHSS had to pay a claim based on what
services were covered and were allowed to be paid under
each claim. She explained DHSS would never hit the number
exactly. For example, if DHSS designated a number for
Senior and Disabilities Services in a separate
appropriation and it ran short, if the department did not
have the ability to move between appropriations, the budget
could be short. Conversely, the department could overfund
Senior and Disabilities Services and have a shortage in
another Medicaid appropriation. She explained that a budget
was a plan - the department's best estimate and projection;
however, claims may not necessarily align to the exact
budgeted numbers.
1:44:47 PM
Ms. Steward highlighted the governor's proposed $233
million reduction to the Medicaid program. The department
had approached the reduction in two phases (slide 3); the
presentation would focus on phase I. She highlighted the
department's belief that the strategies under phase I were
attainable in FY 20. Some of the cost containment
strategies were new and others had been utilized in the
past. Each of the division directors had been focusing and
working together to identify ways to become more
economical. Phase II had been identified for the end of FY
20 or the beginning of FY 21.
Vice-Chair Johnston directed attention to the bullet point
regarding new flexibilities released in November 2018. She
asked if the department had a list of the items.
Ms. Steward agreed to follow up with the list.
Representative Josephson asked whether the timeline for
phase II indicated the administration would need to spend
from the Statutory Budget Reserve (SBR) to fund Medicaid
for FY 20.
Ms. Efird replied the department was on board to realize
all of the savings in FY 20 for phases I and II; however,
phase II was not within the department's control and would
require approval from CMS. Safety net language had been
included in case DHSS did not receive the approval through
CMS during FY 20 for the phase II initiatives.
1:47:44 PM
Ms. Steward turned to slide 4 and addressed the four
primary cost containment levers within the Medicaid program
including, eligibility adjustments, rate adjustments,
service/utilization adjustments, and program/administrative
adjustments. She underscored that DHSS was not recommending
any adjustments to Medicaid program eligibility. The plan
did not impact eligibility for Denali KidCare or Medicaid
expansion.
Vice-Chair Johnston asked for verification that Ms.
Steward's statement was true for both phases.
Ms. Stewart agreed; phase II would not address specific
eligibility items either. She turned to slide 6 and
addressed four principles for approaching rate adjustments:
• Protect Primary Care
• Protect Small Hospitals
• Protect Access to Services
• Align Payment with Other Public Payers
Vice-Chair Johnston asked for an example of other public
payers (slide 6).
Ms. Steward replied that the other public payer was the
Medicare program.
Co-Chair Johnston asked if the other public payer was
limited to Medicare and did not include Tricare.
Ms. Steward agreed. She explained the payment systems were
more aligned between Medicare and Medicaid because they
were administered by CMS at the federal level. Other public
payers, such as Tricare, were administered differently and
had much more complex rate structures.
1:50:11 PM
Vice-Chair Ortiz pointed to the second bullet point to
protect small hospitals. He had heard concern from small
hospitals that the proposed budget would put them in
jeopardy. He asked if the slide indicated that small
hospitals could somehow receive greater rates than large
hospitals (for the same services).
Ms. Steward explained that each hospital received a daily
rate based on that hospital's cost; each hospital received
a separate rate. For example, the daily rate for an
appendectomy at Providence Hospital in Anchorage was very
different than the rate in Sitka because the costs within
the two facilities were different. She reported DHSS could
separate out acute care hospitals from critical access
hospitals; the critical access hospitals, by designation,
would be protected from any rate adjustments.
Vice-Chair Ortiz asked Ms. Steward to repeat the term for
the hospital that would be protected.
Ms. Steward replied they were critical access hospitals.
Vice-Chair Ortiz asked if critical access meant the
hospital was the only hospital accessible to individuals in
a given area.
Ms. Steward answered that critical access was a specific
designation of hospital; there were criteria a hospital was
required to meet in order to receive the designation. She
detailed that size was typically the determining factor;
the threshold of inpatient beds was 25. She elaborated that
the first threshold a critical access hospital had to meet
was that they have 25 or fewer beds available for services.
Vice-Chair Ortiz asked if Ms. Steward was saying that even
though some hospitals operated on much smaller margins, the
adoption of the governor's proposal would not place the
hospitals in any added jeopardy.
Ms. Steward answered that the critical access hospitals
would not receive a 5 percent reduction to their inpatient
daily rates and would not have inflation withheld. She
noted that a later slide included a list of hospitals that
would not be affected.
1:53:43 PM
Representative Josephson asked if the plan was to align
payments at the Medicare rate even in cases where Medicaid
paid more to providers.
Ms. Steward answered the department did not have a specific
goal to match Medicaid payments to Medicare payments;
however, DHSS had a federal upper payment limit imposed by
CMS. The limit established a cap where the state could not
pay Medicaid services above what Medicare would have paid
in the aggregate. The department had to consistently
benchmark against what Medicare was paying in order to
avoid exceeding the federal upper payment limit. She
elaborated that for every dollar exceeding the cap, the
state would be required to pay 100 percent of the dollars
out of the GF (instead of receiving the traditional 50/50
federal match). The penalty imposed by CMS for exceeding
the payment threshold was severe; therefore, CMS was
constantly monitoring Medicaid rates based against Medicare
rates.
Representative Josephson remarked that the information
described by Ms. Steward was already in place. He asked if
the plan was to pay providers in the Medicaid population
less than they were currently receiving in the hopes they
would continue to provide at a rate lower than Medicare.
Ms. Steward answered that there were no specific proposals
to move "this rate" to the Medicare rate. As the department
approached reductions to meet the $233 million reduction,
it applied any rate adjustments as fairly across all
providers as possible. The department had set forth the
goals to protect primary care and small hospitals.
1:56:40 PM
Representative LeBon asked where the Fairbanks Memorial
Hospital fell within the group of hospitals in the state.
He asked if Providence Hospital in Anchorage was baseline,
whether that put the Fairbanks hospital in the small to
medium or medium to large category. He asked what rate
adjustments Fairbanks Memorial Hospital should expect from
the proposal.
Ms. Steward answered that the Fairbanks Memorial Hospital
was not a critical access hospital - there were only two
designations including critical access or not. Fairbanks
would see the 5 percent reduction for inpatient and
outpatient hospital services and the inflation hold would
apply.
Representative LeBon asked for verification the Fairbanks
hospital would be treated the same as Providence Hospital
in Anchorage.
Ms. Steward agreed.
Representative LeBon asked for verification the difference
in location, size, community, and energy cost would not be
taken into consideration.
Ms. Steward replied that energy costs, personnel costs,
facility size, were all figured into the daily rate
established for a facility. The daily rate would see the
additional reductions [she had previously mentioned].
Representative LeBon asked if the Fairbanks Memorial
Hospital would be at a disadvantage to Providence Hospital
in Anchorage.
Ms. Steward was not familiar with whether the two hospitals
were in competition for services. She elaborated that the 5
percent reduction would apply for Providence as well, but
the dollar amount would be different based on the fact they
were paid different daily rates. She pointed out that the
reduction for Providence would be higher because of the
hospital's greater volume.
1:59:13 PM
Ms. Steward moved to a list of proposed rate and payment
adjustments under phase I on slide 7. The first item was
the 5 percent provider rate reduction to inpatient and
outpatient services for prospective payment system
hospitals. She clarified that critical access hospitals
were exempt from the change. Additionally, the change would
not apply to any Indian Health Service hospitals receiving
the federal encounter rate. The rate adjustment would only
apply to specialty physician services and would exclude
primary care, obstetrics, and pediatrics. In an attempt to
help protect primary care, the rate adjustment would not
apply to Federally Qualified Health Centers.
Vice-Chair Johnston asked if the savings would be one-time
or ongoing.
Ms. Steward answered the 5 percent reduction would be a
one-time savings for FY 20.
Co-Chair Wilson asked for verification the 5 percent
reduction would remain in effect beyond FY 20.
Ms. Steward answered that the governor's plan would not
reapply the 5 percent reduction in FY 21. The rate would
move forward at the 5 percent reduction and inflation would
move forward as scheduled for FY 21.
Co-Chair Wilson asked for verification the administration
would not impose an additional 5 percent reduction in FY 21
and inflation would be added in.
Ms. Steward agreed.
2:01:54 PM
Vice-Chair Johnston asked for information on what had
happened with the rates over the last four years.
Ms. Steward answered that the information would be covered
later in the presentation. She continued with slide 7 and
addressed the proposed adjustment to withhold inflation.
The adjustment would be applied to all providers that
receive an annual inflation increase, with the exception of
those excluded under the 5 percent provider rate reduction.
The proposal would move the acute care hospital system to
diagnosis-related groups (DRG). She explained that DRGs
were the first step towards bundling payments. She noted
that critical access hospitals would have an option to move
to DRGs, but primarily they would be unaffected by the
change.
Vice-Chair Johnston stated that the legislature had heard
the importance of making sure the issues were dealt with
accurately. She pointed to the administration's timetable
of January 1. She asked if the department was confident in
its ability to get the work right under the stated
timeline.
Ms. Steward answered it was the department's goal. She
reported DHSS would work with two contractors to help
ensure the facility base rates were set to the best of the
department's ability. There were national companies that
helped set facility base rates. The department's MMIS
contractor conduit had a bundling module used in other
states that the department could use to ensure DRG packages
moved forward. With those approaches, the department
believed it would be ready for a January 1, 2020
implementation.
Ms. Steward continued with slide 7 and highlighted the
proposal to develop an acuity-based nursing facility rate.
The adjustment would allow for differential payments based
on the level of care needed per patient in a skilled
nursing facility. The governor's proposal would move end
stage renal disease (ESRD) clinic services from a set rate
to a cost-based rate based on the clinic costs reported on
their Medicare cost reports.
Vice-Chair Ortiz asked about the cost-based end stage renal
disease. He asked what would not happen that had happened
in the past in relation to the particular category.
Ms. Steward answered that there had been a set rate for the
services. She noted that dialysis services could be
provided in an outpatient setting in a hospital or in an
ESRD clinic. The rates would apply to the ESRD clinics. She
detailed that for several years a rate had been set, but
there had been no real theory behind it. The proposal was
to move to a cost-based rate, which was similar to what was
used for hospitals under the prospective payment system.
The cost-based rate was determined in a model methodology
system, which set a rate based on all of the inputs
necessary to deliver services as identified on a clinic's
Medicare cost reports.
2:06:06 PM
Vice-Chair Ortiz asked for verification that end-stage
renal disease implied the individual was near renal failure
and at the end stages of their life.
Ms. Steward answered that there were four levels of kidney
degradation. End-stage renal disease meant a person had
reached the point where they need dialysis; however, there
were a number of individuals who were on dialysis for many
years before having a transplant or passing away.
Vice-Chair Ortiz asked if the proposal meant that people in
the end-stage category would receive less benefits than
before.
Ms. Steward answered in the negative. She clarified that
the service would be exactly the same, but the unit cost
would be different. She noted that Medicaid accounted for a
small percentage of the payment for the services. The
majority of individuals who needed ESRD services were with
the Medicaid for about 60 days before transitioning into
the Medicare program. Some individuals would never transfer
to Medicare and would be with the state under Medicaid for
a longer period of time, but in general Medicare was the
primary payer for ESRD services.
Vice-Chair Ortiz asked if the payout to providers would be
less.
Ms. Steward answered in the affirmative.
2:08:17 PM
Vice-Chair Johnston referenced a separate chart [titled
"State of Alaska Medicaid Program, Phase I: Cost
Containment - Implementation Schedule," dated March 21,
2019 (copy on file)] indicating no regulation change was
required to make the ESRD change.
Ms. Steward answered that the regulations had already been
approved. The change to the [ESRD] payment methodology
would happen by the July 1 implementation.
Vice-Chair Johnston asked when the department started the
conversation with CMS regarding the state plan amendment.
Ms. Steward replied that the state plan amendment was
currently in process. The department believed it would be
in time for a July 1 implementation.
Vice-Chair Johnston was trying to understand the timelines
for the state plan amendments. She wondered when the
department had started the conversation with the federal
government. She noted that the regulation process had
already occurred. She pointed out that some of the other
[rate and payment] adjustments still required regulation
changes and a state plan amendment. She asked how long it
took to amend the state plan.
Ms. Steward replied she would follow up with specifics on
when DHSS had started the [state plan amendment] process
[regarding ESRD]. She relayed the payments for ESRD clinics
had been putting DHSS in jeopardy of exceeding its federal
upper payment limit. As the state plan amendment moved
forward, the department would submit a new upper payment
limit showing that adjusting the rates would bring DHSS
down and in line with the federal payment limit
requirements. The department anticipated that the ESRD
state plan amendment would potentially move quickly because
of the immediate issue with the upper payment limit. She
did not want to provide a timeline because the immediate
issue with the upper payment limit would affect it.
Vice-Chair Ortiz looked at the reduction in payouts to
providers for the acuity based nursing facility rate. He
asked how the changes would impact skilled nursing
facilities and critical access hospitals.
2:11:09 PM
Ms. Steward answered that "combo facilities" housed a
critical access hospital and a skilled nursing facility.
She detailed that rates were set separately for each of the
two licensures. The movement to the acuity base would apply
to skilled nursing facilities and their patients' level of
need (lower or higher intensity) would either drive an
overall aggregate increase in their payment, keep them
about the same, or reduce their payment (if they only
served lower acuity individuals).
Representative Josephson asked if there was a chance the
cost-based methodology could result in a higher payment
than a set rate.
Ms. Steward asked which provider Representative Josephson
was speaking about.
Representative Josephson clarified he was asking about
ESRD.
Ms. Steward asked if Representative Josephson was asking
whether the cost-based methodology could result in a higher
level of payment for ESRD clinics.
Representative Josephson replied in the affirmative.
Ms. Steward answered in the negative. She elaborated that
currently ESRD facilities were reimbursed at 233 percent
above the Medicare rate. When adjustments were made under
the model methodology (based on the costs reported by a
facility), the state would only pay 23 percent above
Medicare.
Representative Josephson asked if the state would pay 123
percent rather than 233 percent.
Ms. Steward replied in the negative and clarified that the
payment would be 23 percent above Medicare.
Representative Josephson asked how to know what the
position of the providers was.
Ms. Steward answered that the Office of Rate Review had
been working with providers for slightly over one year. The
department had notified the providers there was a problem
regarding the federal upper payment limit and that DHSS
would need to make the adjustments. The department had been
working on a dual track with providers: 1) to make
adjustments to remain under the federal upper payment
limit, and 2) to work collaboratively with providers on a
global payment system model (being replicated in eight
states) to serve patients with dual eligibility for
Medicaid/Medicare. She elaborated there was a dual waiver
where Medicare and Medicaid programs came together to
provide a dual payment. The change would help improve care
coordination between the two programs. She had not followed
up with the Office of Rate Review to learn whether
additional conversations had occurred [with providers]. She
explained that step two of the process was still underway
with the providers.
2:15:03 PM
Ms. Steward addressed the last bullet point related to
pharmacy rate and payment adjustments on slide 7. The
department would move its preferred drug list to allow DHSS
to move more nimbly through changes in order to respond
quickly when drug prices went up or down. She explained it
would help save a substantial amount of money.
Ms. Steward stated that given the interest in hospitals,
DHSS had provided additional slides to the finance
subcommittee; the information had been consolidated in the
presentation to streamline the timing. She turned to slide
8 and continued to address phase I cost containment. The
table highlighted the increases in hospital payments for
inpatient and outpatient services. The table also
identified federal funds and some of the funds under
federal reclaiming that would be General Fund expenditures
if they were not being reclaimed. She pointed to a steady
increase in payments going to hospitals from FY 15 to FY
18. Some of the increase was due to the expansion
population, but there were other elements contributing to
the increase as identified with claiming and other. She
noted there had also been an increase in the traditional
Medicaid program that had contributed to that in the past.
Co-Chair Wilson asked how rates in Alaska compared to rates
in Seattle for the same services.
Ms. Steward replied that most hospitals in the Lower 48
were paid on the DRG system that Alaska was in the process
of moving to. She explained that a direct comparison was
not currently possible due to the bundled rate paid to
facilities in the Lower 48. When Alaska moved to DRGs it
would allow DHSS to determine whether it was paying above
or below some of the Lower 48 facilities. She relayed that
the State of Washington's Medicaid program paid all
providers and all services below Medicaid rates. She
elaborated that no matter what the DRG was, if the DRG set
the base rate and total, there would be a discount applied
to the payment. The department assumed that Alaska probably
greatly exceeded costs of services compared to other
states.
Co-Chair Wilson discussed that insurance in Alaska had
moved to incentivizing individuals to travel out of state
for procedures. She asked if the Medicaid program had
looked at the same process. She assumed Medicaid had gone
through a process and found certain procedures could be
done in the Lower 48 even when including the cost of
airfare. She was frustrated that the state's insurance
tried to push people out and Medicaid tried to keep people
in state. She wondered if the department had researched how
much Alaskans had to pay for procedures in state versus out
of state.
Ms. Steward replied that DHSS had not looked at whether it
would be cheaper to send individuals out of state for
certain services; it had not been a consideration as the
cost containment process moved forward. There were some
specialty services that were not available in Alaska and
required sending individuals out of state. She highlighted
intermediate care facilities as an example of a service not
available in Alaska.
2:19:37 PM
Co-Chair Wilson asked what it would take to do the review.
She guessed that some data must already exist in
AlaskaCare. She stated that insurance provided an incentive
to travel out of state and included per diem and airfare.
She was curious why the two programs did not share data.
Ms. Steward replied that she was not certain data would be
the determining factor in the particular situation. She
explained that under the Medicaid program the state "was
not a group product" and the state did not have a risk base
for its pool. The department accepted claims from providers
and paid them. Additionally, DHSS controlled the rates, as
required by its state plan amendment agreement with CMS.
The department was able to pay providers lower than
AlaskaCare because it was able to set the rates. She stated
that AlaskaCare, with limited flexibility [to pay lower
rates], likely paid higher than the Medicaid program. She
noted the topic was outside her purview, but she suspected
her explanation was accurate. She did not believe
AlaskaCare was able to make rate adjustments like the
state.
Co-Chair Wilson believed the state should be looking at all
avenues if they were putting everything on the table. She
did not necessarily believe sending people out of state was
the right avenue. She reasoned that the number of providers
in Alaska would decrease if patients were sent out of state
for services. She knew there was a balance point. She
stated it was one of the fastest growing areas in the
state. She wanted to ensure the best care was given, but if
services were not available locally and a patient had to
fly for care, there may be a bigger cost savings, while
receiving excellent care.
2:21:57 PM
Ms. Steward moved to slide 9 and spoke about Medicaid
hospital rate adjustments from FY 15 to FY 19. The slide
provided history of some of the rate reductions that
occurred under previous administrations. For inpatient
services inflation had been withheld in FY 16 and FY 17. In
FY 18, in addition to the withholding of inflation, there
had been a 5 percent reduction to inpatient and outpatient
services in all facilities including critical access
hospitals. In FY 19 each of the items had been restored
from FY 18 - the 5 percent reduction had been added back,
rebasing had moved forward, and inflation was granted for
the FY 18 rate and applied for FY 19.
Ms. Steward looked at some of the increases from FY 15 to
FY 18. She detailed that if the state continued on trend it
would be spending approximately $496 million (total funds)
for hospital services. Slide 10 showed a bit of an increase
for utilization. She referenced the idea that the increase
was due to [Medicaid] expansion. There had been a 6 percent
increase in Medicaid patients seeking hospital services
between FY 15 and FY 16 and a drop of 1 percent from FY 16
to FY 17. She reported the department would compute the
information for FY 18 in about three months to determine if
the trend was continuing down. She summarized that
utilization was not up dramatically, yet there had been
increases in hospital rates.
2:24:29 PM
Co-Chair Wilson had received a call from a person on
Tricare. She believed the individual had told her that once
they were in the hospital or treatment for 30 days, they
were switched to Medicaid even though they were still on
Tricare.
Ms. Steward answered that she was not familiar with the
issue but would be happy to look into it. She noted that
Medicare had a benefit limit and only allowed a limited
number of inpatient days; once that threshold was exceeded,
the individual would transition to Medicaid.
Co-Chair Wilson asked if there was any instance a person on
Tricare would be switched to Medicaid.
Ms. Steward was unfamiliar with the issue and would follow
up.
Co-Chair Wilson would get back to the department on the
issue. She had not known about the Medicare process
highlighted by Ms. Steward. She asked how many individuals
had reached their benefit limit on Medicare and been
switched over to Medicaid, "which is Medicare federally
funded into the state program in which we're now 50/50."
Ms. Steward replied she could follow up with the
information.
2:26:15 PM
Vice-Chair Johnston looked at slide 11 asked for
verification the FY 19 trend line included the $37.8
million of the supplemental from FY 18.
Ms. Efird replied in the affirmative.
Vice-Chair Johnston acknowledged the trend line and noted
some of the amount was possibly due to underfunding the
year before.
Ms. Steward highlighted a list of hospitals that would not
be affected by proposed rate adjustments or the withhold of
inflation (slide 12). The list primarily included critical
access hospitals. Additionally, hospitals paid under the
Indian Health Service inpatient encounter rate were also
not affected. The department did not control or adjust the
federal encounter rate. She turned briefly to slide 13 that
showed a recap of the rate and payment adjustments. The
slide identified an implementation date for adjustments if
it differed from the July 1 date.
2:27:48 PM
Ms. Steward moved to slide 14 and addressed access and
provider rates. She explained that anytime DHSS made a rate
adjustment it was required to go through a process with the
state plan amendment to identify and make changes in the
state plan and to signal to CMS that a change was being
made. She elaborated that CMS monitored to ensure rates
were sufficient enough to keep an adequate number of
providers able to deliver services. The state was bound by
federal law to submit an Access Monitoring Review Plan that
included information on utilization, location and overall
number of providers, and the number individuals served in
certain communities. The department provided the
information to CMS each time the state made a rate
adjustment. She explained that DHSS was required to submit
follow up information for the next three years in order for
CMS to identify whether utilization had been impacted,
whether the state had lost providers, or whether there was
a general shift in the way services were delivered in
response to the rate reduction.
Vice-Chair Johnston asked if DHSS could simultaneously do a
regulation change and state plan amendment.
Ms. Steward answered that in the case where DHSS had used a
strategy in the past (e.g. withhold inflation and a 5
percent rate reduction), the regulation package could move
at the same time as the state plan amendment. However, if
the department had not used the strategy in the past, it
would not necessarily take that approach because it would
want the public process to help inform what the final
regulations and ultimately what the state plan would look
like.
Vice-Chair Johnston pointed to slide 13 and asked how
implementing the hospital DRG would mesh with the 5 percent
inpatient/outpatient rate reduction. She asked if it was
figured in with the department's savings.
Ms. Steward answered that once the DRG system was in place,
the 5 percent reduction and the withhold of inflation would
go away. She noted the same would be true for the acuity
based skilled nursing facility rates.
2:30:55 PM
Vice-Chair Johnston asked if the innovative payment model
was part of phase II.
Ms. Steward thought perhaps Vice-Chair Johnston was
speaking about the ESRD.
Vice-Chair Johnston agreed.
Ms. Steward answered that discussions with ESRD providers
had been to look at a global payment via a CMS
demonstration model. She explained it was a partnership
between the Medicare and Medicaid worlds. She explained the
department would pursue the option if ESRD providers
believed it could be viable in Alaska.
Vice-Chair Johnston surmised it was an excellent example of
coordination efforts.
Ms. Steward agreed.
Representative Josephson looked at slide 13 regarding
implementation dates. He asked if the department's budget
requests reflected that it was the middle of the fiscal
year.
Ms. Steward answered in the affirmative. She detailed that
as the department had looked at the dollar figures, they
had been identified for the effective implementation dates.
2:32:35 PM
Ms. Steward moved to slide 15 and addressed service and
utilization adjustments as a way to affect cost
containment. The department planned to limit services for
physical, occupational, and speech therapy for adults to 12
visits in each category per year. With the caveat that
should the individual move their provider, identify that
they must move forward with additional services in that
category, they would be provided. There would not be a
limit on the level of therapy sessions for children. The
department would expand the "lock-in" or care management
program. She explained that under the program an individual
was assigned to a specific primary care provider or
pharmacy. The change was an effort to curtail a pattern of
behavior where some individuals appeared to be shopping for
something. The department intended to implement a 24/7
nurse hotline to connect individuals with the appropriate
level of care to avoid unnecessary emergency room or doctor
visits. The last change on the slide was the proposal to
eliminate adult preventative dental.
Ms. Efird followed up on an earlier question asked by Vice-
Chair Ortiz regarding adult preventative dental. She shared
that in FY 18 there were 31,947 recipients in the program.
Vice-Chair Ortiz asked for verification that the 31,000-
plus individuals currently receiving adult dental care
would no longer receive care if the governor's plan was
adopted.
Ms. Efird clarified that the number of individuals she had
provided reflected individuals who had received
preventative dental care in FY 18. She confirmed that under
the governor's proposal and with an approved state plan
amendment, preventative care for adults would no longer be
provided in FY 20. Preventative care included exams,
crowns, dentures, and other related services.
2:36:04 PM
Vice-Chair Ortiz believed Ms. Efird had mentioned that
emergency dental care would still be provided.
Ms. Steward agreed. She elaborated that Alaska would join
18 other states in which emergency dental services were
still available for their Medicaid population.
Vice-Chair Ortiz asked what the impact would be on the
increased need for emergency care if preventative care was
no longer provided. He reasoned there would likely be an
increase in emergency care.
Ms. Steward answered that the Medicaid population was
unique and teasing out what the change may be was
difficult. She explained that currently, even with the
availability of preventative dental services, emergency
services made up a good portion of the treatment adults
were receiving.
Representative Josephson asked which states Alaska would be
joining that did not provide adult preventative dental
services. He asked if the states were regarded as poor
(e.g. Mississippi or Arkansas) or affluent.
Ms. Steward agreed to provide the information. She noted
there were eight states that did not provide any dental
services.
Representative Josephson thought it was a policy call about
aspiration and where the state was headed. He believed it
was a retreat of some sort.
2:38:44 PM
Ms. Efird answered that the change was a policy decision.
She referenced the governor's tenets for putting the budget
together that had been shared with the department. The
department's direction was to meet its core services and it
was working through its budget numbers. The department was
trying to protect the core services for low income Alaskans
for their healthcare coverage. She acknowledged that
cutting adult preventative dental could increase costs in
other areas, but it was currently difficult to project. She
explained that the service was optional under the Medicaid
program and had been added more recently.
Representative Josephson referenced testimony earlier in
session by Becky Hultberg, President and CEO of the Alaska
State Hospital and Nursing Home Association (ASHNHA). He
remarked that Ms. Hultberg was a respected former
commissioner [of the Department of Administration] and had
worked for multiple administrations. He recalled Ms.
Hultberg's testimony that the term "optional" with regards
to Medicaid services was a misnomer and could not be
treated in its typical definition. He asked if the
testifiers agreed.
Ms. Steward answered that what Ms. Hultberg had brought
forward was certainly true of medical services. When the
state expanded and chose to use a benchmark for the state
employees benefit program to deliver expansion services to
the Medicaid population, it eliminated flexibility for
optional services. However, dental was not a requirement
under the Affordable Care Act (where the model originated)
and was a truly optional service under the Medicaid
program.
Vice-Chair Johnston asked if DHSS had started the
regulation process and amending the state plan. If not, she
wondered how long the process would take.
Ms. Steward replied that DHSS had not started the
regulation or state plan amendment change processes. The
department would start the process as soon as it received
direction the change would move forward; the process was
anticipated to take about six months.
Vice-Chair Johnston asked if the regulation change was a
90-day process.
Ms. Steward responded affirmatively.
Vice-Chair Johnston asked for verification that the state
amendment plan depended on CMS.
Ms. Steward answered that eliminating an optional service
would mean a compressed timeline.
Vice-Chair Johnston asked if the processes could occur
simultaneously.
Ms. Steward agreed. She expounded that because the service
to be eliminated was optional, the regulation and state
plan amendment could move forward at the same time.
Vice-Chair Johnston asked if implementation had been
included in the department's cost savings related to the
program.
2:42:49 PM
Ms. Efird answered that the figures on slide 15 reflected
the program's total cost.
Vice-Chair Johnston asked for verification that the amounts
on slide 15 showed the cost of the adult preventative
dental program for the coming year.
Ms. Efird clarified that the figures on slide 15 showed
costs for FY 19.
Vice-Chair Johnston asked whether the adjustment [shown on
slide 15] should be cut in half, given that the state plan
amendment would take six months.
Ms. Steward replied that one of the options through the
state plan amendment was for the state to have everything
completed within a quarter. She detailed that if everything
was completed within a quarter, the effective date started
the first day of the quarter; the department had until
September 30 for CMS to approve a state plan amendment for
a July 1 implementation date.
Vice-Chair Johnston asked for verification that if DHSS
started the process after the legislature passed the budget
(hopefully by May 15), the elimination of the services
could be effective on July 1.
Ms. Steward agreed.
Representative LeBon asked for verification that the 12
hospitals on slide 12 were held harmless from the rate
reduction.
Ms. Steward responded affirmatively.
Representative LeBon asked how many hospitals throughout
the state were not included in the group (e.g. Providence
Hospital and Fairbanks Memorial Hospital).
Ms. Steward replied there were seven.
Representative LeBon asked if the seven hospitals all
received the 5 percent rate reduction.
Ms. Steward agreed.
Representative LeBon asked if the department had considered
Providence Hospital in Anchorage as the baseline. He
wondered if Providence was considered the most efficient
hospital in the state in terms of economies of scale.
Ms. Steward stated that she did not feel qualified to
answer the question.
Representative LeBon suspected the answer was yes. He
considered the size of the seven hospitals and wondered
whether the department had contemplated a tiered treatment
rather than going from zero to a 5 percent provider rate
reduction.
Ms. Steward replied that the rate reduction had been
modeled on the 5 percent reduction made in FY 18. In order
to protect the critical access hospitals, they were exempt
from the reduction.
Representative LeBon asked if there had been no
consideration for a sliding scale for the remaining seven
hospitals.
Ms. Steward agreed. The department had used the methodology
from FY 18.
Vice-Chair Johnston requested the daily reimbursement rates
for the seven hospitals.
Ms. Steward agreed.
2:47:29 PM
Ms. Steward briefly highlighted a recap of proposed service
and utilization adjustments on slide 16. She moved to cost
containment in administrative and program changes on slide
17. She addressed the proposal to reduce the timely filing
allowance for all providers to six months. She explained
that currently Medicaid providers had up to one year to
submit claims from the date a service was delivered.
Vice-Chair Johnston relayed that legislators were beginning
to have people come to their offices regarding the
proposal. She noted she had been excited about the proposal
when it had been introduced. She explained there seemed to
be a processing issue where providers had to wait for
insurance or other billing before they could submit a claim
to Medicaid. Additionally, there had been some holdups in
the past related to service authorization. She noted that
some of the responsibility resided in the state's hands.
She asked how the state would ensure providers were able to
submit claims in a timely manner.
Ms. Steward responded that there would be a number of
different exemptions. For example, there would be an
exemption if there was third-party coverage and a provider
was waiting for the primary payer to process a claim. There
would be an exemption any time there was a glitch in the
DHSS system that would suppress payments. There would be
appropriate ways to augment the six months to ensure the
state was not unduly penalizing a provider. Additionally,
providers would also have an opportunity to request
reconsideration and present arguments as to why they
qualified for an exemption, if they submitted a claim
beyond the six-month deadline. The department did not want
to unduly penalize a provider if there was a problem
preventing them from submitting a claim within the six-
month window.
2:50:28 PM
Vice-Chair Johnston asked if the proposal would be a one-
time cut.
Ms. Steward replied that the adjustment would be a
permanent change in the way DHSS would accept claims. She
referenced the associated $10 million reduction and
explained that the majority of the amount was due to
aberrant billings. She highlighted cases where a provider
retired or left the state, and someone picked up their
billing ID to submit false claims. Unless the provider
notified DHSS they were no longer working, the department
was in a "pay and chase" situation trying to get the funds
back once it realized the provider was no longer working.
There would be a reduction in the $10 million figure over
the years, but the state would potentially be saving in pay
and chase situations annually.
Vice-Chair Ortiz considered the $714 million in proposed
cost reductions or projected savings on slide 2. He pointed
to slides 7, 15, and 17 that highlighted different amounts
of the savings and calculated savings of $187 million. He
asked where the other $527-plus million savings were.
Ms. Efird answered that the presentation focused on phase I
of the department's proposal. She directed attention to a
summary sheet of the proposed phase I reductions on slide
20. She explained that phase II would include the
additional reductions the department would address at
another time. She believed Ms. Steward would speak about
phase II at the end of the current presentation.
2:53:59 PM
Vice-Chair Ortiz highlighted the title of slide 2 "Medicaid
Services FY2020 Operating Budget: Change Summary." Based on
the title, he assumed the phase I and II stages would both
occur in FY 20.
Ms. Efird answered that DHSS was working towards that goal.
She explained that items within phase I were in the
department's control, while phase II items required
approval from CMS. She detailed that because DHSS could not
control the federal timeframe for approval, the operating
budget included safety net language in case it could not
achieve all of the savings in the governor's FY 20 budget.
The budget would enable the department to use SBR funding
if it was not able to achieve the reductions.
2:55:25 PM
Vice-Chair Ortiz asked about the specifics related to the
SBR.
Ms. Efird replied that the budget language gave DHSS the
approval to use $172.4 million from the SBR to cover any
shortfall that may be created if the department was unable
to receive approvals from CMS for phase II of its plan in
FY 20.
Vice-Chair Ortiz asked if the $172 million would act as
federal matching funds if the goals of phase II were not
achieved.
Ms. Efird answered it would include $102 million GF, plus
whatever portion of the $172.4 million DHSS may need in
order to achieve the $225 million in the proposed GF
reduction that the department may not achieve in FY 20. She
detailed the department may not be able to achieve $123
million of the $225 million proposed reduction in FY 20.
The department was still working towards achieving CMS
approval for FY 20; it had met with CMS and was looking at
the possibilities it would propose for phase II and
approval in FY 20. She reiterated her earlier testimony
that CMS was in control of the department's ability to make
the total $225 million reduction in FY 20.
2:58:09 PM
Co-Chair Wilson believed Vice-Chair Ortiz asking whether
any portion of funds used from the $172 million in the SBR
would go towards a federal match if the department had to
access the SBR as a fund source. She believed the answer
was yes.
Ms. Efird replied in the affirmative. She expounded that
the funds would replace UGF associated with the federal
match that would continue to be realized if approval for
phase II was not achieved.
Vice-Chair Ortiz thought it was safe to say it was the goal
of the House Majority to stay away from using savings to
balance revenues with expenditures for FY 20. He asked if
it was not the administration's goal.
Ms. Efird answered that that the goal of the department,
under the direction of the governor, was to achieve the
large savings in its Medicaid program in FY 20. The
administration realized the savings were not all within the
department's control and it had given the go ahead to
realize changes to streamline the Medicaid program. The
administration believed in the department's ability to
achieve the savings, but because changes involved [approval
from] other entities, the administration wanted to provide
a safety net to ensure claims would not go unpaid. She
elaborated the goal was to avoid any short funding issues
that had occurred in the past, which had required
supplementals, pushing payments into another year, and
leaving some providers waiting for payment longer than DHSS
would like.
3:00:54 PM
Representative Josephson referenced the department's
testimony that the 5 percent rate reduction was a one-time
occurrence. He asked what the 5 percent reduction and
withhold of inflation applied to for FY 20 (slide 7).
Ms. Steward answered that the 5 percent rate reduction and
the withholding of inflation would apply to all providers
except critical access hospitals, primary care physicians,
pediatrics, obstetrics, and federally qualified health
centers.
Representative Josephson asked about the policy behind the
one-time 5 percent rate reduction. He understood it had
happened before. He was trying to determine the long-term
plan.
Ms. Steward replied the question was more complex than it
may seem. She detailed that for facilities, in addition to
the reduction, the department was moving towards new
payment models that it hoped would bring more
sustainability for payments received by facilities. She
elaborated that the department hoped the move to hospital
DRGs and acuity-based payments for skilled nursing
facilities would mean a leveling out with more sustainable
payments. With regard to other providers, the department
had attempted to apply the reduction as fairly as possible
across all provider types, while protecting primary care
and small hospitals. There would be some adjustments for
more sustainable payment models for those two providers;
the department would be working through 2020 to potentially
identify other payment models for other payment types that
may help achieve more sustainability.
3:04:05 PM
Representative Josephson referred to the department's
testimony about combo facilities for critical care
hospitals and acute nursing facilities. He asked if there
was a risk that cutting acute nursing care could have an
impact on reimbursement for the critical care hospital. He
asked if the issue had been accounted for regarding
combination facilities.
Ms. Steward replied that the rubric for setting the payment
rates for the critical access hospitals and skilled nursing
facilities was essentially the same. She elaborated that if
the hospital and nursing facility were reporting their
costs correctly on their Medicare cost reports, one should
not interface with the other. However, if the facility was
sharing costs among the two sides and they were not
appropriately accounting for them in either of the cost
reports, there could be an unintended consequence that had
nothing to do with the formula. The department took the
information at face value from the facilities and did not
suspect anything was going on, but the situation she
presented was an instance where some problems could arise.
3:05:57 PM
Representative LeBon looked at slide 20 and remarked that
the total adjustment of $187 million was fairly exact. He
asked how much of the "financial hit" the three Fairbanks
facilities in his district (Tanana Valley Medical Clinic,
Fairbanks Memorial Hospital, and the Denali Center) would
take. He asked if the department had broken out the $187
million by hospitals and variety of Medicaid providers for
inpatient and outpatient services.
Ms. Steward returned to slide 7 and answered that the 5
percent provider rate reduction to hospitals total was
$15.2 million. In addition, some portion of the $26 million
under the "withhold inflation" line would also be applied
to the hospitals. Somewhere above the $15.2 million would
be the total hit to all of the acute care hospitals, which
would include Fairbanks Memorial Hospital. She could check
to see if there was a specific projection for Fairbanks.
Tanana Valley Medical Clinic and the Denali Center would be
part of the larger group of providers with a total
adjustment of $28.6 million. She noted that because the
larger group included all other providers, the amount would
be much smaller; the other providers would also be a
smaller part of the withhold inflation line.
Representative LeBon asked if the $15.1 million adjustment
[5 percent rate reduction to inpatient/outpatient PPS
hospital services on slide 7] was spread across seven
hospitals.
Ms. Steward agreed.
Representative LeBon asked if the money could be broken out
by hospital.
Ms. Steward agreed to follow up with the information.
Representative LeBon asked if the $28.6 million adjustment
[5 percent rate reduction to all other providers on slide
7] could be broken out by provider.
Ms. Steward agreed to provide the information.
3:09:31 PM
Ms. Steward continued with the presentation on slide 17
regarding proposed administrative program changes. The
department planned to streamline the cost of care
collection, which would be a change in the way the money
would go to the department. Currently, a third-party
collected the money from individuals residing in assisted
living facilities; the change would mean the department
would collect the dollars directly. She moved to the third
administrative adjustment on slide 17. The department had
federal allowances that would pay 100 percent federal funds
for the Medicaid program's payment of Medicare Part B
premiums for all enrollees on the Medicare program; the
adjustment would mean an increased reclaiming of federal
funds for the department. The slide showed a reduction in
state funds and an increase in federal funds.
Co-Chair Wilson noted any remaining questions would be
taken at the end of the presentation.
Ms. Steward continued with slide 17. The department was
using new internal strategies where it was hoping to
improve some of the collections under tribal reclaiming,
which would hopefully bring in an additional $20 million in
federal funds. The department was also working with CMS on
an additional tribal claiming modeled on the flexibilities
under Medicare Part B. The department was currently
negotiating with CMS to allow DHSS to claim for all tribal
health beneficiaries in Medicare Part A and Part B
premiums. The department would be taking transportation
efficiencies and would no longer pay above posted rates;
currently, the department had certain contracts with
certain providers that paid above the posted rates. The
change would mean DHSS would pay the same as all others.
Additionally, more bus passes would be used, and the
department would be attempting to coordinate family visits
via air travel much more tightly to avoid flying out
different family members for nonemergent needs.
Ms. Steward reported that DHSS would be transitioning
behavioral health grants with the implementation of the
1115 waiver for behavioral health services (slide 17); the
department would be bringing on new services covered under
the waiver. Currently, the services were paid through state
GF grants. When the grants moved under the 1115 waiver and
paid by Medicaid, the grants would be reduced from $51
million to $39 million. The next proposed change included
the implementation of electronic visit verification,
primarily for PCA services in order to more accurately
identify utilization of the services and build charges. The
department would be transitioning some additional services
from its current 1915(c) waiver to the 1915(k) waiver for
services not previously earmarked. The change would move
the department's federal match from 50/50 to 56/44.
3:13:18 PM
Ms. Steward noted slides 18 and 19 contained a recap of the
items on slide 17. She pointed out that the reduction to
the timely filing period [from 12 months to 6 months] was
the one area DHSS would need additional flexibility for
timelines. The administrative/program adjustments would
take the department a bit beyond the July 1 implementation
dates. She turned to a recap of total adjustments on slide
20. She highlighted that DHSS was expecting $697 million
new federal dollars coming in once the netting was done for
a change in the reductions along with some additional
incoming federal funds.
Ms. Steward moved to slide 21 provided a preview of phase
II. The department was evaluating additional federal
flexibilities that may be coming, to identify some new ways
to potentially transform the Medicaid program. She read the
department's goals listed on the slide:
• Ensuring Alaskans have access to affordable health
care coverage and health care services
• Exploring synergies between federal waiver
opportunities that could reduce coverage instabilities
for low income Alaskans
• Shoring up the financial sustainability, affordability
and predictability of the Alaska Medicaid program
Vice-Chair Johnston referenced a concern she had heard
about a proposed adjustment related to behavioral health
grants. She asked about a timeline including when the
waiver process had started for behavioral health and going
forward. She observed that the adjustments were dependent
on obtaining the 1115 waiver.
Ms. Steward answered that discussions on the 1115
behavioral health waiver had begun in FY 16 and had begun
in earnest in FY 17. In FY 18, DHSS had continued
negotiations with CMS and had received a partial approval
of the waiver in November [2018] for substance use disorder
services. The department was still in negotiation on the
second phase, but it was seeing positive signs from CMS.
The process was down to the last details and DHSS was
hoping for a decision prior to June 30.
Vice-Chair Johnston asked if the remaining grant money
would be prorated to grantees until Medicaid could be
billed.
Ms. Steward replied that the Division of Behavioral Health
was working diligently with providers. There were a number
of different reasons some of the providers were having
difficulty becoming Medicaid providers; once they became
Medicaid providers they could bill for existing services
and some of the new services. There were some challenges in
getting some of the providers ready to become Medicaid
providers. The division was working with providers to
ensure all of the pieces could be in place. There would be
a structuring of the remaining $39 million in grants to
ensure services continued to be covered with providers and
providers that were still having difficulty getting signed
up to transmit the Medicaid claims.
3:17:37 PM
Vice-Chair Johnston asked if the department did not see any
of the services going away due to the cut in grants.
Ms. Steward answered that a number of the services
currently delivered and paid with state funds would
transition and become Medicaid services. While a reduced
number of services that were prohibited from being a
Medicaid service, would be paid for with state dollars. She
elaborated that those grants would always have a state GF
component for funding until there was a change in how the
service was delivered so it became a Medicaid service or
until there was no longer a need for the service.
Representative Josephson looked at slide 15 and addressed
the proposed elimination of the adult preventative dental
services. He assumed the numbers would fluctuate up or down
by several percent annually. He asked for verification that
if the state rejected or did not apply for the $8.2 million
GF, it would lose $18.7 million in federal funds that would
have gone to adult preventative dental.
Ms. Efird confirmed that if the state did not submit the
claims for adult preventative dental, it would not receive
the federal matching funds.
Co-Chair Wilson asked for verification the proposal would
require legislation as well as CMS approval.
Ms. Steward clarified that the elimination of the optional
benefit would not require legislation; it would require a
regulation change and a state plan amendment.
3:21:04 PM
AT EASE
3:21:43 PM
RECONVENED
^OVERVIEW RESPONSE: DAVID TEAL, DIRECTOR, LEGISLATIVE
FINANCE DIVISION
3:21:43 PM
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
addressed a State of Alaska Medicaid Program Phase I
handout (copy on file). He backed up to February 13th, when
the governor had turned in a proposed savings of $225
million in cost containment measures to Medicaid. He stated
there had not been much indication of what the cuts would
be. The Legislative Finance Division (LFD) believed the
department's longstanding approach to proposed Medicaid
reductions. He elaborated the process included regulations
and CMS (the federal agency controlling state plans). He
furthered that LFD thought the department's argument held
true - that the process would be long and difficult. He
remarked that it seemed like the administration was trying
to cut the budget first and then decide how to achieve the
plan. He shared that LFD had been concerned the proposed
cuts would be unachievable, particularly in FY 20.
Mr. Teal continued that LFD had noted the governor's budget
included a $172 million appropriation from the SBR that was
effective in FY 19 and therefore did not count as an FY 20
expenditure, but the funds were available in FY 20. He
explained that LFD saw the effective rate as $225 million
minus the $172 million, for an actual cut of about $53
million. He added there was a $15 million supplemental
proposed for FY 19. He stated it could be argued the
reduction was about $68 million from FY 19. He discussed
that DHSS had unveiled phase I of its cost containment plan
the previous week; the department had expressed confidence
it could achieve the phase I savings in FY 20.
3:24:02 PM
Mr. Teal continued that DHSS had testified earlier in the
meeting that it was not making any proposed changes to
eligibility. He believed that probably made a large group
of Alaskans happy because the department was on record
saying that Medicaid expansion rules would not be changed.
The department had also said that rate payments
[adjustments] did not apply to critical access hospitals.
He argued that perhaps the adjustments should not apply to
skilled nursing facilities as well because the bottom line
for some of those facilities was probably tighter than for
critical access hospitals. The department had provided the
most comprehensive analysis that LFD had seen regarding any
of the governor's proposals. He thought the analysis
provided was helpful.
3:25:23 PM
Mr. Teal addressed a document that had been provided to LFD
by DHSS titled "State of Alaska Medicaid Program, Phase I:
Cost Containment - Implementation Schedule," dated March
21, 2019 (copy on file). The document included a table
showing all of the reductions. The total GF reduction was
approximately $103 million. He had been hoping for a
ranking on the slide showing how difficult each reduction
may be in terms of changes required (i.e. regulation and/or
state plan amendment changes). He believed that the
department had explained that any of the changes requiring
a state plan amendment involved fairly simple and easy
state plan amendments; in some cases, like the optional
preventative adult dental services, it was necessary to
tell CMS but there was not a long approval process. Other
changes were slightly more complicated. There was not a
ranking of complexity, but that information was conveyed
with the implementation date. He explained that
implementation dates of July 1 indicated DHSS thought the
change could be made quickly, while other dates were
delayed until October. The department had testified it was
confident the $103 million GF reductions could be achieved
in FY 20.
Mr. Teal stated the question facing the committee was
whether all of the reductions were achievable. He believed
the proposal was fairly aggressive. He did not want to say
the proposal was not achievable, but he would not be
surprised if it was not. He thought it was more important
for the committee to consider what it wanted the department
to achieve. He asked what if the committee did not support
some or all of the proposed changes. He stated, "that train
left the station" and the department was in control of the
reductions. The committee could take the reductions if it
wanted, but the department's direction was already set, and
it would try to achieve the reductions. He reasoned that if
the legislature gave the department too much money it may
end up with a surplus at the end of the year.
Mr. Teal continued that the legislature did not get to
select which of the reductions [it wanted] or what each may
cost. The legislature could choose to add intent to the
budget. For example, the legislature could tell the
department it wanted DHSS to retain adult preventative
dental or exempt skilled nursing homes from the rate
reductions. The legislature could go further and put adult
preventative dental in a separate appropriation, which
would prevent DHSS from using the money for any other
services; however, it would not prevent DHSS from
eliminating adult preventative dental and lapsing the
money.
Mr. Teal reiterated that the legislature did not have the
control over the program that it may like to think it had.
He considered the impact of making a smaller reduction. He
remarked that he had been expecting a governor's amendment
showing reductions of $103 million instead of $225 million.
He noted it did not appear to be the case; he believed the
department was aiming at $225 million and it was confident
that $103 million was achievable. The key point was that
DHSS would either achieve the target or not.
3:29:59 PM
Mr. Teal continued that if the committee decided to take
the $103 million reduction and the department achieved it,
some committee members may be pleased, and others may be
displeased (pleased with cost reductions and displeased
with service reductions or vice versa). He stated it made a
strong case for accepting the proposed $103 million
reduction. He stated that if the department did not achieve
the proposed reductions it ran a risk of being short funded
in FY 20. He explained that if DHSS achieved half of the
proposed cuts, there would be a $45 million hole in the
Medicaid budget. He continued that $45 million was an
entire year's budget for some agencies, but it accounted
for roughly three weeks of the Medicaid budget. The
department wrote weekly checks that were between $12
million and $15 million.
Mr. Teal elaborated that if the department only achieved
half of the $103 million cut, it meant DHSS would run out
of money in the first week in June instead of at the end of
June. The department had established procedures for the
situation; it simply delayed payments to major hospitals
until July. The delay was fairly brief and had taken place
in the past. Additionally, the legislature would know of
the shortfall well in advance and could address it in the
supplemental process. He stated it was an odd situation
where the cart was before the horse; however, in the
particular situation it did not seem that bad to accept the
department's recommendations and see what DHSS could do,
knowing that the legislature could not control what DHSS
did. The alternative was for the legislature to add intent
language or structural changes to the budget.
3:33:05 PM
Mr. Teal highlighted an LFD handout in members' packets
showing Phase I of the FY 20 reductions proposed by DHSS
(copy on file). He emphasized that the legislature did not
have any control over the individual items or the
associated amounts. The legislature would decide what
reduction to give the department and the department
controlled how much money was saved at each point and in
total.
Representative Josephson highlighted changes made by rule
making that an administration could say it would reduce
rates or not fund things. He stated it gave him the
impression that instead of having a strong governor model,
Alaska had something more than that.
Mr. Teal replied by referencing a court case tying [an
appropriation] to education funding. He and others had told
the legislature that the governor could not withhold the
$20 million that was appropriated by the legislature to be
spent on schools. The primary reason was that schools could
and would spend the money. He returned to the proposed
reductions by DHSS and explained that the department was
saying the state had an entitlement program where the state
was required to pay if people went to a healthcare
provider. The legislature had to fund the program either in
the operating budget or supplemental budget. The program
took what the program cost. The department could control
costs of the program. For example, he highlighted the
proposal to eliminate the adult preventative dental
program. He explained that if the program was gone, it
would simply be an eligibility issue and patients would no
longer get the services. The department had the ability to
change the requirements and costs associated with its
programs. There was nothing the legislature could do about
savings from tribal claiming. He stated the savings target
was aggressive, "but if they achieve it, they achieve it."
3:36:33 PM
Representative Josephson pointed to slide 5 of the DHSS
presentation where the department stated it was not
recommending any adjustments to Medicaid program
eligibility. He asked if the department could make people
ineligible unilaterally by using executive branch authority
to have a state plan amendment and remove preventative
dental.
Mr. Teal replied it was his interpretation. The department
was in charge of the state plan and if it received CMS
approval it could move forward.
Representative Josephson was thinking of remedies and
political remedies that were slow to take up.
Vice-Chair Johnston thought the legislature could make a
difference in the behavioral health grant that was not part
of Medicaid.
Mr. Teal replied in the affirmative. He stated that DHSS
had explained that the total amount was $51 million. The
department believed it could move grants under Medicaid to
receive federal cost sharing in order to reduce the state
cost by approximately $12 million.
Co-Chair Wilson surmised that the act of including the
grant in the operating budget would not force the
department to distribute the funds. She noted that a budget
was the maximum a department could spend.
Mr. Teal replied that it was a tricky question. In Medicaid
where it was a state plan, the department followed the
state plan. However, behavioral health grants were not in
the state plan; therefore, if the legislature funded them,
it was limiting the amount that could be spent and telling
the department what it should be spending. He explained
that if the grants became a part of Medicaid, he was not
sure whether it was a CMS approved part of Medicaid. He
stated it would be necessary to ask the department.
Co-Chair Wilson reviewed the schedule for the following
day.
ADJOURNMENT
3:39:47 PM
The meeting was adjourned at 3:39 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Medicaid Services Presentation for House Finance March 27 2019.pdf |
HFIN 3/27/2019 1:30:00 PM |
|
| Medicaid FY2020 Changes Implementation Schedule.pdf |
HFIN 3/27/2019 1:30:00 PM |
|
| Medicaid Phase One Reductions.pdf |
HFIN 3/27/2019 1:30:00 PM |
|
| Packet 4 Public Testimony HF39 OP Budget March 27 Emails.pdf |
HFIN 3/27/2019 1:30:00 PM |
HB 39 |
| Packet 3 Public Testimony HF39 OP Budget March 26 Emails.pdf |
HFIN 3/27/2019 1:30:00 PM |
HB 39 |
| AML Muni - Municipal Impact Statement _Public Testimony HB39 3.27.19.pdf |
HFIN 3/27/2019 1:30:00 PM |
HB 39 |