Legislature(2007 - 2008)
04/16/2007 10:06 AM House L&C
| Audio | Topic |
|---|---|
| Start | |
| HB228 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 16, 2007
10:06 a.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Mark Neuman, Vice Chair
Representative Carl Gatto
Representative Gabrielle LeDoux
Representative Jay Ramras
Representative Robert L. "Bob" Buch
Representative Berta Gardner
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Representative John Coghill
Representative Mike Kelly
Representative Les Gara
COMMITTEE CALENDAR
HOUSE BILL NO. 228
"An Act relating to fees for certain medical treatment and
service under the Alaska Workers' Compensation Act; and
providing for an effective date."
- MOVED CSHB 228(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 65
"An Act relating to breaches of security involving personal
information, credit report and credit score security freezes,
consumer credit monitoring, credit accuracy, protection of
social security numbers, care of records, disposal of records,
identity theft, furnishing consumer credit header information,
credit cards, and debit cards, and to the jurisdiction of the
office of administrative hearings; amending Rule 60, Alaska
Rules of Civil Procedure; and providing for an effective date."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 228
SHORT TITLE: WORKERS' COMP. MEDICAL TREATMENT FEES
SPONSOR(s): REPRESENTATIVE(s) KELLY
03/29/07 (H) READ THE FIRST TIME - REFERRALS
03/29/07 (H) L&C, FIN
04/16/07 (H) L&C AT 10:00 AM CAPITOL 17
WITNESS REGISTER
DEREK MILLER, Staff
to Representative Mike Kelly
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 228 on behalf of
Representative Kelly, sponsor.
SALLIE STUVEK, Director
Human Resources
Fairbanks Northstar Borough
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 228.
MICHAEL HAUGEN, Executive Director
Alaska Physicians & Surgeons, Inc.
Anchorage, Alaska
POSITION STATEMENT: Testified in support of the bill as
"another stop-gap measure" to use in figuring out what is
driving the cost increases in the workers' compensation system.
LINDA HALL, Director
Division of Insurance
Department of Commerce, Community, & Economic Development
(DCCED)
Anchorage, Alaska
POSITION STATEMENT: Testified on behalf of the division in
support of HB 228.
JAMES J. JORDAN, Executive Director
Alaska State Medical Association (ASMA)
Anchorage, Alaska
POSITION STATEMENT: Testified in favor of a balanced approach
that will help meet physician recruiting goals.
ROD BETIT, President
Alaska State Hospital and Nursing Home Association (ASHNHA)
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 228.
PAUL F. LISANKIE, Director
Division of Workers' Compensation
Department of Labor & Workforce Development (DLWD)
Juneau, Alaska
POSITION STATEMENT: Offered information during the hearing on
HB 228.
WAYNE STEVENS, President/CEO
Alaska State Chamber of Commerce
Juneau, Alaska
POSITION STATEMENT: Encouraged the work of the committee in
moving HB 228 through the legislative process.
BARBARA HUFF TUCKNESS, Director
Governmental and Legislative Affairs
Teamsters Local 959
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 228.
ACTION NARRATIVE
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 10:06:20 AM. Representatives
Buch, Gatto, Gardner, and Olson were present at the call to
order. Representatives LeDoux, Ramras, and Neuman arrived as
the meeting was in progress.
HB 228-WORKERS' COMP. MEDICAL TREATMENT FEES
10:06:36 AM
CHAIR OLSON announced that the only order of business would be
HOUSE BILL NO. 228, "An Act relating to fees for certain medical
treatment and service under the Alaska Workers' Compensation
Act; and providing for an effective date."
10:06:53 AM
DEREK MILLER, Staff to Representative Mike Kelly, Alaska State
Legislature, presented HB 228 on behalf of Representative Kelly,
prime sponsor. He paraphrased the sponsor statement, which read
as follows [original punctuation provided]:
In 2005 the Alaska Legislature passed [Senate Bill]
130 which was a rework of the Workers Compensation
statutes. As part of this rework, medical payments
were frozen at the 2004 fee schedule so that a review
could be done of the underlying reasons for premium
increases. This review was to be jointly done by a
special Workers Compensation Legislative Taskforce in
concert with the Department of Labor & Workforce
Development Medical [Services] Review Committee. Two
important tasks of the committee were to look at
program design problems and to study the underlying
reasons for medical cost increases experienced in the
program. Following this, the taskforce was to develop
recommendations to moderate program increases in the
future. As part of the conditions of the medical rate
freeze, the Taskforce was to have completed their
review by February of 2006 and the rate freeze would
sunset in August of 2007 (to be replaced by a new fee
schedule).
The Taskforce did not complete its report by February
of last year and we are facing the sunset of the
medical rate freeze in August of this year. There is
not yet a plan for the post rate freeze sunset period
and that is why this legislation was introduced.
Under HB 228, the medical rate freeze would be
extended two years to allow time for recommendations
to be developed. It implements an annual rate increase
based on the CPI [Consumer Price Index] index. This
extension of the freeze should allow time for the
insurance companies to compile and submit their
analysis and recommendations after reviewing care
costs for injured workers so that the Legislature can
address the underlying reasons for premium increases.
MR. MILLER directed attention to the sectional analysis for HB
228, which read as follows [original punctuation provided]:
Section 1. Specifies that fees and other charges for
medical treatment or service provided before August 1,
2007 do not exceed the fees in the fee schedule
specified by the Workers' Compensation Board in its
published bulletin dated December 1, 2004. Specifies
that fees and other charges for medical treatment or
service provided after August 1, 2007, but before
March 31, 2009 is the percentage change between 2004
and 2006 in the medical care component of the Consumer
Price Index for the Anchorage metropolitan area.
Section 2. Repeals AS 23.30.097(a)(1), specifying fees
and other charges for medical treatment or service may
not exceed the fees in the fee schedule specified by
the Workers' Compensation Board in its published
bulletin dated December 1, 2004.
Section 3. Allows the Department of Labor & Workforce
Development and Workforce Development to adopt
regulations necessary to implement this act.
Section 4. Section 3 of this act takes effect
immediately.
Section 5. Section 1 and 2 of this act take effect
July 31, 2007.
MR. MILLER described HB 228 as "a short-term solution to a long-
term fix that we hope will ... come to fruition in the coming
years."
10:10:18 AM
REPRESENTATIVE GARDNER inquired as to whether information is
available to injured workers seeking medical care to direct them
to physicians who will treat them at the current rate.
MR. MILLER said he does not know, but he suggested that an
upcoming testifier may be able to provide and answer.
10:10:47 AM
REPRESENTATIVE RAMRAS stated that although ongoing care is a
different issue, immediate care often means emergency room care.
10:11:38 AM
REPRESENTATIVE LeDOUX expressed concern regarding whether the
issues currently affecting those under Medicare are happening to
those covered by workers' compensation.
MR. MILLER replied that the sponsor's intention is to streamline
HB 228 to address the medical component of workers' compensation
rates, with the hope that larger issues will be addressed in the
future.
REPRESENTATIVE LeDOUX clarified that she is not trying to fix
the national health care problems in one bill, but rather wants
to ensure that HB 228 "or the previous bill" didn't cause the
same problems for workers as has happened for those under
Medicare.
10:12:58 AM
MR. MILLER, in response to a question from Representative Gatto,
confirmed that medical fees currently charged by medical doctors
are capped at the 2004 medical rate fees, and HB 288 proposes to
adjust that cap according to the rising cost of providing those
services.
REPRESENTATIVE GATTO asked if the hospital fees, outside of the
physicians' fees, would also be adjusted.
MR. MILLER said he does not know, but can find out.
10:14:32 AM
SALLIE STUVEK, Director, Human Resources, Fairbanks Northstar
Borough, said she oversees the workers' compensation programs
for both the Fairbanks North Star Borough and the Fairbanks
North Star Borough School District. She stated that the
Fairbanks North Star Borough supports HB 228. She relayed that
the borough was concerned about the sunset provisions and is
pleased that legislation has been introduced to address that
issue. She continued:
The worst-case scenario for us would be to allow the
fee schedule to lapse without any consideration of its
impact. We need stability in establishing costs for
provider services, and an extension of the fee
schedule allows for that stability.
The adjustment to the schedule also seems reasonable,
as it has been frozen at 2004 rates. An inflation
factor is appropriate, as costs have not remained
stagnant for medical services during that period.
However, the mechanism chosen in the language may not
be available; I'm not sure that ... the Department of
Labor & Workforce Development has actually calculated
the medical CPI for Anchorage, so you may want to take
a look at that.
The only part of the bill ... that we have
reservations about is the March, 2009, sunset
language. The extension basically puts us back in the
same scenario that we're currently in; it just extends
it. And so, we would propose that consideration of a
long-term solution be found so that we don't have to
continue to address this issue in the future.
Having said that, we are ... supportive of the bill,
as is, because it does put us in a much better
position in the interim than just having the fee
schedule lapse in August.
The committee took a brief at-ease from 10:17:17 AM to 10:17:39
AM.
10:17:45 AM
MICHAEL HAUGEN, Executive Director, Alaska Physicians &
Surgeons, Inc., testified in support of the bill as "another
stop-gap measure" to use in figuring out what is driving the
cost increases in the workers' compensation system. He urged
the committee to put pressure on the insurance industry to
produce data to figure out "where these costs are coming from."
He said the request for that data originated back in October
2004, and it has still not been produced.
10:18:41 AM
LINDA HALL, Director, Division of Insurance, Department of
Commerce, Community, & Economic Development (DCCED), testified
on behalf of the division in support of HB 228. She said the
bill obviously affects language in the Department of Labor &
Workforce Development, but the actual outcome of the cost of the
workers' compensation system is what drives workers'
compensation premiums. She agreed that some type of cap on
medical fees will be necessary once the current freeze ends, and
she said she thinks HB 288 seems reasonable in its use of a CPI
adjustment.
MS. HALL said some of the information she would present is
available in the committee packet. She noted that in Alaska,
[medical] fees have increased from 41 percent of the cost of the
system in 1985 to its current amount of 69 percent. She
predicted that without some type of parameter on how much can be
charged for medical fees, there is likely to be a dramatic
increase in the cost of the system. She said that system cost
drives premium costs. She said one type of premium cost is
called, "lost cost," which is the physical dollars paid out.
Ms. Hall explained that the when the division does a premium
rate-making analysis, it looks at historical system cost, using
three years of system cost data, and then it does what is
called, "trending," which projects future costs. After that,
the division adds a carrier component related to expenses. She
added, "So, what we're talking about today is just the actual
lost cost piece of a rate making."
MS. HALL mentioned a couple of premium rate rankings from
Oregon. She related that in 2004, Alaska had the second highest
rates in workers' compensation in the country, with its average
being $4.39, while California's average was $6.08. As of 2006,
Alaska ranked number one, with approximately a $5.00 average
rate index, exceeding California's rate by nearly 80 cents. She
stated, "I don't think this is a number one we ever hoped to
reach."
MS. HALL mentioned a rate history going back to 1959. She said
there was a 10.2 percent rate increase in 2002. The largest
rate increase, at 21.4 percent, was in 2004. She noted that
that rate increase has slowed and, as of 2007, there has been a
rate decrease. She stated, "I would not presume to say that ...
that decrease will continue; I could almost guarantee that it
won't if we don't do something about medical fees."
MS. HALL directed attention to a handout in the committee packet
compiled by the National Council on Compensation Insurance,
Inc., which suggests that if no action is taken, the system cost
will increase between 4.5-5.8 percent. She said that does not
include compensation premiums; it reflects only the system cost.
If HB 228 is passed, the impact on the system will be reduced to
between .8-1.2 percent. Ms. Hall said any kind of impact works
its way through the workers' compensation rates for a period of
years. She said the division has seen those rate increases and
urges the legislature to pass HB 228.
MS. HALL mentioned another handout showing "medical severity,"
which she said includes factors of price and utilization, and
which shows the increase in medical costs over the CPI and how
complex the issue actually is when comparing varying treatments
and their related cost. She noted that there is a 25-page study
that she would make available to any interested committee
members.
10:24:59 AM
REPRESENTATIVE LeDOUX said the purpose of changing the workers'
compensation law in 2005 was to allow a task force to create
ideas that would be implemented to solve the problem. She said
that does not seem to have happened, thus, the legislature is
"back here again with this kind of band aid approach." She said
she is not comfortable with that.
MS. HALL replied that she does not disagree with Representative
LeDoux and would like to see some long-term solutions; however,
it does not appear that those solutions are forthcoming. In
regard to medical data, she noted that there has been a half-
year debate over "who requested what from whom, and when." She
stated that she did not receive a request for information until
one and a half years ago. Claims data, she relayed, is
sensitive; it is personal information. She said the insurance
companies are willing to provide information to one of two
sources: herself, as the director of the Division of Insurance;
or the National Council on Compensation Insurance, the
statistical agent. She continued:
In December of last year there was a meeting where
there was finally a data set described of what kind of
information was being requested; what would satisfy
the medical community, in terms of medical
information. Also, to put together a body of data
that would give us some idea of where we have, as a
state, areas that may be out of line or are growing
faster than other areas. That data took almost a year
to actually get at what is it you really want.
At that time, the National Council on Compensation has
done - for lack of better term - ... what's called a
"data call." They go out to the insurance companies
[and] they ask for the information. The insurance
companies have agreed to provide it. It is a manual
task. They did not keep this level of detail in the
data they collect. It's a ... gruesome, almost manual
task, going back to bill providers, bill reviewers,
and actually putting together manually the kind of
information we're asking for them to provide.
So, I would suggest to you that I'm anticipating, at
some point, still this year - I'm not going to say
when - we will have the medical data that has been
asked for.
Meanwhile, there is a national study - I've given you
two pages of it - that shows the same kind of data on
a national basis. So, I think we will have a good
body of information analyzing the cost of various
types of claims by various types of providers.
10:29:07 AM
MS. HALL, in response to a request from Representative Neuman,
explained that without HB 228, there would be no cap on "the
provider fees that are charged to treat Worker's Compensation."
She continued:
Up until August 1, of 2007, there has been a medical
fee schedule promulgated by the Division of Workers'
Compensation - the Workers' Compensation Board. That
fee schedule still dates to December of 2004, so that
the fees have been frozen since that date. There
would be a normal increase, say, in 2006 and 2007,
because that fee schedule would have applied to 2005.
Even ... if we had continued the cap, there would be
logical increase as the medical fees go up. So, this
is saying [that] without any cap, they will go up
reasonably to 5.8 percent [maximum], I believe. Even
with this cap, it's ... moving the cap forward. I
don't think anybody thought that it was fair to keep
that freeze going on at that level into perpetuity.
So, there would still be ... an increase, although
much smaller.
REPRESENTATIVE NEUMAN asked Ms. Hall how an increase of 4.5 to
5.8 percent in workers' compensation rates would affect small
business owners.
MS. HALL emphasized that "this isn't premium rates," but rather
is "a component." She continued:
I think that without this bill, or something of this
nature, we will likely see an increase immediately,
because ... from the analysis NCCI [National Council
on Compensation Insurance, Inc.] does - and they do
the rate filings for Alaska; they are the statistical
agent ... - I think we can anticipate seeing an
increase immediately. We will also see an increase in
workers' compensation medical care that will carry
forward for a number of years.
10:32:38 AM
MS. HALL, in response to Representative Gatto, confirmed that
the bill adjusts the CPI.
REPRESENTATIVE GATTO asked if emergency room and post-care fees
are also capped.
MS. HALL replied that that is her understanding.
REPRESENTATIVE GATTO asked, "If ... a physician or a person
involved in long-term care simply said, 'At that rate, I'm not
interested,' would we be forced to pay the higher rate if no
service was available, or would we send a patient outside, or
have we not reached that situation where we simply had a refusal
for care?"
MS. HALL offered her understanding that there have been no
complaints regarding the availability of medical care to date,
although she indicated that that could happen. She said, "The
complaints we receive from injured workers are not about the
access to medical care, but rather the way in which their claim
has been handled."
REPRESENTATIVE LeDOUX recalled that during her first session as
a legislator, the legislature changed the medical tort system,
capping punitive damages. The reason, she reviewed, was to make
Alaska more "doctor friendly," in order to solve a shortage of
doctors. This year, she noted, the House has voted to increase
the number of WAMI scholarships. She questioned how a bill
designed to put a cap on medical fees will fit into the
philosophy of making Alaska more desirable for doctors to come
live and practice.
MS. HALL responded that that is not her area of expertise. She
offered her understanding that Mr. Jordan had indicated that
doctors do support [HB 228].
10:35:50 AM
CHAIR OLSON said he has spoken with many members of the
aforementioned task force. He said he thinks part of the
problem is that Senators Seekins and Guess were no longer on the
task force as of last November. He offered his understanding
that "the framework for the task force" still exist, but simply
has not been funded.
MS. HALL said that's her understanding.
10:36:26 AM
JAMES J. JORDAN, Executive Director, Alaska State Medical
Association (ASMA), in response to Representative LeDoux's
previously stated question, said the Alaska State Medical
Association represents physicians across the state. He said
there are many members who are employers "no different than any
other small employer," and there are members for whom a large
portion of their practice involves dealing with injured workers.
He stated that the Alaska State Medical Association's interest
in HB 228 and in dealing with "any appropriate and timely
change" is "a balancing act." He posited that the association
is interested in a balanced approach - having a fair system that
will help meet physician recruiting goals.
REPRESENTATIVE LeDOUX referred to a letter [included in the
committee packet] from Roland Gower, M.D., [President of ASMA],
dated April 13, 2007, which she said does not seem to be a
"ringing endorsement" of the bill. She asked Mr. Jordan to
respond.
MR. JORDAN agreed that the letter is not a ringing endorsement;
however, he indicated that it includes a recommendation that
[the bill] be amended to "tie in some regular provision of such
data" to be reviewed by the Medical Services Review Committee
(MSRC). He said that frankly, ASMA is guessing at what its
members' reactions will be to HB 228. He stated that the reform
enacted in 2005 was supported by the medical association on the
basis that there would be an objective review of data regarding
what is driving medical costs, in order to determine "which
areas and which surgery" are needed, as well as to ensure
doctors can [perform procedures] "with the scalpel and not the
machete."
REPRESENTATIVE LeDOUX shared her understanding that the ASMA
does not support HB 228 in its present form, but supports the
bill if amended.
MR. JORDON confirmed that's correct. He said the association
would like to see a tie-in to the production of data, not only
related to the present, but also into the future.
10:41:51 AM
CHAIR OLSON noted that Mr. Jordan served as the Deputy Director
of the Division of Insurance prior to his moving to ASMA. He
stated that he has found Mr. Jordan to be extremely
knowledgeable regarding workers' compensation issues over the
years, among other insurance issues.
REPRESENTATIVE GARDNER referred to the aforementioned letter
from Dr. Gower, and drew attention to the last sentence, which
read as follows:
ASMA urges you to not take action that will adversely
impact an injured worker's access to care.
REPRESENTATIVE GARDNER pointed out that the letter does not
specify whether, in the opinion of ASMA, HB 228 would adversely
impact that access. She said it is unclear whether or not ASMA
supports or opposes the bill.
[Due to technical difficulties, there is no sound recording from
10:43:00 to 10:54:25; that segment was reconstructed from Gavel
to Gavel's recording.]
REPRESENTATIVE GARDNER referenced the last paragraph on the
first page of the letter from Mr. Gower, which read as follows:
It must be pointed out that it is ASMA's understanding
that physicians do not have a different fee schedule
for injured workers than for other patients.
REPRESENTATIVE GARDNER said she would like the record to reflect
whether or not that is a fact, rather than just a general
understanding.
MR. JORDAN replied that he does not know the answer. He
explained that fee data is not collected by the association.
Furthermore, he said that the association has not heard,
anecdotally, of physicians charging different rates to attend to
an injury resulting in an accident at work versus an accident on
the ski slopes.
REPRESENTATIVE LeDOUX questioned the need for the freeze if
physicians are not charging differently for work versus non-work
injuries.
10:44:50 AM
MS. HALL explained that the Department of Labor & Workforce
Development has always had caps on provider fees and fee
schedules. She said "we" have the ability to negotiate between
payors and providers related to medical fees. She mentioned
preferred provider organizations (PPOs) and various discounted
plans. She stated, "None of that is a tool that is available to
the payers of workers' compensation claims, whether they be
insurance companies or self insured; that is prohibited under
statute today."
REPRESENTATIVE LeDOUX asked, "Why don't we simply cap the fees
that the workers' compensation carriers can charge, or lower
those fees?"
MS. HALL replied that if the fees that insurance companies can
charge are capped below their actual costs, the carriers are
going to be less willing to write fees in Alaska.
REPRESENTATIVE LeDOUX questioned why the same logic would not
apply to workers' compensation carriers and physicians.
MS. HALL replied that it is her responsibility to look at claims
costs and adjust accordingly, and she said she does not know
that anybody has that kind of oversight of the charges and the
actual costs of medical providers.
10:48:01 AM
REPRESENTATIVE GARDNER asked for clarification regarding the
task force. She said if the task force has not been effective
in the past, perhaps there is different approach that should be
taken.
MS. HALL responded that she thinks the data and the task force
are two different things. The task force met and came up with a
report. She continued:
The Medical Services Review Committee was supposed to
bring back recommendations to that group regarding
what they felt might be solutions to the problems that
we're encountering with the medical costs. That group
was looking for data. They have come to me for that
data at this point, but not two and a half years ago.
So, I think the task force did perform the functions
as they were set out, and I can't tell you that it
would or wouldn't be a good idea to continued that. I
think that was a legislative call on legislative
members, as well as various stakeholders. I mean, I
think it was an excellent exchange of ideas and an
attempt to get buy-in.
MS. HALL, in response to a question from Representative Gardner,
explained that "severity" relates to cost of claims, not injury.
REPRESENTATIVE NEUMAN asked Ms. Hall to give her opinion as to
why the task force is taking longer to complete its job.
MS. HALL stated that the task force is having a difficult time
completing its job for the same reason the legislature has had a
difficult time wresting with issues: there are so many diverse
stakeholders with varying opinions regarding what needs to
change and what does not. She said she thinks there is an
overall thought that anything done to help one stakeholder
automatically penalizes another stakeholder. She said she does
not think there was adequate time and discussion to arrive at a
solution acceptable to all the stakeholders.
CHAIR OLSON asked if stakeholders are being treated as sacred
cows.
MS. HALL said she cannot answer that question.
10:52:50 AM
ROD BETIT, President, Alaska State Hospital and Nursing Home
Association (ASHNHA), testified in support of HB 228. He noted
that there is a statement from the ASHNHA membership in the
committee packet. He said ASHNHA began the process some time
ago of trying to head off what it sees as a serious problem for
small and medium employers should HB 288 not be passed, which is
that there is no administrative method in place to take the
place of the cap when it is repealed. Without the cap, he
related, insurers would be forced to pay charges for physicians
in the hospitals, which would result in 25-30 percent higher
payments for services rendered. He explained, "We give big
discounts currently under this program."
MR. BETIT reminded the committee that he is talking only about
medical claims related to injured workers' treatments for
injuries. He said, "There's a cap that's being extended and
then increased by the CPI. It's only a cap in those injuries
themselves. It isn't a cap on everything that physicians in
hospitals do; it's specific to that population of patients and
their specific injury."
MR. BETIT said ASHNHA approached the bill sponsor to warn that
without timely legislation, the cap would be repealed in August
[2007], "the charges are then what they pay ... by," and "the
reserves that insurers have been collecting through premiums to
pay for that medical care won't be enough to cover it." He said
there will be future adjustments and premiums, and principally
the small employers or medium employers - because a lot of
larger employers self-insure - will see some very significant
changes to their premium structure. He said he doesn't think
anyone wants that to happen.
MR. BETIT stated, "The thing that has been holding up a
solution, in my view, is the medical cost analysis." He said he
served on the task force where no one wanted to "drill down into
making finite recommendations for permanent solutions 'til they
understood what the medical cost increases were attributed to."
He said, "We have some suspicions, but nobody had any hard data
to be able to decide what to do ...." Mr. Betit said a general
rate adjustment across the entire community was not appropriate,
because there were "specific areas we thought were going up
faster than others." The data that would help decide what
action is needed, originally due by summer [2007], is now
expected to be available at a later date. He stated his
understanding that the task force is "sunsetted" - the original
extension period having expired already. Mr. Betit recommended
that the Medical Services Review Committee, within the
Department of Labor & Workforce Development, be given the task
of coming up with recommendations, hopefully by the next
legislative session, at which point there could be a meaningful
discussion regarding the present and future of the workers'
compensation program in Alaska.
MR. BETIT said it is both his and his membership's perspective
that HB 228 is "critical to head off a particular problem." He
stated that ASHNHA does not like extending the cap, because it
does not think that is the best way to do business; however, he
said he thinks there could be some serious repercussions in the
future if there's nothing to take the place of the cap that is
being repealed.
10:56:57 AM
REPRESENTATIVE BUCH requested clarification regarding workers'
compensation care costs.
MR. BETIT replied that there are multiple reimbursement
arrangements agreed to by hospitals. He said there was a
reimbursement methodology used by the Department of Labor &
Workforce Development in workers' compensation up until 2004,
whereby it would take charges from all the hospitals and arrive
at a per day rate for any worker-related care provided by
hospitals. Senate Bill 130 extended that plan for two years in
order to allow more time to come up with a better system. The
proposed legislation would once again extend that plan, while
also giving "a CPI adjustment" for two years, which would be a
slight improvement over using the rates from 2004.
REPRESENTATIVE BUCH stated his concern that the level of care
"is the same for that particular type of injury and that type of
payment as it is for any other type of injury."
MR. BETIT confirmed that the care remains the same; there is no
difference in care provided based on the agreed upon
reimbursement arrangements.
10:59:00 AM
REPRESENTATIVE NEUMAN asked Mr. Betit to share with the
committee the problems he has addressed, what solutions were
found, and why he feels more time is needed.
MR. BETIT responded that two groups were working on the issue
simultaneously: the Medical [Services] Review Committee, in the
Department of Labor & Workforce Development, and the task force
created by the legislature. He indicated that the focus [of the
legislative task force] was on the underlying cause of the
health care costs and possible solutions. He said there were
small steps taken initially, but until the cost data was
available, no one felt comfortable moving forward with permanent
recommendations. He said he personally has never seen specific
recommendations come out of any of the legislative leadership of
that task force. In response to a follow-up question from
Representative Neuman, offered his understanding that the
primary reason for the extension was that Senator Seekins,
chairing the task force, had noted at its last meeting that the
earliest [the data] would be available would be in July 2007.
He said he heard that through third-party means, and he
understands that there may be additional complications to delay
the data.
REPRESENTATIVE GARDNER offered her understanding that the
hospital association is not subject to the rate freeze, but
rather, it has a rate negotiated with the state.
MR. BETIT replied as follows:
We would be subject to this bill. What I was
referring to is that ... the reimbursement arrangement
between the workers' compensation program and each of
our hospitals ... wasn't so much negotiated, but it
was arrived at by the board and [its] process of
setting those rates over the years. And it's a per-
day rate, and it's different for each hospital. We do
negotiate lots of rates, obviously, with other
entities, like employers; but we don't have as much
individual negotiation authority when we're working
with the state on [its] programs [as] we do with other
entities.
11:01:49 AM
REPRESENTATIVE GARDNER asked, "If you operate under a negotiated
rate with ... other organizations, ... and you're subject to
this 2004 rate freeze, what ... was the rate used for your
base?"
MR. BETIT answered that the Department of Labor & Workforce
Development compiled a history of the claims submitted for
injured workers and what the charges for those claims were, from
which the board and the department produced a daily rate. He
said [ASHNHA] accepts that rate as payment in full for services.
That is the rate that was in place in 2004 and has continued
under the freeze for the last two years.
REPRESENTATIVE GARDNER suggested that since ASHNHA is accustomed
to negotiating rates, if HB 228 did not pass, it could simply
negotiate a rate that would not greatly increase the state's
cost.
MR. BETIT said he cannot speak for ASHNHA's 37 members.
Notwithstanding that, he surmised that "whatever they come up
[with] would not be consistent throughout the system."
Furthermore, he said he does not know what the instructions from
the Department of Labor & Workforce Development would be to the
insurers, in terms of what they should pay toward claims of
injured workers.
REPRESENTATIVE GARDNER posited that if the association supports
HB 228, but the bill does not pass, then the association could
still choose to "implement it in terms of [its] own coding for
Workers' [Compensation]."
MR. BETIT reiterated that the association does not make that
decision - its individual members do, and he said he does not
know how those members would handle that situation. In response
to a follow-up question from Representative Gardner, he
confirmed that those individuals have made the decision to
support the bill, because they believe it is the best solution
"to get the time needed to make some permanent change to the
program, without creating a financial crisis for anyone."
REPRESENTATIVE LeDOUX questioned why the workers' compensation
carriers don't negotiate rates with physicians and hospitals as
healthcare insurers do.
MR. BETIT suggested that the Department of Labor & Workforce
Development would be better equipped to answer that question.
11:05:22 AM
MS. HALL stated that one of the reasons it does not work to have
negotiated rates for workers' compensation is that "you can't
direct care." She continued:
We don't regulate their fee arrangements with any
provider; that's something the insurance company is
able to do with the provider. You then, in health
insurance, have in-network providers and out-of-
network providers, for which the health insurance
carriers pay different amounts. But ... that is a
choice that you can go to an in-network or not, and
there may be a difference in cost.
REPRESENTATIVE LeDOUX, regarding the state health care system,
offered her understanding that there are no places where people
are directed to go, but she said she knows the rate is lower for
those with health care insurance than for those without it.
MS. HALL said even with state insurance, there are both in-
network and out-of-network providers. Those providers are
reimbursed, and the insured may be subject to a different level
of co-payment. She reminded the committee that [the division]
doesn't regulate the state's health insurance program, nor does
it regulate any self-insured program, "so there may be some
differences in that also."
11:07:46 AM
PAUL F. LISANKIE, Director, Division of Workers' Compensation,
Department of Labor & Workforce Development, stated that under
current law, it is illegal to interfere with the selection of a
health care provider; the injured worker has control over the
selection. He concurred with Ms. Hall that typically, when
there is some negotiation, the quid pro quo is: "If you give us
a lower volume rate, we can guarantee you that you'll get the
volume of people seeking your services, and ... a workers'
compensation insurer doesn't have any control over that process,
other than the pay up to the required amount."
11:08:38 AM
MR. BETIT, in response to Representative Buch, confirmed his
understanding is that the aforementioned task force has been
discontinued, as it has not met since September [2006], and
there is no money appropriated for its continuance. In response
to a follow-up question from Representative Buch, he reiterated
that July 2007 was the estimated date provided at Senator
Seekins' last task force meeting on which the anticipated data
would be made available; however, since then that date has been
postponed, possibly by four to five months. He recommended that
the Medical Services Review Committee in the Department of Labor
& Workforce Development be the entity to finish the work of the
task force regarding the presentation of the data.
11:10:15 AM
MR. BETIT, in response to Representative Gatto, confirmed that
medical charges are specific to each hospital, thus there could
be ten different charges for the same treatment code depending
on which hospital provides the treatment. He explained that the
discount percentage he had used during his previous testimony
was a best estimate based upon the daily rate set by the
Department of Labor & Workforce Development for that facility,
versus the charges at the time. He continued:
... It isn't really just a flat 25 percent; it's an
estimate on my part, and it varies by facility - it
could be a little less, it could be a little more.
But, no, they couldn't raise their rates and see any
improvement in what they're getting paid for the
services that they're providing, because that's set by
the Department of Labor & Workforce Development.
... What [the] Department of Labor & Workforce
Development sets is a daily rate, per facility, for
each day of care that they provide to that injured
worker.
11:12:03 AM
WAYNE STEVENS, President/CEO, Alaska State Chamber of Commerce
("the chamber"), testified that the chamber has long advocated
to lower the high cost associated with workers' compensation
insurance. He reviewed the history of the medical rates and the
freeze. He stated that substantive reforms are needed to
address the quality of medical utilization, as well as other
factors, such as frequency and [severity] of costs. Mr. Stevens
reviewed that the task force work was supposed to result in
recommendations to ease rate increases going forward, and that
work was to result in a newly recommended rate fee by the time
the medical rate freeze sunsets in August 2007. That work has
not been completed and the report has not been submitted. He
said the extension of the medical rate freeze to March 2008,
proposed by HB 228, will allow time for "the committee to
complete its data gathering and analysis and develop its
recommendations," and will allow sufficient time for the
legislature to address the underlying reasons for premium
increases. He stated that the chamber encourages the work of
the committee in moving HB 228 through the legislative process.
REPRESENTATIVE GARDNER, referring to the statistics previously
stated by Representative Neuman regarding Alaska's poor standing
among other states when comparing Worker's Compensation rates,
asked Mr. Stevens if his membership believes it is medical costs
that are to blame for the state's continued decline - even in
the face of a rate freeze - and whether another rate freeze will
remedy the situation.
Mr. Stevens replied, "It's our belief that ... absent a rate
freeze, the rates will escalate, presumably to make up for
whatever perceived difference would have occurred in that
ensuing two-year period and whatever CPI adjustments may very
well be made." He said there are a number of costs; however, he
stated that it is the understanding of [the Alaska Chamber of
Commerce] that medical costs are singularly the largest driver
of Worker's Compensation.
CHAIR OLSON noted that the workers' compensation rates dropped
approximately 11 percent in [2007] - the first time in seven
years there has been a reduction. He indicated that [the
freeze] may have had an impact.
11:15:52 AM
REPRESENTATIVE NEUMAN said he interprets one of Mr. Stevens'
prior remarks to mean that although there is a rate freeze, it
allows for CPI increases; therefore, "it's not like a doctor or
anybody in the medical field is going to be going into the
negative on this."
MR. STEVENS responded, "That's not my understanding. Consumer
Price Index is calculated by the Department of Labor & Workforce
Development at the national level on a number of factors ... to
rate the level of inflation annually, and that would - as it
[is] captured in this bill - ... allow the rates to increase,
based on that index."
11:17:08 AM
REPRESENTATIVE BUCH shared his understanding that a major
component has been lost with the [discontinuation of] the task
force. He questioned whether there is a way to reinstate the
task force and reliably complete the job that was started.
MR. LISANKIE replied that he agrees with the previous testimony
of Mr. Betit that the Medical Services Review Committee was
established as an ongoing entity. He posited that that
committee has struck a good balance between health care
providers and other stakeholders in the workers' compensation
system; therefore, when the data becomes available, that
committee would certainly be willing to pick the issues up once
more. He stated:
If it was a decision of the body that there should be
a new workers' compensation task force, you would have
time to institute one to receive the recommendations
from the Medical Services Review Committee, or, in the
absence of such a task force, my advice for the review
committee would be to submit it to the entire
legislature or, you know, through that methodology.
11:19:06 AM
REPRESENTATIVE BUCH expressed concern that the information be
received.
MR. LISANKIE offered his understanding that the on-going efforts
to get that data into the system are being made independently of
the existence of the task force. He stated that he understands
Representative Buch's concern.
MR. LISANKIE, in response to a question from Representative
LeDoux, said the price of prescription drugs is not capped. In
response to a follow-up question, he said the price of those
drugs has a significant impact to medical costs. He said he has
no personal opinion regarding whether the price of prescription
drugs should be regulated, other than to say he thinks that is
an issue that the MSRC is free to take up. He concluded, "If I
continue to have input on that committee, I certainly think it
would be of interest."
REPRESENTATIVE NEUMAN observed that the testimony of those who
support the bill seems to show that they want the extended
freeze in order to have time for a solution to be found. He
inquired as to how that solution would affect workers'
compensation in the future, particularly as it relates to
competition in the market place. He said he thinks one of the
major reasons for the large increase in medical costs for
workers' compensation is due to the lack of competition in
Alaska, which he said is a result of the state's high incident
rate, low population, and expansive state.
MR. LISANKIE responded as follows:
I think that's actually what's driving the various
concerns of the various stakeholders, that we not do
something that appears logical on its face, based on
some experience in, say, a more urbanized setting, and
then end up inflicting something on the less urbanized
state of Alaska, which wouldn't work. And I'd say
that the challenge that's before the Medical Services
Review Committee or a task force or you, as individual
members of the legislature, is that in many instances,
one person's unacceptable cost is somebody else's
revenue stream or their benefit.
We're talking about medical costs as ... more than 50
percent of workers' compensation benefits, but that
certainly is going to affect the next time the cash
benefits are increased. People are going to weigh the
overall impact on the system. So, that is a bit of
[a] conundrum; it is difficult for us to do things in
a setting where we have a huge geographical area and a
total population that's the size of ... a medium-size
city. And I know that Director Hall is doing
everything she can to try and have more insurance
companies compete for the business, but certainly
everybody else that's a stakeholder in a process,
whether they're a health care provider or a provider
of prescription drugs or durable medical equipment -
all these things go into this very complicated
question that you're asked to address.
11:24:37 AM
REPRESENTATIVE RAMRAS asked whether there are plans to work with
the attorney general (AG) to do a significant overhaul of the
Worker's Compensation system, because he said the attorney
general has the expertise to offer help.
MR. LISANKIE replied that he has worked with the AG previously
in various capacities and would be happy to work with him.
REPRESENTATIVE RAMRAS suggested that the overhaul of the
workers' compensation system might be considered in January
2008.
REPRESENTATIVE BUCH expressed appreciation for the work done by
Mr. Lisankie and Ms. Hall. He stated, "The one good thing we do
have is ... a carrier now that is in the black for the first
time in a long time, and ... if, by increments, we can make some
positive changes, I think that we're perhaps on the right track
here."
11:28:46 AM
BARBARA HUFF TUCKNESS, Director, Governmental and Legislative
Affairs, Teamsters Local 959, testified in support of HB 228.
She confirmed that she was a member of the labor management
workers' compensation coalition groups that worked for about one
and a half years and presented recommended changes regarding
workers' compensation. Regarding the medical component, she
said injuries relate to medical costs. The coalition task force
was somewhat disappointed when recommendations that it gave
regarding workers' compensation changes were set aside in favor
of then Governor Frank Murkowski's own legislation. She said,
however, that some of the task force's recommendations were
incorporated into that legislation. She stated for the record
that the coalition did discuss medical costs, including
pharmaceutical costs. She stated that while it was not a big
change, the coalition did look at utilization of generic drugs.
She said she does not know any workers' compensation in
existence in which an injured worker has had trouble finding a
physician and appropriate treatment.
MS. HUFF TUCKNESS emphasized that one big issue is related to
the controversion with the insurance companies, which she said
is a distinctly different situation than that of the medical
costs.
MS. HUFF TUCKNESS stated that Teamsters Local 959 believes that
HB 228 is an important piece of legislation, and while members
of the Local 959 do not believe the proposed legislation will
fix the problem, it will hopefully give an opportunity "for some
folks to get back together again and to start looking at
hopefully making some changes out there that are ... beneficial
to the injured workers." Ms. Huff Tuckness said Alaska does not
have a system set up whereby an injured worker is "directed to
go to a physician," and she said the Local 959 believes that is
a good factor, not a bad one. Because of that scenario, she
explained, "you don't have PPOs out there in the workers'
compensation program."
11:32:27 AM
REPRESENTATIVE RAMRAS concurred that two key points are reducing
costs to employers, while providing the best benefits for
injured workers. He asked Ms. Huff Tuckness to speculate what
the situation would be like now if the task force
recommendations she spoke of had been adopted into the workers'
compensation legislation.
MS. HUFF TUCKNESS responded that those task force
recommendations were actually two-fold. She said the task force
had a bill that it would have liked to see introduced that would
have addressed some of the existing cost issues. Another piece
of legislation the following year would have addressed the
medical and more contentious issues that she said the task force
was not able to encompass. She said she thinks the
aforementioned Medical Services Review Committee is having a
similar problem in getting information. She said a medical cost
is the thread that runs through everything that the Local 959
deals with. For example, when negotiation labor agreements, the
issue is the medical costs and how they will be covered, through
wages or other areas in the contracts. She indicated the need
to find a fair and balanced perspective that recognizes the
point of physicians as well as workers.
CHAIR OLSON asked Ms. Huff Tuckness if she thinks MSRC would be
the vehicle to use to analyze the anticipated data once it
becomes available.
MS. HUFF TUCKNESS answered yes.
MS. HUFF TUCKNESS, in response to Representative Neuman,
clarified that she had not been a participant on the legislative
task force [during the hearing of Senate Bill 130]. She said
her involvement was with the Workers' Compensation Labor
Management Ad Hoc Committee, which she said ensured the
implementation of legislation enacted to change workers'
compensation. She reiterated that the Teamsters Local 959
supports HB 228 and hopes to comment on the data once it is made
available.
MS. HUFF TUCKNESS, in response to Representative Buch, offered
further clarification regarding her involvement in the ad hoc
committee. She mentioned a letter written in January by Vince
Beltrami, American Federation of Labor and Congress of
Industrial Organizations (AFL/CIO), to Dick Cattanach of the
Association of General Contractors of Alaska, suggesting the
reinstitution of the ad hoc committee. She offered her
understanding that there has been no response to the letter.
She concluded, "The task force is something that's been out of
our ... hands."
11:39:42 AM
CHAIR OLSON, after ascertaining that there was no one else to
testify, closed public testimony.
MR. MILLER drew attention to [Amendment 1] in the committee
packet, which he said would allow for the adjusted change to
match the national CPI.
11:40:59 AM
REPRESENTATIVE NEUMAN moved to adopt Amendment 1, which read as
follows [original punctuation provided]:
Page 2, line 3,
Delete: "for the Anchorage metropolitan area"
REPRESENTATIVE LeDOUX objected for discussion purposes. She
asked:
What would be the difference between all urban
consumers - a consumer price index - or if you did it
on a totally ... statewide basis, which would include
all consumers, whether they're in Anchorage,
Fairbanks, Juneau, or in the Bush?
MR. MILLER said he does not know.
11:43:04 AM
REPRESENTATIVE RAMRAS said he shares Representative LeDoux's
concern regarding the reflection of a different inflationary
schedule in the Bush; however, he said as it relates to
Amendment 1, there is not a great deal of difference between the
CPI for Anchorage and the national CPI.
REPRESENTATIVE NEUMAN said he thinks Amendment 1 addresses
Representative LeDoux's concern that there be a broader scope.
He said he sees Amendment 1 as encompassing the state as a
whole.
11:44:44 AM
REPRESENTATIVE LeDOUX questioned the choice of "doing this on
[an] increase in the consumer price index for everybody all
across the country," rather than using the CPI for the State of
Alaska.
MR. MILLER offered his understanding that other states use a
similar adjustment to their workers' compensation rates, thus he
thinks it is appropriate to use for the State of Alaska. In
response to Chair Olson, he confirmed that the conformity was
the intent of the bill drafter.
MR. MILLER, in response to Representative LeDoux, confirmed that
data regarding the medical care component is not available for
2003-2004, so for those years, the state is conforming to the
national CPI.
11:47:00 AM
MR. MILLER, in response to Representative Gatto, stated his
belief that Amendment 1 would benefit everyone. He said, "If
the committee chose not to adopt it, I'm not sure how the
Division of Insurance would be able to adjust the rates
accordingly."
REPRESENTATIVE LeDOUX removed her objection to Amendment 1.
There being no further objection, Amendment 1 was adopted.
11:47:54 AM
REPRESENTATIVE NEUMAN moved to report HB 288, as amended, out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSHB 228(L&C) was
reported from the House Labor and Commerce Standing Committee.
The committee took an at-ease from 11:48:31 to 11:56:12.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
11:56:53 AM.
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