Legislature(2005 - 2006)Anch LIO Conf Rm
10/06/2005 10:00 AM House HEALTH, EDUCATION & SOCIAL SERVICES
| Audio | Topic |
|---|---|
| Start | |
| Overview || Transforming Health and Healthcare in Alaska - Saving Lives and Saving Money | |
| Overview || Health Savings Accounts: What You Need to Know | |
| Commonwealth North || Alaska Primary Health Care Opportunities & Challenges | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
JOINT MEETING
SENATE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE
HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE
Anchorage, AK
October 6, 2005
10:06 a.m.
MEMBERS PRESENT
SENATE HEALTH, EDUCATION AND SOCIAL SERVICES
Senator Fred Dyson, Chair
Senator Kim Elton
HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES
Representative Peggy Wilson, Chair
Representative Paul Seaton, Vice Chair
Representative Berta Gardner
Representative Sharon Cissna
MEMBERS ABSENT
SENATE HEALTH, EDUCATION AND SOCIAL SERVICES
Senator Gary Wilken, Vice Chair
Senator Lyda Green
Senator Donny Olson
HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES
Representative Tom Anderson
Representative Vic Kohring
Representative Lesil McGuire
OTHER LEGISLATORS PRESENT
Senator Bettye Davis
Representative David Guttenberg
Representative John Coghill, Jr.
Representative Carl Gatto
COMMITTEE CALENDAR
Health Savings Accounts
Hospital Billing
Commonwealth North: Health Care Task Force Findings
Division of Public Health: Concepts for a Web-Based Health Tool
Kit
PREVIOUS COMMITTEE ACTION
No previous action to record.
WITNESS REGISTER
Jim Frogue
State Project Director
The Center for Health Transformation
Washington, DC
POSITION STATEMENT: PowerPoint presentation - Transforming
Health and Healthcare in Alaska
Greg Scandlen
Consumers for Healthcare Choices
Washington, DC
POSITION STATEMENT: Commented on HRAs & HSAs
Laura Trueman, Executive Director
No address provided
POSITION STATEMENT: PowerPoint presentation - Health Savings
Accounts
Duane Heyman, Executive Director
Commonwealth North
Anchorage, AK
POSITION STATEMENT: Reviewed the Alaska Health Care Taskforce
report
Dr. Tom Nighswander
Commonwealth North
Anchorage, AK
POSITION STATEMENT: Reviewed Alaska Health Care Taskforce
report
Tammy Green, Section Chief
Division of Public Health, Department of Health &
Social Services
PO Box 110601
Juneau, AK 99801-0601
POSITION STATEMENT: PowerPoint presentation - Concepts for a
Web-Based Health Tool Kit
ACTION NARRATIVE
CHAIR FRED DYSON called the joint meeting of the Senate and
House Health, Education and Social Services Standing Committees
to order in Anchorage at 10:08:11 AM. Present were Senators
Dyson, Elton and Davis and Representatives Gardner, Gatto and
Seaton. Attending via teleconference were Representatives
Wilson, Coghill, and Guttenberg. Representative Cissna arrived
during the course of the meeting.
CHAIR DYSON announced that the joint committee was meeting to
hear about some of the solutions for providing quality and
affordable healthcare to Alaskans.
He introduced Jim Frogue.
^Overview
^Transforming Health and Healthcare in Alaska - Saving Lives and
Saving Money
JIM FROGUE, Director, Center for Health Transformation, gave
background information on the center and presented the following
slide show:
Slide 2: Center for Health Transformation
MR. FROGUE explained that the organization is three years old
and that it acts as a catalyst to accelerate transformational
change in the healthcare sector. The job is to identify better
solutions that provide more choices, and better health at lower
cost. They share ideas with the widest array of opinion leaders
and decision makers across all sectors to accelerate adoption by
all in the system. They also help create, advance and improve
state and federal public policies to accelerate the
transformational changes they talk about.
He directed attention to the Medicaid Web-cast event held on
September 20 titled, "Creating a 21st Century Medicaid System."
He noted that it is archived on the business website.
Slide 3: Health Transformation
He said this slide indicates that the current healthcare system
is in a box. Changes to the system should include raising co-
payments, raising deductibles, and increasing co-insurance.
However, those are solutions that only marginally change the
current system. What really needs to happen, he said, is to
decide what the ideal system would look like and then work
backwards. He suggested that most bureaucracies prefer to
explain failure as opposed to creating a brand new system that
may have little in common with the current system.
Slide 4: What if in 1985 someone told you...
Don't limit future possibilities by what you know now, he said.
If you had explained the Internet, DVD players, TiVo, Ipods, and
cell phones that double as cameras to someone back in 1985, you
would have been viewed as irrational.
Slide 5: Current system versus the 21st Century System
This slide indicates the current system and where we need to go
to create a new system, he said.
Current System 21st Century System
Provider-centered Individual-centered
Price-driven Values-driven
45 million uninsured Americans 100% coverage
Hidden price Transparent price
Knowledge-disconnected Knowledge-intense
Slow diffusion of innovation Rapid diffusion
Disease-focused Health focused
Paper-based Electronically-based
Third party controlled market Binary mediated market
(patient - provider - payor) (individual - provider)
Process-focused govt. Outcomes-focused govt.
Limited choice Increased choice
Litigation system Health justice system
Overall cost increases Overall cost decreases
Quality and price measured Quality of care & life
Slide 6: The Consumerism Grid - Generations 1 - 4
This slide talks about the different generations in the move
toward more consumerism in healthcare.
First Generation Consumerism:
· Personal Care Accounts: Initial Account Only
· Wellness/Prevention 100% Basic Preventive
Early Intervention: Care
· Disease & Case Information, health
Management coach
· Information Decision Passive Information
Support Discretionary Expenses
· Incentives & Rewards Cash, tickets, Trinkets
(meager)
Second Generation Consumerism:
· Personal Care Accounts: Activity & Compliance Rewards
· Wellness/Prevention Web-based behavior change
Early Intervention: support programs
· Disease & Case Compliance Awards, disease
Management specific allowances
· Information Decision Personal health mgmt, info
Support with incentives to access
· Incentives & Rewards Zero balance acct,
Activity based incentives
Third Generation Consumerism:
· Personal Care Accounts: Individual & Group
Corporate Metric Rewards
· Wellness/Prevention Worksite wellness, safety,
Early Intervention: stress & error reduction
· Disease & Case Population Management,
Management Integrated Health Mgmt,
Integrated Back-to-Work
· Information Decision Health & performance info,
Support integrated health work data
· Incentives & Rewards Non-health corporate metric
Driven incentives
Fourth Generation Consumerism:
· Personal Care Accounts: Specialized accounts,
Matching HRAs,
Expanded QME
· Wellness/Prevention Genomics, predictive modeling
Early Intervention: push technology
· Disease & Case Wireless cyber-support,
Management cultural DM, Holistic care
· Information Decision Arrive in time information
Support and services,
information therapy
· Incentives & Rewards Personal developed
plan incentives, health
status related
Slide 7: Health Savings Account (HSA) vs. Health Reimbursement
Accounts (HRA)
It's important to point out the key differences between the two
accounts, but the ideal vehicle for consumer directed care is a
blend of the two.
HSAs HRAs
Individually owned Employer owned
Interest bearing No interest
Fully portable Remains with employer
Always tax-free if 213d Not addressed by IRS
Penalties if non-213d Healthcare expenses only
Everyone eligible but Medicare Eligible if employer
allows it
Funded by owner and employer Funded by employer only
Min/max deductibles No min/max deductibles
Max contribution limits No max contribution
limits
No incentives for Incentives for
compliance compliance
Slide 8: More Information on HSAs
www.cahi.org
www.cahi.org
www.hsadecisons.org
www.hsadecisons.org
www.hsainsider.com
www.hsainsider.com
www.ehealthinsurance.com
www.ehealthinsurance.com
www.treasury.gov
www.treasury.gov
Slide 9: Consumer Driven Health Care
The slide lists eight companies that changed to consumer driven
health care plans. Most are HRAs. All the companies listed had
been expecting double digit increases in healthcare costs. After
the change in plans, all but two saw double digit decreases
Slide 10: Effects of Consumerism
With consumer directed care plans, it has been found that:
· The use of generic substitutions has led to a 15 percent
decrease in pharmacy spending.
· Preventive care increases from 2-3 percent to 5 percent of
total money spend.
· Outpatient doctor visits are decreased by 18 percent.
· 62 percent of the participants rolled money over into the
following year.
· 44 percent of the consumers report they have increased
their knowledge in managing their own healthcare.
· 27 percent of consumers report they are more actively
pursuing healthy behaviors.
REPRESENTATIVE BERTA GARDNER asked who funds the Center for
Health Transformation.
MR. FROGUE informed her that former Speaker of the House, Newt
Gingrich, founded the organization. He described it as a
combination of think-tank and consultation.
REPRESENTATIVE CARL GATTO questioned whether slide 10
represented fourth generation consumerism.
MR. FROGUE explained that slide 6 represents second-generation
consumerism so there is still significant potential for further
decreases.
REPRESENTATIVE PEGGY WILSON referenced an Alaska Medicaid
demonstration program and asked about ways to make in-home care
less expensive.
MR. FROGUE pointed out that a true comparison analyses the same
population as it moves from one program to another. He then said
he understood that the eligibility requirement for the Alaska
experiment was very loose. More people were attracted to the
program so there was an overall cost increase. In addition, some
people were getting care for the first time so they were
spending more than zero, which is what they spent previously.
The companies listed on slide 9 included the same populations.
They simply moved from one plan to another.
Slide 11: CHT Georgia Project
MR. FROGUE explained that the organization has a satellite
office in Georgia and the governor is making the Georgia Project
a key part of his 2006 reelection bid. The effort is to:
· Bring together employers group for pay-for-performance.
· Increase diabetes management of state employees and the
Medicaid population.
· Advocate public policies that increase screening,
education, and management.
· Identify and provide incentives for physicians who follow
protocol.
· Impact key populations impacted by diabetes.
· Educate and impact women as key decision-makers.
· Use technology to communicate and manage.
Slide 12: CHT Georgia Project
The slide lists the various participating employers and
companies that are actively involved. Employers in cooperation
with selected physicians and the Bridges to Excellence Program
provide optimal care. By paying physicians $100 per diabetes
patient, there is a $350 annual saving. Absenteeism goes down
and quality of care and life goes up. In 2004 a RAND study
indicated that only 55% of all care given was effective. The
four leading chronic conditions, diabetes, asthma, congestive
heart failure, and depression, result in 140,000 deaths and cost
$143 billion per year.
Slide 13: Consumer "Right to Know"
The slide reflects polling the organization has done on whether
consumers think that they have the right to know about their
healthcare services. The results indicate that 93% of the
population believes that they do have a right to know the price
and quality of information from healthcare providers. This
compares to 91% who think that the word "God" should be in the
Pledge of Allegiance.
Slide 14: Suggested Goals
· Pursue full replacement of consumer directed plans in the
state employee health plan by January 1, 2007.
· Provide electronic health records for all state employees
by January 1, 2007.
· Provide a publicity campaign that is led by the governor
with involvement at all levels of government and private
industry to highlight new and effective advances in health
care consumerism and disease treatments.
· Emphasize examples that simultaneously save lives
and money.
· Involve interest groups that represent various
diseases.
· Create a culture of entrepreneurship in the state
bureaucracies that values innovation. Make sure that the
phrase "but that's the way we've always done it," is never
heard again.
MR. FROGUE concluded the presentation and stated that the
aforementioned ideas are a radical departure from current
practice, but in the long run the result will be better care at
lower cost.
CHAIR DYSON asked about success stories.
MR. FROGUE replied Mr. Scandlen could provide the best response,
but he understands that about 40% of those who bought HSAs were
uninsured previously. He wasn't sure of the drop in cost for any
individual state that embraced consumer directed care but as
HSAs and HRAs bring the cost of health care down, it is feasible
to cover more people. Reflected in the discussion about the
third generation of consumerism on slide 6 is the fact that if
companies can begin to cut healthcare costs, that is the
equivalent of a huge tax cut. That is a competitive issue for
the entire country, he asserted.
10:48:00 AM
CHAIR DYSON introduced Greg Scandlen.
GREG SCANDLEN, Consumers for Healthcare Choices, explained that
his organization was new in September. It is funded by
membership dues and currently has 125 members. The goal is to
have 1,000 members by December and 4,000 members by June 2006.
He stated that the notion that healthcare discussions don't need
to include the consumer is incorrect. His contention is that if
it's not doing a good job for the patient then it's not doing a
good job at all. For the last 20 to 30 years consumers have been
paying outrageously high prices for questionable quality of
care.
MR. SCANDLEN said that the essential problem is that the
consumer has become too reliant on third party payment. The
result of that is that people become divorced from the
responsibility of payment. A triangular relationship is
established that has no accountability. The patient doesn't know
what's happening between the insurance company and the doctor,
the doctor doesn't know what's happening between the patient and
the insurance company, and the insurance company has become far
too curious about what is happening between the patient and the
doctor. He asserted that insurance companies should restrict
themselves to financing care and not get involved in the
delivery of care.
He outlined some of the consequences of becoming reliant on
third party payment. As of 2002, third party payers pay 86 cents
on the dollar while the patient pays just 14 cents on the dollar
directly out-of-pocket. Certainly there is need for insurance in
health care, but it should focus on covering expenses for
unusual situations. It's time to restore the balance between
direct pay and insurance coverage, he said. Different programs
are testing different dimensions to determine how much the
consumer should pay and how much should be covered by a
healthcare policy. Currently it's unclear whether it's better to
have a $2,000 deductible, a $5,000 deductible or a $10,000
deductible, but the research is underway.
MR. SCANDLEN informed members that the early results on the
consumer driven programs has been positive; the uninsured
finally have a health product that they're willing to buy. In
addition, the prospect of being able to save funds in an HSA
allows people to continue coverage even after they lose a job.
This is far better than the COBRA option, he said.
CHAIR DYSON asked him to comment on how HSAs might work for
small and medium size businesses, and nonprofits.
MR. SCANDLEN responded HSAs are advantageous to people with
income surges interspersed with dry periods throughout the year
because they minimize the amount that must be paid on a monthly
basis.
SENATOR KIM ELTON acknowledged that an HSA might be advantageous
to small businesses and non-profits that didn't previously offer
an insurance program, but he questioned whether larger
corporations or governmental units might not reduce insurance
costs by forcing employees to select a HSA program.
MR. SCANDLEN stated his belief that large self-funded employers
will find HSAs more attractive than HRAs. He reasoned that a
self-funded employer doesn't have the monthly premium obligation
so it's hard to have premium savings the way a fully insured
employer would and it's those premium savings that go into
funding the HSA. Large employers don't pay anything until a
claim is due and that's the way an HRA works.
MR. FROGUE chimed in to agree and said the additional reason
some employers like HRAs is because the money that goes in can
only be used for healthcare. Some large employers have expressed
hesitation about putting money into an HSA because the money
might be misused. The evidence hasn't proved that to be true,
but the hesitation isn't totally unjustified. That's another
reason that employers like HRAs. It's critical to remember that
the employee owns the HSA, he said, and in his view that
outweighs everything else.
With regard to the question about employers saving money with
consumer directed plans, he said, yes they do. Furthermore,
consumer directed plans aren't meant to help only the healthy
and young. They work better for everyone, he asserted.
SENATOR ELTON remarked it might be a correct statement that
third party payments might tend to divorce patients from
healthcare decision-making. The flip side is the assumption that
consumers would make good healthcare choices. That might or
might not be the case.
MR. SCANDLEN agreed that might be true but ultimately the person
that receives the care has to make the decision on whether to
receive the care or not. Certainly there isn't a guarantee that
every decision will be the right one. However, once people have
an HSA they have a real reason to pay attention to cost.
MR. FROGUE used the analogy of defined contribution retirement
plans and noted that in the 1980s when companies began moving
from defined benefit programs to defined contributions, the same
opposing arguments were used. He further made the point that
evidence indicates that people make better decisions when they
are paying.
CHAIR DYSON informed members that Dr. Mandsager has a
comprehensive patient/consumer information system that is
laudable.
REPRESENTATIVE SHARRON CISSNA said she is interested in the
difference between the incentives for HSAs and HRAs. She asked
for suggestions on how to maximize incentives for both.
CHAIR DYSON asked her to wait for Laura Trueman to respond to
the question.
MR. SCANDLEN concluded his comments acknowledging that HSAs and
consumer driven healthcare won't solve every problem. However,
they are a big step in the right direction. Consumer driven
healthcare does inspire people to pay attention because they
have the incentive to do so. Finally he applauded Dr.
Mandsager's work on the patient/consumer information system
because that's what is needed.
CHAIR DYSON asked Mr. Frogue about his ideas for adding
incentives for providers and patients with chronic conditions.
MR. FROGUE suggested that Florida would probably serve as a
model for the country. It is creating enhanced benefits packages
for patients who meet certain health metrics. Pay for
performance gets you half way, he said, and the other half is
pay for compliance. There is a lot of potential there,
especially for those who are sick. Every discussion of health
care should use the word "incentives" with great regularity. In
parallel with getting dollars in the hands of patients there has
to be a strong effort to provide quality information. With that
in mind, he applauded the work Dr. Mandsager is doing. He
encouraged legislators to work with medical societies and
hospital groups so that information is gathered in a cooperative
manner.
CHAIR DYSON introduced Laura Trueman.
11:20:08 AM
^Overview
^Health Savings Accounts: What You Need to Know
LAURA TRUEMAN, Coalition for Affordable Health Coverage, stated
that 2004 Census data indicates that 18 percent of Alaskans are
uninsured. That is the eighth highest rate in the country.
However, Alaska has the eighth lowest 3-year poverty rate, which
means that many Alaskans have a good income. Of course goods and
services are high so the comparison isn't exactly "apples and
apples."
She explained that the coalition works on a national level to do
what is being discussed here on the state level. They bring
together the major stakeholders in the country that want to
improve the healthcare and coverage system. They advocate in
Washington DC on how to help people get access to more
affordable health coverage in the private sector.
MS. TRUEMAN said her discussion and PowerPoint presentation
would focus on Health Savings Accounts (HSA). She noted that
every state is facing a crisis with its Medicaid program and
it's been said that in about ten years every state will be
bankrupt if Medicaid isn't brought under control. A second
problem that states are facing is that the uninsured population
is growing. That is draining hospital resources and causing all
health insurance premiums to rise. She suggested that HSAs are
an interesting option for changing the system because they make
premiums affordable for more people. She gave several examples
from other states.
MS. TRUEMAN explained the purpose of her PowerPoint presentation
is to help members understand HSAs and to encourage legislators
to consider this as one option for state employees and a
possibility for Medicaid recipients. Addressing the needs of
those two populations could begin to change the dynamics of the
healthcare marketplace in ways that could possibly affect
everyone's healthcare premium.
Slide 1: What is a Health Savings Account?
HSAs are a new way to have health insurance and establish a tax
advantaged savings account for medical expenses.
· HSAs allow people to put money in and take it out tax-free
as long as the money is spent on medical care.
· HSAs were created in Medicare legislation in December 2003
and were in the marketplace by January 2004.
Slide 2: Who Can Open A Health Savings Account?
· Anyone with a qualified "High Deductible Health Plan"
(HDHP) may open a HSA.
· For 2006 HSA plans, a high deductible health plan would
have a minimum deductible of $1,050 for individuals or
$2,100 deductible for families.
Deductibles can be higher than the minimum qualifying amounts,
she said. For instance, in South Carolina the deductible for
state employees with HSAs is $3,000.
Slide 3: Do HSA Owners Have Any Protections on How Much they
Must Spent Out of Pocket?
· Yes.
· The annual out of pocket expense including deductibles and
co-pays cannot be over $5,200 for an individual and $10,500
for families.
· The amounts are indexed annually for inflation.
After meeting the annual out of pocket limit, additional
expenses are totally and completely covered.
Slide 4: Won't HSA Owners be Tempted to Skip Medical Care
Since it Comes out of their Pocket First?
To answer she said you must remember that:
· All preventative care is paid for at 100% coverage.
There is no co-payment. The incentive is to encourage
people to be proactive in managing their health.
· All physicals, mammograms, colonoscopies, vaccines and
other such preventative services and drugs are covered
The reason for this is to provide incentive for people to
take care of themselves because in the long run, everyone
saves money. She reiterated that drugs that are considered
preventative such as Statins or insulin are 100% paid for.
There is no co-pay.
Slide 5: HSAs Do More to Encourage Preventative Care Than
Traditional Coverage.
· Many traditional policies require that you meet an
individual deductible or family deductible before they
begin making payments. Then, they require co-payments
- usually 20%.
· In comparison, HSA owners have no required deductible
or co-payments in order to receive 100% payment for
preventative care, drugs, or diagnostic services.
Slide 6: HSA Rules for 2006
MS TRUEMAN showed a table and explained that single people have
a minimum deductible of $1,050 and they could contribute a
maximum of $2,700 into their account. The out-of-pocket limit is
$5,250. For a family, the deductible is $2,100 with a maximum
annual contribution of $5,450. The out-of-pocket expenses would
be no more than $10,500.
Slide 7: Shows the 2006 HSA contribution rules for single and
family in more detail
Slide 8: What About Prescription Drugs?
· Current status: HSA owners can have a separate prescription
drug plan and receive insurance coverage for their expenses
on drugs even before the deductible is met.
· Beginning in 2006, the transition period will end.
Prescription drugs will be treated just like all other
healthcare expenses. Individuals would pay the negotiated
rate for prescriptions and the payments would count toward
the deductible. Once the deductible is met, insurance with
co-payments would begin.
It's important for people to think about prescription drugs in
terms of whether or not the drug is need, whether there is a
less expensive alternative, whether an over-the-counter medicine
would work as well. It's important to ask those questions, but
when the out-of-pocket expense is minimal you're less likely to
do so. Research indicates that employers are seeing cost savings
for drug coverage with the increased use of generic drugs.
· Important Exception: Preventative drugs are covered at 100%
before any deductible is met.
Slide 9: If I Pay Cash for Drugs and Medical Services by Using
My HSA, Won't I be Stuck With the Highest Dollar Charge for
Those Services?
· No. You will receive the best negotiated rate that has been
obtained by the insurance carrier. You will not be paying
the usual and often highest, prices that cash paying
customers are often charged.
CHAIR DYSON noted that individuals could use their annual
contribution to the HSA for predictive, preventative and
remedial care that typically isn't covered. He asked her to give
some examples.
MS. TRUEMAN referenced Slides 10 & 11 and explained that
qualified medical expenses would include mental healthcare,
dental or orthodontia treatment, premiums for long-term care
insurance, over-the-counter drugs, and plastic surgery. The list
is extensive and allows individuals to decide what's important
to them. It's not a one-size-fits-all kind of thing, she said
SENATOR ELTON observed that this might result in individuals
shifting costs to elective treatments such as lasic eye surgery
while not leaving enough money for treatment that is necessary
such as blood pressure medicine. That would create a future
cost, he said.
CHAIR DYSON pointed out that once the deductible is met then the
insurance company would meet all those costs.
MS. TRUEMAN acknowledged that it's a reasonable concern because
people sometimes do make poor choices. However, because the
money carries over from year to year the incentive is there to
use your own money carefully.
REPRESENTATIVE CISSNA asked if disincentives might not be worth
considering.
MS. TRUEMAN responded in addition to paying the tax there is
also a 10% penalty if you remove money from the account and use
it for non-medical expenses. With regard to "frivolous"
expenditures, she said additional data is needed. She said she
has seen reports indicating that people's behavior has changed
in several ways: emergency room use is reduced; generic drugs
are used more frequently, and preventative care is used more.
Slides 12 - 14: Other HSA Advantages.
· Portability is one advantage. HSAs are owned by the
individual and not by the employer. If the employee leaves
the job, his or her savings goes too.
· Choice is another advantage. Employers cannot restrict how
individuals spend money from an HSA.
· HSAs roll over from year to year so there aren't the same
problems that are associated with flexible spending plans.
· The money can grow. It's like a 401 K in that it can be
managed and invested.
· HSA owners are rewarded for healthy lifestyles.
· HSAs offer protection for occurrence of catastrophic or
chronic illness. By limiting the total out-of-pocket
expense for HSA owners, those who do have illnesses are
protected.
Slide 15: Who is Offering HSAs?
· The federal government offers several HSA options for
federal employees.
· States such as South Carolina, Arkansas, and Florida are
all offering HSA plans to state employees. In the first
year, 30% of the state employees in South Carolina switched
to an HSA plan.
· Small businesses - Blue Cross Blue Shield indicates the
strongest HSA customers are small business owners.
· Individuals are purchasing HSAs. About one third of those
individuals were previously uninsured.
REPRESENTATIVE CISSNA asked if it is possible to invest
separately to put extra money away in anticipation of additional
expenditures.
TRUEMAN answered yes, but there is an annual contribution limit
to receive the favorable tax treatment. An additional account
would be similar to a regular savings account.
CHAIR DYSON noted that Florida has limited purpose flexible
medical accounts that allow the use of pre-tax dollars. He asked
Ms. Truman to elaborate.
MS. TRUEMAN explained that is to address the fact that many
people have flexible spending accounts, which aren't allowed
once you have an HSA. However, an adaptation of a flexible
spending account is allowed for certain purposes, she said.
MS. TRUEMAN made the point that she and others advocate
increasing the contribution limit, which would take some of the
pressure off Medicare in years to come. For that to be
successful, contribution limits must be increased because as
Blue Cross Blue Shield has said, right now people are pretty
much spending what is in their account each year.
11:52:30 AM
SENATOR ELTON questioned whether government employees in the
three test states who chose a high deductible HSA could cash out
the account at some point in the future and return to a
different plan.
MS. TRUEMAN answered yes.
SENATOR ELTON observed that to get a true sense of the potential
savings over time you'd have to take into account the ability
for people who develop a chronic condition to opt for a more
expensive plan.
MS. TRUEMAN cited an article from the "Washington Post" that
compared the Blue Cross Blue Shield plan federal workers with
AETNA's high deductible HSA health plan for federal workers.
Comparisons were made for out-of-pocket expenses and savings
under three circumstances: a good health year, a mediocre health
year, and a catastrophic health year. In two cases the HSA plan
came out far ahead and in the third case there was a $12
difference.
If, over the course of ten years, you experienced three bad
health years and seven good health years, you would come out way
ahead with the HSA. You're presuming that an HSA plan isn't a
good deal for a diabetic and I'm not sure that's correct, she
said.
SENATOR ELTON questioned whether it wouldn't be smart for a
savvy consumer to join an HSA plan at age 22 and then return to
"the old system" at age 45.
MS. TRUEMAN embraced the question to counter the criticism that
HSAs are for "the healthy, wealthy, and young." She pointed out
that the demographics indicate that the purchasers of HSAs
mirror the age breakdown of regular insurance buyers. Assurant
Health has sold a lot of HSAs and it says that 57 percent of the
purchasers are over the age of 40. She asserted that it hasn't
been true that HSAs have gone to just the young.
CHAIR DYSON added that the idea that the savings accounts can be
rolled forward and then moved into a retirement account on a
tax-free basis is attractive.
REPRESENTATIVE GATTO remarked he couldn't help but think that
there would a zero sum gain if there isn't a limit beyond the
deductible. If a family had major legitimate medical expenses in
one year, some might take advantage of the situation by having
elective procedures done. He questioned whether that wouldn't
affect the ability for HSAs to be beneficial to the public as a
whole.
MS. TRUEMAN responded it's too early to tell how people that
have major illnesses would contend with the situation so she
would reserve further comment.
CHAIR DYSON added the catastrophic healthcare program would have
significant limits on what would be paid for.
MS. TRUEMAN agreed that insurance companies won't pay for all
sorts of elective surgery.
12:00:43 PM
CHAIR DYSON asked Ms. Trueman to continue.
Slide 17: How Much Cheaper are HSAs than Traditional Plans?
· Average price for a traditional individual policy is
$1,800.
· Ehealthinsurance.com indicates that the average 2005
premium for an individual HSA policy is $1,344.
· South Carolina state employees HSA plan costs $1,200 vs.
the traditional plan for $2,640.
Slide 18: Do HSA Plans Save Employers money?
· Yes. Studies by Humana, Blue Cross Blue Shield, and others
show a significant decrease in healthcare cost inflation
for HSA premiums.
· Why? Decreased use of emergency room, increased use of
generic drugs. No evidence of savings coming from delaying
or avoiding needed care.
Slide 19: HSA Plan Design Questions to Consider:
· Should the employer make a contribution to the HSA Account?
· The federal government decided it should. Florida
decided that it should and South Carolina decided
not to make a contribution.
· Should the deductible be higher than the minimum so that
the premium is even lower than the traditional policy?
· South Carolina said yes while Florida and the
federal government said no.
Slide 20: The Banking Questions on HSA Accounts:
· Who can be an HSA Trustee or Custodian?
· In Alaska unions are fund custodians for health
insurance dollars. They could do that for HSAs as
well.
12:04:00 PM
CHAIR DYSON thanked Ms. Trueman for her work.
REPRESENTATIVE PAUL SEATON asked if she had reviewed the new
retirement plan and HRA that Alaska adopted last year. In that
plan 3% of the average salary for all employees went into a
personalized account. After 5 years it became vested as an
individual portable account. He observed that it seems to have
the portability element of the HSA and the flexibility element
of the HRA.
MS. TRUEMAN said she knew the retirement program was changed,
but she didn't know the particulars.
REPRESENTATIVE SEATON asked her to familiarize herself with the
specifics and then provide feedback to the committee.
MS. TRUEMAN agreed to do an assessment if someone provided her
with the information.
CHAIR DYSON called a break at 12:06.
CHAIR DYSON reconvened the meeting and outlined the integrity in
billing legislation he had introduced. He followed up with a
discussion on hospital cost shifting and asserted that the
incentives are at the wrong end. Those who self pay are
penalized, those who pay nothing are rewarded, and those who
have a third party payer have increased insurance costs. His
legislation would shine light on the situation and force
providers to tell patients what's really happening. At the
least, you should get a tax break if you're supporting the poor,
he said.
He noted that he had distributed copies of new federal
healthcare legislation that Congressman Lipinski recently
introduced.
12:20:15 PM
CHAIR DYSON introduced Ms. Fink and asked her to inform members
what the industry is doing to bring more integrity to the
billing system.
LINDA FINK, Vice-President with the Alaska State Hospital and
Nursing Home Association, read a letter into the record stating
that the hospital shares the concern about hospital billing
practices. They need to be more understandable to the consumer
and to fairly reflect the actual cost of providing care.
Furthermore, the hospital would like bills for services for the
self-insured and uninsured to more closely parallel those for
patients covered under group plans. Although some patients must
pay more to cover those who don't pay enough, the uninsured
shouldn't be billed two and three times more than others.
During a previous meeting the association had expressed concern
with Senator Dyson's bill. At that time commitments were made to
move forward as an industry and as individual community
hospitals to find more solutions and avoid the complex billing
process set forth in the proposed legislation.
She reported that all Alaska hospitals signed an American
Hospital Association (AHA) confirmation of commitment pledge to
help uninsured or self-insured Alaskans. One change is to make
billing systems more understandable to the consumer. She
explained the new billing system employed by the Fairbanks
Memorial Hospital, and the new explanation-of-billing website
developed for the Central Peninsula Hospital in Soldotna. In
addition to an improved billing system, Providence Hospital in
Anchorage also offers financial counseling.
MS. FINK reported that Alaska hospitals are revamping charge
systems so that the amount that self-insured and uninsured
patients are charged is closer to the charges for patients in
negotiated insurance arrangements. To make the point she
provided several examples. She then reiterated the view that
this is a better solution than instituting the complex billing
requirements called for in SB 11.
12:31:22 PM
CHAIR DYSON asked Ms. Fink to send a copy of the new standards
the national association calls for, a copy of the pledge that
Alaska providers have signed, and a timeline for instituting the
pledge.
MS. FINK agreed to do so.
SENATOR ELTON referenced an example Ms. Fink cited and made the
observation that for the cost for uninsured patients to be less
than the cost for covered patients, the rate for group coverage
would have to increase. He asked if there is another
explanation.
MS. FINK said she didn't have a short answer.
SENATOR ELTON said he would like hospitals to post the costs for
services so that anyone could make better decisions regarding
where to seek healthcare services.
MS. FINK responded that is part of the pledge and facilities are
working to make that possible.
CHAIR DYSON asked other hospital personnel to send their
testimony to the committee.
He asked if it's reasonable to infer that hospitals would
continue to cost shift.
MS. FINK replied the problem is that hospitals have a mandate to
take everyone who walks through the door so costs are incurred.
To assume that no one is going to pay for those costs begs the
question, she said.
CHAIR DYSON commented the answer is probably yes. He
acknowledged that the federal government has forced hospitals
into a tough situation and it should take responsibility for
doing so.
12:36:45 PM
^Commonwealth North
^Alaska Primary Health Care Opportunities & Challenges
CHAIR DYSON announced that the Commonwealth North summary was
next on the agenda.
DUANE HEYMAN, Executive Director, Commonwealth North, said many
points that were already made are consistent with what the
taskforce found. He continued:
We don't think it's so much the amount of money that's
being spent in healthcare in the country and in the
state because right now, in terms of percent of gross
domestic product, the US is already spending way more
than other industrialized countries. On a per capita
real dollar basis, we're spending over $4,000 a person
- way more that other industrialized countries.
Unfortunately the trend is going in an unsupportable
way. And it looks like by 2013 we'll be spending 18%
of our gross domestic product on healthcare costs and
it just can't keep going this way.
Are we getting benefit from all that we're spending
right now? Unfortunately no. By various measures -
diabetes, obesity, lung cancer, infant mortality, life
expectancy etc - we're hardly even in the middle of
the pack compared to other industrialized countries.
So we're spending more and we're not getting the
benefit of that.
On page 10 of our report somebody had suggested that
Chilkoot Charlie was a kind of dynamic aspect of our
US healthcare policy. We cheat the other guy and pass
the savings along to you. Unfortunately, that's more
true than not.
The impact in Alaska has been substantial. Providence
and Alaska Regional last year wrote off almost $90
million in charity and uncompensated care. It's a very
significant percentage of their revenues. Even much
higher than what we've indicated in the graph here
because they don't collect anywhere near what they
bill.
It's not just on institutions. The impact is also on
individuals. A great percentage of the bankruptcies in
the state and in the country are because of medical
costs even if people already had some type of coverage
before they started. The costs of medical care are
going up dramatically in Alaska and pretty much the
rest of the country. Unfortunately, it's a national
issue.
What can we do about it here? We thought that with a
coordinated and focused effort continuing the kind of
meetings that we've been having that we think that
there are things that can be done that are
controllable here in Alaska that are a whole series of
small solutions. What we call three percent solutions
things that can be done. A lot of the issues you've
just been talking about and dealing with. Transparency
[and] information to enable people to have consumer-
based choices are very important. And to help
facilitate that we have put together this Alaska
Healthcare Round Table, which is a continuation of the
type of efforts that we've had to try and keep working
on these types of specific solutions. We have
identified 34 of them starting on page 27 of the
report.
DR. TOM NIGHSWANDER, Commonwealth North, gave data on the
uninsured in Alaska. About 114,000 people or 18% of Alaskans are
uninsured. That doesn't include the 100,000 Alaska Natives that
have coverage or the 100,000 military personnel that have
coverage. That translates to about 25% of the Alaska population
that are uninsured.
The weak link in HSAs is the knowledgeable consumer. The
patient/consumer doesn't know the cost for or the quality of the
healthcare service they might receive. There's also a need for
an infrastructure for electronic health records. More than
likely, the Legislature will have to help with that, he said.
There's a consortium of healthcare providers and others that
have formed an alliance to work in that direction. Another
problem in Alaska is the aging population of physicians.
Both the commissioner of health and the president of the
university are calling for a physician workforce study group to
make recommendations. One will be to ask legislators to double
class size for medical students. Another recommendation is how
to better recruit physicians back to Alaska. A third
recommendation relates to preventative strategies that emphasize
physical education and nutrition in schools.
CHAIR DYSON remarked the Commonwealth North report was
disappointing because it didn't address accountability and the
connection between a patient's wallet and the service provided.
He asked Mr. Heyman for a response.
MR. HEYMAN replied the long-term answer is that the individual
must take responsibility. Health is the goal rather than
healthcare.
CHAIR DYSON responded the report doesn't give a single
recommendation for getting someone with a third party payer to
make better choices.
DR. NIGHSWANDER acknowledged they didn't get into national
issues, but he assured members that this would become part of
the national agenda because of rising costs.
SENATOR ELTON said he would like to participate in the future
and commented that it's important to figure out how to get more
representation to the consumer element.
DR. NIGHSWANDER agreed.
SENATOR ELTON mentioned his legislation relating to school
vending machines.
DR. NIGHSWANDER responded some businesses have offered
compensation to make up for what vending machines make.
REPRESENTATIVE SEATON asked how patient consumers would find out
about the quality of particular healthcare services and who
might do the evaluations.
Dr. NIGHSWANDER replied it would probably be the Center for
Medicaid/Medicare Services (CMS). The federal government and
insurance companies are starting pay-for-performance programs to
improve service quality by both hospitals and doctors. England
has already established such a program. Hospitals are rated on a
1,000-point scale evaluating such things as how many women
employees have had a mammogram in the last year or how many
diabetics have acceptable hemoglobin levels. Another part of the
score is the patient's experience of care. If a family
practitioner meets the 1,000-point quality standard, he or she
receives an additional $70,000 per year, which provides real
incentive.
DR. NIGHSWANDER explained that such a program isn't possible
without an electronic health record system and noted that the
CMS already has a pay-for-performance pilot program in New York.
He added that the best system in the US is the Veteran Affairs
(VA) because they have electronic health records. Instituting
such a system would allow the director of public health to get
population data.
REPRESENTATIVE SEATON said it sounds like it's only under a
single payer system.
DR. NIGHSWANDER answered emphatically, "No." He asserted that
the US will have electronic health records and he thought that
there would be incentive pay if standards were met.
He acknowledged that Alaska has to get up to speed on electronic
health records.
CHAIR DYSON added establishing the standards that are used in
England is necessary as well.
DR. NIGHSWANDER responded the standards are already established,
but physicians have been slow to adopt evidence-based medicine.
This is a step in the continuum, he said.
REPRESENTATIVE CISSNA questioned how to ensure that the broad
healthcare solutions fit into the localized solutions that
tribal governments come up with.
DR. NIGHSWANDER responded the roundtable hasn't come up with all
the definitive answers and there will be other iterations.
MR. HEYMAN added that suggestions or ideas are welcome.
1:02:50 PM
CHAIR DYSON asked Ms. Green to testify.
TAMMY GREEN, Section Chief Chronic Disease Prevention and Health
Promotion, Division of Public Health, Department of Health and
Social Services, said she was speaking on behalf of Dr.
Mandsager.
MS. GREEN said she would focus on ways to develop a consumer
population that is informed about healthcare issues. She further
explained that the major risk factors that underlay all chronic
diseases are obesity, poor nutrition and the use of tobacco.
She reviewed several websites to show that the division
envisions a site that is consumer based and interactive. The
site will include a health promotion section, a self-management
section, and a healthcare resource and provider section. She
encouraged members to give the division feedback.
REPRESENTATIVE CISSNA asked about the system used by the
Municipality of Anchorage.
MS. GREEN said she wasn't aware of the system, but would look
into it.
CHAIR DYSON suggested that including information regarding the
quality of the providers would be helpful.
MS. GREEN responded that's a huge order, but you have to start
somewhere.
REPRESENTATIVE CISSNA indicated that she would like an
assessment of the pieces of the budget that have something to do
with prevention.
MS. GREEN added you need the evidenced based information rather
than the suggestion that the idea is good. She said the division
is aware of the need.
CHAIR DYSON said he would encourage Governor Murkowski to take
some visible leadership. He made the point that a significant
part of the budgetary battle is won if the needed resources are
in the governor's budget.
MS. GREEN stated that the division appreciates the bills that
Senator Dyson and Senator Elton have introduced.
CHAIR DYSON adjourned the meeting at 1:17:36 PM.
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