Legislature(1999 - 2000)
02/21/2000 01:35 PM Senate HES
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* first hearing in first committee of referral
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+ teleconferenced
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SENATE HEALTH, EDUCATION AND SOCIAL SERVICES COMMITTEE February 21, 2000 1:35 p.m. MEMBERS PRESENT Senator Mike Miller, Chairman Senator Pete Kelly, Vice-Chairman Senator Gary Wilken Senator Drue Pearce Senator Kim Elton MEMBERS ABSENT None COMMITTEE CALENDAR SENATE CONCURRENT RESOLUTION NO. 15 Relating to Alcohol-Related Birth Defects Awareness Weeks. -MOVED SCR 15 OUT OF COMMITTEE SENATE BILL NO. 191 "An Act making appropriations for the operating and capital expenses of the state's integrated comprehensive mental health program; and providing for an effective date." -MOVED SB 191 OUT OF COMMITTEE SENATE BILL NO. 256 "An Act relating to regulation of managed health care and allowing physicians to collectively negotiate with a health care insurer that has substantial market power." -HEARD AND HELD PREVIOUS SENATE COMMITTEE ACTION SCR 15 - No previous Senate action. SB 191 - No previous Senate action. SB 256 - No previous Senate action. WITNESS REGISTER Ms. Holly Hemming Staff to Senator Lincoln Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Testified for the sponsor of SCR 15 Senator Georgianna Lincoln Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Sponsor of SCR 15 Mr. Jeff Jesse, Executive Director Alaska Mental Health Trust Authority 550 West 7th Ave., Suite 1820 Anchorage, AK 99501 POSITION STATEMENT: Supports SB 191 Ms. Janet Clarke, Director Division of Administrative Services Department of Health and Social Services PO Box 110650 Juneau, AK 99811-0650 POSITION STATEMENT: Discussed DHSS Mental Health Budget Items in SB 191 Ms. Alison Elgee, Deputy Commissioner Department of Administration PO Box 110200 Juneau, AK 99811-0200 POSITION STATEMENT: Discussed DOA Mental Health Budget Items in SB 191 Mr. Dwayne Peeples, Director Division of Administrative Services Department of Corrections PO Box 112000 Juneau, AK 99811-2000 POSITION STATEMENT: Discussed DOC Mental Health Budget Items in SB 191 Ms. Caren Robinson, Chair Alaska Mental Health Trust Authority 550 West 7th Ave., Suite 1820 Anchorage, AK 99501 POSITION STATEMENT: Answered questions about SB 191 Mr. Jim Jordan, Executive Director Alaska State Medical Association 4107 Laurel Street Anchorage, AK 99508 POSITION STATEMENT: Supports SB 191 Mr. Mike Haugen, Executive Director Alaska Physicians and Surgeons, Inc. 4120 Laurel Street, Suite 206 Anchorage, AK 99508 POSITION STATEMENT: Supports SB 191 Dr. George Rhyneer Alaska Heart Institute LLC 3340 Providence Dr. Anchorage, AK POSITION STATEMENT: Supports SB 191 Mr. Gordon Evans Health Insurance Association of America 211 4th Street, No. 305 Juneau, AK 99801 POSITION STATEMENT: Opposed to SB 256 Mr. Jerome Selby Providence Health Systems of Alaska PO Box 962 Kodiak, AK 99615 POSITION STATEMENT: Supports SB 256 with changes Mr. Gary Schwartz Independent Medical Providers PO Box 73178 Fairbanks, AK 99707 POSITION STATEMENT: Supports SB 256 ACTION NARRATIVE TAPE 00-6, SIDE A Number 001 CHAIRMAN MILLER called the Senate Health, Education and Social Services (HESS) Committee to order at 1:35 p.m. All members were present. SCR 15-ALCOHOL-RELATED BIRTH DEFECTS AWARENESS MS. HOLLY HEMMING, legislative intern for Senator Lincoln, made the following statement. SCR 15 proposes that Alaska establish two awareness weeks for fetal alcohol syndrome (FAS) - one during the week previous to Mother's Day and one previous to Father's Day. FAS is the number one cause of birth defects and mental retardation in America and in Alaska. It is the only birth defect that is completely preventable. The estimated lifetime cost to the State of each FAS child is between $1.4 and $2.0 million. Approximately 10 FAS children are born in Alaska every year, and an estimated 400 people with FAS live in Alaska right now, at a cost to the State of about $560 million a year. People with fetal alcohol effects (FAE) lack the physical appearance of FAS but they have the same damage to their brain and organs and FAE can be just as serious. The weeks of Father's Day and Mother's Day are appropriate dates to recognize the role and responsibility of parents in FAS. She pointed out that committee packets contain an article that discusses the in utero alcohol damage that can happen after one drink and other information on FAS and its effects. SENATOR LINCOLN added that FAS and FAE have been talked about as a children's syndrome to date, but she has met adults in Alaska with FAS and FAE - a sorry predicament because help is not available for those people. Unfortunately, Alaska does not have legislation that addresses ways to alleviate FAS and FAE. SCR 15 only makes the public throughout Alaska aware of this totally preventable syndrome. There being no further testimony or questions, SENATOR ELTON moved SCR 15 out of committee with individual recommendations. There being no objection, the motion carried. SB 191-APPROPRIATIONS: MENTAL HEALTH MR. JEFF JESSE, Executive Director of the AMHTA, spoke via teleconference from Anchorage and said he would review the proposed items in the Governor's budget that were not accepted at the level recommended by AMHTA. CHAIRMAN MILLER asked that state agency staff testify first. MS. JANET CLARKE, Director of Administrative Services at the Department of Health and Social Services (DHSS), gave the following overview of a packet of reports from OMB to explain some of the items that the Governor included in SB 191. The first page is a summary of the budget items included by the Governor in the integrated mental health program. Some items are included as increases because AMHTA and Senate Finance Committee members agreed that AMHTA would initially fund those items but eventually they would be funded with general funds. Two of those items in the DHSS budget are training for residential child care providers and institutional prevention for community developmental disabilities grants. The large increase in general fund items in the DHSS budget is an increase in the Medicaid program related to the API 2000 Community Implementation Plan. Services in Anchorage will be reconfigured to allow community hospitals to pick up some of the services currently provided by API. Another increase of $100,000 was included for training of foster parents who care for severely emotionally disturbed children. Another $100,000 increase is to reopen the Fahrenkamp Center as a residential facility. That facility was built over ten years ago and has been used by the community mental center as office space and for counseling. DHSS has a proposal in the capital budget to remodel the facility so that it can be used for residential treatment. The other major general fund item does not show up in SB 191 but it is related to mental health services. The Governor has proposed a general fund increment to reduce the infant learning wait list. Other increments relate to $3.4 million of AMHTA funds for different activities within DHSS. MS. CLARKE briefly highlighted some of the projects in the summary of the Governor's capital budget for DHSS. The total of DHSS's capital projects amount to $7.5 million. $495,000 was included to reopen the Fahrenkamp residential facility. Stop-gap repairs in the amount of $379,000 are required at API until the state can finalize an agreement to purchase Charter North Hospital. Even if that agreement is finalized today, API will be used for the next two years. Many of the other projects are grant programs that are competitively awarded to different agencies. Number 0896 ALISON ELGEE, Deputy Commissioner of the Department of Administration (DOA), discussed DOA's list of budget items for integrated mental health programs. The general funds in the amount of $126,000 for the Public Defender Agency (PDA) are new to the AMHTA bill but it is not new money for the PDA. This format recognizes that the work done by the PDA when representing indigent clients in danger of involuntary commitment is an expenditure related to services for the beneficiaries of the Mental Health Trust. The rural long term care development project and innovative respite project are continuing projects. DOA "backs out" those projects and then adds them back in each year as a result of AMHTA's funding decisions. DOA is looking for an opportunity to upgrade the ability of the Division of Senior Services to provide quality assurance. DOA has no comprehensive monitoring function for the variety of services it licenses and regulates. This money would allow DOA to put some tools in place so that it could ensure that the services delivered meet the standards to prevent a crisis. Day treatment for the Chronically Mentally Ill Elderly Program is also a continuation of DOA's outreach efforts for the elderly. DOA is building on that work to focus on outreach to elderly with substance abuse problems. The mini grants for beneficiaries with ADRD is a continuing project. The last two projects, funded by the AMHTA, are a project to develop a comprehensive assessment tool for long-term care facilities to reduce paperwork and to create training materials for a family and private guardian member training program. That increment is also reflected in the general funds column in the amount of $355,000 for the Office of Public Advocacy for public guardians. The caseload of Alaska's public guardians is running twice the recommended national average. Right now they are unable to perform the statutory requirement to work with private and family guardian members. The funds would help them reduce the caseload of public guardians and give them that capacity. DEPUTY COMMISSIONER ELGEE noted that two other general fund requests have been proposed: one expands DOA's care coordination function from four to six regions, the other is to implement ongoing training for caregivers in ADRD care techniques. DEPUTY COMMISSIONER ELGEE pointed out a high priority of AMHTA and DOA is to increase the general relief daily rate. That money is being carried in the fiscal note to SB 73. DOA has one capital project for a data integration project. By combining functions previously performed by other parts of state agencies, data bases that were developed for each function will be integrated by the Division of Senior Services to create a comprehensive tracking system. Number 1161 DWAYNE PEEPLES, Director of the Division of Administrative Services in the Department of Corrections (DOC), discussed DOC's requests. This year, DOC has three AMHTA operations in the operating budget. The first two represent third year transitions between AMHTA funds and general fund mental health funds. The first is an 18-bed psychiatric unit set up at the Highland Mountain institution, established in the fall of 1997. This is the final year of the transition and the total operating cost will be $600,000. The second item is again a transition from FY 98 from AMHTA to the general fund for a mental health planner. This position coordinates services for the AMHTA beneficiaries within DOC. The last item is a new proposal to establish a men's substance abuse residential treatment facility within one of DOC's correctional institutions. The $82.9 is a match for federal money in the amount of $236.0. The new facility will provide fairly intense treatment services for 40 to 50 men prior to the end of their incarceration. The only capital budget item being requested by DOC is for a collaborative project with DHSS to develop a telepsychiatry program between 10 rural correctional facilities and 10 mental health centers and psychiatric units in Anchorage. This program will decrease travel costs and increase services by allowing video teleconferencing for diagnosis and treatment with inmates. SENATOR WILKEN asked if the men's residential substance abuse treatment program is a new program. MR. PEEPLES replied it is a new initiative. SENATOR WILKEN asked that Mr. Peeples provide some detailed information for the Finance Committee regarding how the program will be structured and where and how the results will be measured. DEPUTY COMMISSIONER ELGEE mentioned that DOTPF houses a capital appropriation for a grant program for coordinated transportation and vehicles that benefits all four beneficiary groups. All four groups applied to DOTPF for the money provided through this capital project. Number 1353 MR. JESSE referred to a chart entitled "Alaska Mental Health Trust Authority FY01 Mental Health Trust Operating Budget Recommendations not accepted by the Governor." The first item on that chart is a match for the assisted living rate increase. Over $800,000 of AMHTA income has been committed as a match. The general fund portion was not placed in the Governor's budget because it is expected to be funded from the fiscal note to SB 73. Item 5 on the chart is the DOC Men's Sub-Acute Care Unit in the amount of $300,000. This program would build on to a successful inpatient treatment program for the most severely mentally ill inmates at the Cook Inlet facility. The intent of this increment was to provide a higher level of care for those men when they are housed with the general population of inmates. Another item, listed between items 6 and 7, for substance abuse treatment for rural women with children, contains $500,000 of AMHTA funds but does not include the $500,000 general fund match. Usually the trustees are concerned when their proposals to match efforts with the State are not accepted. The AMHTA match remains in SB 191 because of the critical nature of the services. MR. JESSE referred to a chart entitled "FY01 Mental Health Trust Capital Budget Recommendations not accepted by the Governor" and pointed out the Governor's capital budget did not include either the AMHTA $100,000 commitment or the $914,000 general fund commitment for the Adult Day Care Facility in Juneau. AMHTA will be approaching the DOA subcommittee to request that at least $100,000 AMHTA be placed in the budget to allow the planning process to begin. The Governor's Office is concerned that a false expectation of assured construction will be created if the planning money is forthcoming. The $30,000 in item number 3 on the chart is to make the physical modifications necessary to provide treatment programs discussed in the operating budget. Modifications include cell re-configurations and the addition of video equipment to monitor inmates with serious mental illnesses. Three other programs not accepted for the Governor's capital budget involve AHFC programs for mental health trust beneficiaries. He noted that without housing, many of AMHTA's beneficiaries continue to cycle through API, the court system, and other expensive treatment programs. Housing is an essential component when trying to divert people from the emergency service system. MR. JESSE commented on a few issues that are not addressed in SB 191 but are critical to a comprehensive mental health program. Foremost among those issues is the Medicaid budget. There is a significant increase in that formula program but several of the Medicaid options would not be funded - eyeglasses, dental care, hearing aids, and mental health rehabilitation. Those services are the backbone of Alaska's mental health system. The smaller hospital at API and the project to redesign the service system for people with mental health crises are very dependent on the Medicaid component of the budget. A large portion of the general funds for the Medicaid budget were originally from grant funds in the Community Mental Health grant area. AMHTA believes it would be a monumental disaster to lose those critical services. SENATOR ELTON asked whether AMHTA staff will be present during budget subcommittee hearings. MS. CAREN ROBINSON, Chair of AMHTA, said yes. SENATOR WILKEN moved SB 191 with its accompanying fiscal note out of committee with individual recommendations. There being no objection, the motion carried. SB 256-PHYSICIAN NEGOTIATIONS WITH HEALTH INSURE SENATOR PETE KELLY, sponsor of SB 256, explained that SB 256 addresses inequities that have grown out of the rapidly changing health care industry, specifically the merging of 18 leading health care insurance companies into 6 since 1994, which has given those companies a dramatic increase in their bargaining power with individual doctors. No corresponding increase in the ability of doctors to negotiate with these large companies has occurred. Doctors are restricted by the antitrust provisions placed on the states by Congress. The antitrust laws do make provision, however, for a state action doctrine, which would be created by SB 256. The doctrine allows doctors to negotiate with health insurance companies with state oversight. Number 2018 MR. JIM JORDAN, Executive Director of the Alaska State Medical Association (ASMA), made the following comments about SB 256. There has been an aggregation in the health insurance industry in the last several years. Alaska has never had a great number of health insurance companies competing in its marketplace. One merger under consideration by the FTC is Aetna US Healthcare and Prudential. If that merger takes place, the New York Times has reported that one in ten Americans will be covered by the new mega- corporation. Health insurance plans have increasingly incorporated practices and procedures to manage health care to keep costs down. Theoretically, the health insurer negotiates discounted fees for health care for a promise of a more guaranteed stream of patients. Large group medical practices, none of which exist in Alaska, and big hospitals have more equal bargaining power with the health insurers than the typical Alaska physician who is in a small group practice or works solo. A gross inequity in bargaining power exists. There is no conceivable way that any health insurance will bargain with each individual physician regarding each individual contract provision. Independent competing physicians are prevented from any collective action by the federal antitrust laws to which, ironically, the insurers are not subject. This fact, plus the market concentration of health insurers, causes the imbalance in bargaining power. With insurers having such a high degree of leverage, the balance of interests no longer exists in the market for health care delivery and finance. A mechanism is available, however, that permits independent competing physicians to collectively negotiate with health insurers in regard to the provisions of physicians' services. That mechanism requires an act by the legislature to create the state action doctrine exception. It was first set forth in a 1943 U.S. Supreme Court case, Parker v. Brown. In general, the state action doctrine states that antitrust actions do not apply to actions by a state operating in its sovereign capacity or to private conduct compelled or approved by the state. In other words, where the requirements of the state action doctrine are met, behavior that would otherwise violate the antitrust laws will be exempt from antitrust scrutiny. The test to qualify for exemptions varies depending on the identity of the party performing the action in question. If the party is a legislature or state court, no further inquiry is required. Where the party is a state agency or a local government official, further inquiries are required with respect to whether the action in question followed a clearly articulated and affirmatively expressed state policy. When the party is a private party, the test for qualifying is the strictest. In addition to having to comport with the clearly articulated and affirmatively expressed state policy, the action must be subject to active state supervision. Passive but theoretical power of a state to review a private action in question is insufficient to meet this standard. Physicians fall into the category of private parties, therefore collective actions taken by them would ordinarily be illegal under antitrust laws. In the instance of independent physicians engaging in collective negotiations with the health insurer, such actions would only be exempt from antitrust scrutiny if the requirements for a private party are met. SB 256 sets out the clearly articulated and affirmatively expressed policy in that joint negotiations can only take place when an insurer has sufficient and substantial market power. The joint negotiation must be performed for the physicians by an authorized third party. The process must be supervised by the Commissioner of the Department of Labor and the Attorney General and it does not allow for any joint action that would contribute to any form of boycott of services or a strike by the physicians who are negotiating. ASMA supports SB 256 with proposed amendments. DR. GEORGE RHYNEER, a practicing cardiologist from Anchorage, a member of ASMA, and President of the Alaska Physicians and Surgeons, stated support for SB 256. ASMA members have suffered considerably because of their inability to stand up to insurance companies who have a "take it or leave it" attitude toward contracts. Physicians want to be able to get together to talk about real issues such as what constitutes emergency care, what constitutes the need to be seen by a physician, and what constitutes good medical care. Right now, physicians are prohibited from doing so by the FTC. A proposed consent decree for the Fairbanks' physicians who have the Independent Practices Association, indicates that talking about such medical matters constitutes collusion and constitutes a change in the amount of money that will be spent in the community by the community or the health insurers. Members of the medical profession have traditionally enjoyed reasonable discussions, to the betterment of all patients. The APS feels the situation is out of hand and allows an insurance company, such as Blue Cross, to tie into the federal government health care plan, so that federal employees only get 50 percent reimbursement from non-Blue Cross providers while they get 100 percent reimbursement from Blue Cross providers. That policy acts as a bludgeon to force physicians to sign up with a regular program. There are a number of different issues of this sort and he is interested in resolving the problem. SENATOR WILKEN asked Dr. Rhyneer to give an example of this dilemma in layman's terms. TAPE 00-06, SIDE B DR. RHYNEER said Blue Cross recently provided exclusive contracts. It went to one group of cardiologists in the state and said it wanted them to take care of all Blue Cross patients for a predetermined fee. If the cardiologists agreed, Blue Cross would exclude the other cardiologists from being able to treat Blue Cross patients. Dr. Rhyneer noted that a small number of cardiologists practice in Alaska. Before this Blue Cross interruption, all cardiologists spoke and worked with one another on complex cases and worked together to recruit new physicians to the state. That working relationship was destroyed by the promotion of super- economic competition between the two groups. Blue Cross has done this with the urologists in Anchorage as well. Communities need to maintain the collegiality of physicians. Regarding federal employees, DR. RHYNEER said in times past, federal employees were covered under federal Blue Cross, which paid the standard percentage for physicians' visits - the same as it covered for private Blue Cross plan holders. When physicians became less interested in signing up with Blue Cross, it was able to tie in with the federal Blue Cross plan so that federal Blue Cross patients were not satisfactorily reimbursed for their medical care by those physicians. Physicians find it difficult to stop caring for patients who do not get proper reimbursement for their medical problems so physicians often forgive patients half of the bill amount. SENATOR WILKEN asked, in regard to Dr. Rhyneer's first example, what fee the insurance company offered to pay the cardiologists. DR. RHYNEER said a fee by procedure by patient. SENATOR WILKEN asked if the insurance companies provided a list of procedures with the amount to be reimbursed. DR. RHYNEER said yes. SENATOR WILKEN asked if the group that was excluded would not get any reimbursement. DR. RHYNEER explained those cardiologists would receive much less than the standard payment and the insurance company told patients not to see those doctors because the reimbursement would be much less. The insurance company also told the other physicians in the State who were Blue Cross providers to not refer their patients to the doctors under penalty. Number 2216 SENATOR WILKEN asked if the allegation is that the insurance company does that by discipline or whether it is done in a blanket fashion across a city or state. DR. RHYNEER said insurance companies have done this in other states. They first contract with one group and if they lose money in a year, the fee is reduced by 20 percent. SENATOR WILKEN asked if the suggested remedy is to allow physicians to speak to each other and align the charges. DR. RHYNEER said it would allow physicians to talk to the insurance companies about what constitutes good medical care, what constitutes an emergency, what constitutes covered procedures, what constitutes a reasonable charge, and under what circumstances discussions about fees can take place. SENATOR WILKEN asked if physicians are trying to raise the rates. DR. RHYNEER replied the physicians want to be able to talk as a group with the insurance companies and propose that insurance companies cover heart attacks as emergencies, for example. Physicians need to be able to talk as a group about medical issues and about payment as well. At this time, he is prohibited, by FTC antitrust laws, from talking to a physician across the hall. SENATOR WILKEN asked if the physicians would take a common front to the insurance company and propose rules for administering medicine in Alaska which the insurance companies could take or leave. DR. RHYNEER replied the insurance companies could say take it or leave it or make changes. MIKE HAUGEN, Executive Director of Alaska Physicians and Surgeons (APS), explained that APS's 165 physicians are on the front line of these contracts. APS currently operates under the "Messenger Model" which effectively bars it from negotiating on behalf of its physicians. As executive director, he acts as a go-between among the carriers and physicians. He can poll his members on their individual opinions and give aggregated information to the carriers. While it is true that fees are a component of this discussion, the discussion includes all kinds of extremely important patients' rights issues. The IPA believes that enacting this type of legislation will inject new blood into this State as far as third party payers go. The traditional players have had the predominant market share for quite awhile. Many smaller players are interested in entering this market but doctors are afraid to talk to them because of the federal antitrust laws. SB 256 will allow doctors to come together and talk to the smaller players. It is much more efficient for a smaller player to talk to one entity, such as the APS, than to create a network of doctors. MR. JORDAN emphasized that SB 256 provides a mechanism that is voluntary - insurers do not have to participate. SB 256 also requires active state oversight to ensure that the result of the actions are fair. Third, this measure would allow a single contract to contain different levels of fees for physicians of the same specialty and for different types of physicians. That provision will allow room for negotiation within the contract. He stressed that the most important aspect of SB 256 is the fact that it will allow physicians to speak about some very important issues. Number 1973 SENATOR KELLY asked if SB 256 passed, and a group of physicians from Anchorage formed a group and presented a contract to an insurance provider which was rejected, the insurance provider's only option would be to negotiate with the group or to do business with individual doctors. MR. JORDAN said that is correct. SENATOR ELTON noted the title of SB 256 refers to physicians, Section 1 refers to health care providers, and Section 2 again refers to physicians. He pointed out in Section 1, a health care provider is described as a person licensed in Alaska or another state to provide health care services. He questioned whether that includes chiropractors and dentists and why two terms are referred to. MR. JORDAN replied the provisions in Section 1 were taken from HB 211, which pertains to Alaska's patient bill of rights. One element of HB 211 deals with physicians' services contracts but it does not necessarily cover contracts that would be negotiated under the state action doctrine exception that is set forth in SB 256. SENATOR ELTON asked if, upon passage of SB 256, other health care providers will have the same rights to collectively negotiate as physicians will. MR. JORDAN said no. SENATOR ELTON asked if the state's self insurance health care program would be included in the definition in Section 1. MR. JORDAN said he does not believe so under that definition, however the State Medical Association has asked that SB 256 be amended to include all types of health benefit plans. He noted there is a question about the degree to which a state can regulate a health and welfare plan under the federal Employment Retirement Income Security Act (ERISA) of 1974. That Act exempts, to a great degree, from state regulation health and welfare plans. Until the last four or five years, that preemption from state regulation has been absolute. As a result of a recent federal court case, that exemption is no longer automatic. Those areas regarding health and welfare plans that states regulate, that deal with quality of care, are not subject to the ERISA preemption. Those that deal with quantity of care, such as a mandated type of benefit, do fall under the ERISA preemption and would not be subject to state regulation. He contended that SB 256 deals with quality of care. SENATOR ELTON asked Mr. Jordan if the proposed amendment would change SB 256 so that the state's self-insurance plan would be regulated. MR. JORDAN said yes. CHAIRMAN MILLER asked for the proposed amendment. MR. JORDAN replied that conceptually, the amendment would change the scope from applying to health care insurers to health benefit plans. AS 21.54.500 contains a definition of health benefit plans. Number 1633 CHAIRMAN MILLER asked how many other states have taken action similar to SB 256. MR. JORDAN replied as of Friday (February 18), two states have enacted state action doctrine exceptions: the State of Texas which also allows the negotiation of fees; and the State of Washington. Legislation is currently under debate in the states of Delaware, Hawaii, Illinois, Pennsylvania, New York, District of Columbia and Alaska. Legislation is in the process of being drafted in California, Florida, Georgia, Michigan, New Jersey, and Tennessee. CHAIRMAN MILLER asked whether SB 256 covers all actions, including fees. MR. JORDAN responded yes. Number 1562 MR. GORDON EVANS, representing the Health Insurance Association of America (HIAA), made the following comments. HIAA opposes SB 256 for two simple reasons. First, giving physicians an antitrust waiver would deny consumers a choice, quality and affordability. Second, health care costs would increase significantly for both the public and private sectors. In the past year there has been significant debate at both the federal and state level about physician collective bargaining or physician antitrust waivers. Despite differences among the various proposals, there are four incontrovertible facts. First, quality is not the driving force behind the physician collective bargaining movement - it's economics. Legitimate mechanisms already exist within the boundaries of current antitrust law under which health care providers can and do collaborate and negotiate with health plans, patients and others on clinical or quality of care issues or other concerns. Second, consolidation among health plans has been and continues to be subject to rigorous antitrust scrutiny at both the state and federal levels. Third, antitrust waiver legislation is anti-competitive and would raise costs for health care programs, financed by both the public and private sectors through Medicare and Medicaid and other government programs, as well as employer and union sponsored plans. Fourth, legislation at either the state or federal levels will be costly. For example, if legislation such as that proposed at the federal levels which is HR 1304, were to become law, health care premiums in the private sector would increase by six to 11 percent. On the national level, total annual personal health care spending would rise up to $80 billion annually. These added costs would be paid for by consumers, employers, and taxpayers without any improvement in the quality of patient care. Alternatively, 1.2 to 2.4 million more Americans could be uninsured if their employers chose not to insure because of the extra cost. Physicians who are already among the nation's highest paid professionals are among the least likely Americans to need the benefits of unionization. Over the last decade, as managed care has grown, physician incomes have increased more than 77 percent with a median net income of 1977 of $199,600. Antitrust waivers or some other form of special treatment that they are seeking through SB 256, would effectively allow physicians to further increase their salaries. Moreover, the reality is that physicians are not seeking to form real unions. Rather, they seek to form unrestricted collective bargaining units without the regulatory oversight that all unions are subject to. Physicians are asking state and federal governments for unique legal rights to engage in conduct that would otherwise be per se illegal under the antitrust laws. Granting physicians special waivers to collectively bargain and set prices without regulatory oversight is unwarranted and detrimental to consumers. Physician collective bargaining legislation is opposed by the Chairman of the Federal Trade Commission, Robert Pitofski. Under current law, consolidation among health plans and insurers is subject to rigorous antitrust scrutiny at both the state and federal levels. The health insurance industry continues to remain very competitive, making it improbable for any one plan to be able to exercise significant market power in its negotiations with health care providers. In conclusion, collective bargaining for physicians would serve to benefit the few at the expense of consumers and taxpayers. SENATOR ELTON said he reads the bill to require that, with the advice of the attorney general, the commissioner can approve or disapprove of contracts which is a perfect definition of approval by the state. MR. EVANS commented that only applies to the contracts put together by physicians. SENATOR KELLY indicated that subsection (e) on page 7 enumerates the state's involvement. MR. EVANS pointed out subsection (e) applies before physicians engage in any collective negotiations. SENATOR KELLY thought the bill makes it clear that the parameters of the contract must be presented to the State before the parties can enter into the contract. MR. EVANS noted that is a change from the Texas law. Texas allows a boycott which SB 256 does not. MR. EVANS pointed out for the record that Blue Cross is not a member of HIAA. MR. JEROME SELBY, speaking via teleconference on behalf of Providence Health Systems of Alaska, asked legislators to fine tune the legislation and pass it into law. Three items are of concern. Providence Health Systems employs about 3,000 people so an increase in the cost of insurance is of concern. Second, Section 1(4), regarding publishing of compensation rates, will continue to cause a problem in relation to federal antitrust law. He suggested that section be deleted if it is in violation of a federal requirement. The third concern has to do with community size. Section 1(c)(7) on page 7,line 2, could negatively impact smaller communities because the community may have few physicians so the percentage factor may not work well. He suggested applying that subsection to communities with a larger population. GARY SCHWARTZ, a management consultant from Fairbanks, stated he works with the Independent Practice Association which consists of 78 physicians in Fairbanks and a number of insurance carriers and made the following comments. He believes the anti-competitive environment with insurance carriers can be alleviated with SB 256. Small carriers do not have adequate resources and infrastructure to individually contract to work with physicians. There are 37 small practices in Fairbanks - small carriers are unable to come to Fairbanks and negotiate agreements. Also, the willingness of physicians to perform a number of the administrative services that are requested by those small carriers could be in fact supported and endorsed with the passage of SB 256. By administrative services, he means groups of physicians who credential providers, provide quality assurance programs to improve care, do utilization review, and identify medically appropriate coverage criteria. Finally, he believes the provision of usual and customary fee data for independent physicians in SB 256 is appreciated and would be valued by the small insurance carriers when preparing their fee offers. CHAIRMAN MILLER announced that the committee must adjourn due to schedule conflicts. He asked that those people who suggested changes and amendments work with the sponsor so that a proposed committee substitute can be prepared and brought before the committee next Wednesday. He noted his intention to take action on the bill at that time. He adjourned the meeting at 3:05 p.m.
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