Legislature(2001 - 2002)
11/09/2001 09:05 AM Senate HES
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE HEALTH, EDUCATION & SOCIAL SERVICES COMMITTEE
November 9, 2001
9:05 a.m.
MEMBERS PRESENT
Senator Lyda Green, Chair
Senator Loren Leman, Vice Chair
Senator Gary Wilken
Senator Bettye Davis
MEMBERS ABSENT
Senator Jerry Ward
OTHER LEGISLATORS PRESENT
Representative Fred Dyson
Representative Sharon Cissna
COMMITTEE CALENDAR
Subcommittee on Health Care and Welfare
PREVIOUS COMMITTEE ACTION
See Senate HESS minutes dated 11/8/01.
WITNESS REGISTER
Sandy Hoback
American Institute for Full Employment
PO Box 1329
Klamath Falls, OR 97601
Jim Nordlund, Director
Division of Public Assistance
Department of Health &
Social Services
PO Box 110601
Juneau, AK 99801-0601
Yvonne Chase, Deputy Commissioner
Department of Education &
Early Development
th
801 W 10 St.
Juneau, AK 99801-1894
Karen Pearson, Director
Division of Public Health
Department of Health & Social Services
PO Box 110601
Juneau, AK 99801-0601
Dr. Beth Funk
Division of Public Health
Department of Health & Social Services
3601 C St., Ste 540
Anchorage, AK 99507
Dr. Lynn Lucher
Division of Public Health
Department of Health & Social Services
4500 Boniface Parkway
Anchorage, AK 99507
David Pierce
Department of Health & Social Services
PO Box 110650
Juneau, AK 999811
Janet Clark
Department of Health &
Social Services
PO Box 110601
Juneau, AK 99801-0601
Rob Gould, Manager
Fairbanks Memorial Hospital/ASHNHA
Fairbanks, AK
Cecil Bykerk, Chairman
Alaska Comprehensive Insurance Association (ACIA)
Mutual of Omaha
No address provided
Rick Johnson
PO Box 876389
Wasilla, AK 99687
Nicole Salinas, Executive
Aetna Accounts
No address provided
Mr. Bob Lohr, Director
Division of Insurance
Department of Community and Economic Development
3601 C Street, Ste. 1324
Anchorage AK 99503
Marjorie Linder
PO Box 230029
Anchorage, AK 99523
Dr. Rodman Wilson
361 Egavik Dr.
Anchorage, AK 99503
Renee Mason
901 Justice St.
Wasilla, AK 99654
Karen Nugen-Logan
PO Box 871545
Wasilla, AK 99687
Jerry Near
PO Box 448
Soldotna, AK 99669
Mary Grisco
All Alaska Pediatrics Partnership
No address provided
Marilyn Kasmar
903 W. Northern Lights Blvd.
Anchorage, AK 99503
Susan Mason-Bouterse
PO Box 787
Talkeetna, AK 99676
Sarah Jackson
Catholic Social Services
th
3710 E 20
Anchorage, AK 99508
Angela Gonzalez
th
3710 E 20
Anchorage, AK 99508
ACTION NARRATIVE
TAPE 01-51, SIDE A
CHAIRWOMAN LYDA GREEN called the Senate Health, Education &
Social Services Committee meeting to order at 9:05 a.m. She
announced the committee would discuss welfare reform and the
impact that welfare reform has had on Medicaid.
MS. SANDY HOBACK, a consultant under contract with the American
Institute for Full Employment, explained that she did an
assessment of Alaska's welfare reform effort. She was unable to
do an in-depth assessment but believes she hit most of the high
points of Alaska's welfare reform efforts during her trip to
Alaska this past summer.
REPRESENTATIVE DYSON informed the committee that Mr. Nordlund
concurred with a significant portion of the recommendations made
in the consultant's report and that he has asked that the
recommendations be sorted into three categories: those that
require legislative action; those that involve DHSS policy
direction; and those that would be good practice. He asked that
Ms. Hoback explain the recommendations and that Mr. Nordlund
describe DHSS's take on those recommendations.
MS. HOBACK said the first recommendation is to amend Alaska
statute to allow Alaska to give full flexibility allowed under
federal law to extend benefits to some long-term recipients.
Alaska law is currently more restrictive than the federal law
regarding the percentage of people who can receive an exemption
from the five-year time limit. That restriction unnecessarily
puts the state at risk of federal penalties. She recommends
using very narrow criteria to exempt people rather than an
arbitrary percentage cap. Creating a legislative review process
would assure that the program is not being abused or overly used.
MR. JIM NORDLUND, Director of the Division of Public Assistance,
Department of Health and Social Services (DHSS), mentioned that
the first recommendation is in legislation introduced last year.
It removes the strict 20 percent cap on the number of individuals
exempted from the five-year limit from state law. The Institute
recommends, and DHSS advocates, the use of criteria instead to
determine who is exempt from the five-year limit.
REPRESENTATIVE DYSON said that after the review of each
recommendation, the committee would like to know whether the
Administration plans to introduce legislation to address it.
MR. NORDLUND explained that the Governor introduced two bills
last year to address the first recommendation. The House bill
passed without that provision. The Senate bill is still in the
Senate HESS Committee.
CHAIRWOMAN GREEN asked if the Senate bill will need to be
changed.
MR. NORDLUND said it might.
SENATOR TAYLOR asked how the cap can be repealed if it is a
federal requirement.
MR. NORDLUND clarified the federal requirement applies to federal
money. States are required to spend a certain amount to
participate in this program, but the federal law contains a
liberal interpretation of how states can spend the money. The
state share of the money can be used to provide benefits for
families that go over the 20 percent cap.
SENATOR TAYLOR said he understands that the state does not have
to comply with the federal law if it wants to pay the full cost
and that federal participation only applies to families that
qualify under the federal law.
MR. NORDLUND replied that if the number of exempted recipients is
over 20 percent and the state wants to be able to provide
benefits beyond that, it has to set up a separate state program
that uses state money only. He said it all comes "out in the
wash" because a greater share of federal money is applied to the
20 percent.
CHAIRWOMAN GREEN called a brief at-ease.
MS. HOBACK agreed that this matter is essentially a bookkeeping
issue because the states' maintenance of effort (MOE) is
required. More of the federal dollars can be shifted to the
families under the five-year time limit and the state dollars can
be used for what is called a state open program.
CHAIRWOMAN GREEN asked if the state's MOE may not pay enough in
future years.
MS. HOBACK said a number of states disagree that they should have
to maintain such a high MOE.
CHAIRWOMAN GREEN said her concern is that this approach may only
work for a few years. She asked if the MOE is a fixed amount
every year.
MR. NORDLUND explained the federal law says that the state must
spend at least 75 to 80 percent of the amount of money it spent
in 1994, when it was running the Aid to Families with Dependent
Children (AFDC) program. The federal block grant, for the
current six-year authorization period, is based on the amount of
money spent on the AFDC program in 1994.
CHAIRWOMAN GREEN asked if that number can always be calculated so
that what happened last year has no effect.
MR. NORDLUND said that is correct.
MS. HOBACK pointed out that in 2003, the federal program will be
reauthorized so that issue will be addressed at that time. At
the very least, Congress will draw a different line and not hold
states to 1994 levels.
SENATOR TAYLOR commented that under that federal law, no state
has been able to achieve a savings greater than 25 percent of the
1994 base. He asked:
Is that why some states have now branched out and are
utilizing some of those funds as opposed to welfare
payments? They are now showing up in the form of
education grants and opportunities for welfare to work
programs and that kind of stuff. Is that what's
happening in those other states?
MR. NORDLUND said essentially yes, but there are strict limits on
what TANF dollars can be spent on. Some states have gone beyond
what has traditionally been the AFDC program. He explained that
in Alaska, the savings from fewer benefit dollars have been used
to replace general fund dollars used for childcare. Those
federal funds have to be used for programs related to TANF.
CHAIRWOMAN GREEN asked if the legislature should do anything to
prepare for the federal reauthorization in 2003.
MR. NORDLUND said no one knows what the federal reauthorization
will look like. He believes the best thing to do is advocate
with Alaska's congressional delegation. Most states are asking
that federal funds not be cut because even though the amount of
benefit money has decreased, states are using those funds to make
general fund savings elsewhere. States are also asking for
continued flexibility. He believes one of the reasons welfare
reform has been successful is that states were freed from the
shackles of federal rules.
CHAIRWOMAN GREEN asked DHSS for a model of how the state and
federal funds saved by welfare reform have been redirected in
Alaska, where the state has flexibility, and the consequences of
different actions the state might take.
MR. NORDLUND noted that he prepared a handout for committee
members that shows how funds were spent before and after welfare
reform.
SENATOR TAYLOR noted Ms. Hoback found that DHSS has no formal
process in place to provide additional staffing to ensure that as
few families as possible reach the five-year limit. She
recommended an additional statutory change to create a separate
state program. He asked if that statutory change is in the bill
before the Senate HESS Committee.
MR. NORDLUND said DHSS is in the process of figuring out whether
statutory authority is required to create a separate state
program.
SENATOR TAYLOR asked if DHSS supports a separate state program so
that the state can avoid federal penalties.
MR. NORDLUND said it does and he offered to follow-up with the
committee on the need for a statutory change.
MS. HOBACK said the second recommendation is to develop a
progressive sanction system for clients who are not cooperating.
Alaska's sanction policy is to remove the adult needs from the
grant, which results in a 40 percent reduction. No penalty is
associated with the first sanction. The second sanction lasts
for six months and the third and subsequent sanctions are for 12
months. 37 other states use a different strategy: the first
sanction results in a very small grant reduction of $50; the
second sanction results in the removal of the adult needs; the
third sanction can result in full closure of that grant.
However, any of the sanctions can be "cured" with cooperation so
that prolonged penalties do not have to occur. She feels that
prolonged penalties work as a disincentive to cooperation. As
long as individuals are on prolonged sanctions, the time clock
continues to tick. She said it is more effective to close the
grant if a person will not cooperate and reopen it when he or she
wants to cooperate. She noted that in almost every state that
imposes full family sanctions, sanction rates have been reduced
because there is a great deal of incentive to cooperate when the
alternative is to lose all benefits.
MR. NORDLUND acknowledged that DHSS is reviewing its sanction
policies as they have not worked very well. He pointed out that
a person who is sanctioned and then immediately tries to comply
may not be eligible for six months. The reward for compliance is
so delayed, it is not much of an incentive. DHSS has not decided
whether it wants to implement full family sanctions and would
like to discuss that matter with the legislature.
CHAIRWOMAN GREEN asked whether DHSS will have a position on that
issue before the legislative session.
MR. NORDLUND said it could but he felt DHSS should have an
interactive discussion with the legislature on this issue because
there are different ways to design the sanctions. He pointed out
that if a full family sanction regime is used, DHSS would want to
implement another level of scrutiny so that no mistakes are made.
MS. HOBACK said the next recommendation is in regard to the
diversion program, which is an upfront process to get people
employed before they sign up for cash assistance. Clients could
get up to two months worth of assistance in exchange for not
applying for full cash assistance. During interviews across the
state, she found very few clients took advantage of it because
the amount of money was not enough to allow people to be self-
sufficient. She suggested the diversion program needs closer
review and, at a minimum, pay at least three months of cash
assistance to entice people to use it. She also believes there is
room for improvement in the process of engaging applicants when
they come through the door. People should immediately understand
that the entire process is about becoming employed versus
becoming eligible for benefits. She pointed out that effective
programs in other states are able to divert a significant
percentage of applicants into employment.
MR. NORDLUND agreed the program has too much of an eligibility
focus rather than a self-sufficiency focus and stated a statutory
change would be the simplest because the program needs to be
"operationalized" in a different way.
REPRESENTATIVE DYSON felt the mindset of the staff will have to
change.
MR. NORDLUND said he believes the mindset of staff has changed
but the bigger problem is the process, which has an eligibility
focus.
REPRESENTATIVE DYSON asked if DHSS needs legislative help to
change the process.
MR. NORDLUND said it does not and that most of the
recommendations in the report are management priorities. He
pointed out DHSS is not asking for statutory or financial help
since the recommendations require operational changes.
MS. HOBACK said the final legislative recommendation is to
authorize a more complete wage subsidy. The State of Oregon has
a very successful private sector wage subsidy program that cashes
both the food stamp and cash grant benefits out to use as
reimbursement to private sector employers who are willing to work
with TANF recipients and provide them actual training
opportunities for up to six months. This has been a very
successful tool to get people engaged in the private sector,
especially in the more rural parts of Oregon where it became an
economic development tool. It allows businesses to explore
expansion of their businesses when they otherwise would not have
sufficient capital. Oregon purposely puts its more barrier-prone
clients into those opportunities so it ends up being a very cost-
effective tool for the state and a good economic development tool
for employers. She noted that many people believe the new on-
the-job training approach used in Alaska will not provide
sufficient incentive to get many employers involved.
MR. NORDLUND said DHSS definitely wants to look into this
recommendation and believes it can be implemented with policy
changes.
REPRESENTATIVE DYSON said he is surprised that TANF funds can be
given to an employer instead of a recipient and he would be
surprised if DHSS has the flexibility to do that. He commented
that the recommendations will require a complete change that he
does not think can be done incrementally.
MR. NORDLUND said he believes the concept is valid. One reason
DHSS has not employed it is that the economy has been very good.
However, two factors are now coming into play, one being that the
people who were easiest to get employed are and second, the
economy is starting to turn around. Looking at greater
incentives for employers to hire people is something that DHSS
needs to address at this time.
SENATOR TAYLOR asked Mr. Nordlund to suggest statutory changes if
he discovers they are necessary to implement the recommendations.
MR. NORDLUND said he would but pointed out that Senator Green's
welfare reform bill that passed several years ago contained broad
language that pertained to work supplementation. He believes
that language provides the statutory authority to run this
program the way it is envisioned.
REPRESENTATIVE DYSON said the legislature could also revisit
DHSS's missions and measures statement.
CHAIRWOMAN GREEN asked Ms. Hoback to review welfare reform policy
priorities.
MS. HOBACK said the first recommendation is to change the
childcare co-pay schedule to avoid the "cliff" effect. The
current co-pay schedule is stair-stepped, similar to the tax
code, so that a small increase in income can create a large
increase in the co-pay amount. Consequently, a person could get a
raise but take home less pay.
TAPE 01-51, SIDE B
YVONNE CHASE, Deputy Commissioner of the Department of Education
and Early Development, said Ms. Hoback's description of the
"cliff" effect is very accurate. It is a problem that many states
have grappled with. Oregon is one state that moved to eliminate
those cliffs. A working group has been reviewing the problem and
expects to eliminate the "cliff" effect in Alaska by next July.
The working group is facing a couple of challenges: it is trying
to make sure that it can be accomplished for the individuals with
the lowest income while maintaining cost neutrality. She
believes the working group has designed a system to accomplish
that and will take regulations to the state board at the end of
this month for public comment. Right now, a low-income person
may pay 3 percent of childcare costs while the state pays a 97
percent subsidy. A 50-cent per hour raise may change the equation
so that the state subsidy drops to 85 percent. The State of
Oregon implemented a system where the person is given a couple of
months of extra assistance when he or she moves from public
assistance to get on their feet. In addition, a sliding scale
with a curve is used. At the same time, the top end of the scale
needs to be reviewed to determine at what point a person's income
is sufficient to move out of the program. DOEED looked at a
broad overview of the caseload in the Palmer-Wasilla area and
found that public assistance clients needed a lower subsidy as
their wages increased.
CHAIRWOMAN GREEN said in some cases, it would not be worth
accepting a salary increase so she thinks the changes will be
great. She reaffirmed that this change will require no
legislation.
REPRESENTATIVE DYSON said it is his desire that whatever tracking
system is used to qualify a person for benefits be used to
qualify a person for other programs so that the person doesn't
have to go on a pilgrimage from department to department. He
said he would like to see departments transmit electronically and
plans to follow up on that issue.
CHAIRWOMAN GREEN said she believes creating a seamless process
for state program eligibility will be a priority over the next
few years.
DEPUTY COMMISSIONER CHASE agreed that it is something DOEED needs
to look at and, in discussing the issue with Mr. Nordlund, she
believes they have a solution that will not only be seamless but
will drastically reduce the need for the client to appear in
person. She explained that as the parent moves from being a
client of public assistance toward self-sufficiency they would
move into a different childcare subsidy system, if it is still
needed. An interagency process could take place without the
client seeing much of that movement.
CHAIRWOMAN GREEN asked Ms. Hoback to continue discussing the
Institute's recommendations.
MS. HOBACK said the next recommendation is to revise the policy
and practices for treating individuals limited by incapacity from
full participation in work activities and require mental health
and substance abuse treatment when needed. She believes the
agency is working to change this policy. The Institute recommends
that if a doctor says a person is incapacitated, the exemption be
to the level of capacity so that, for example, the person might
still be capable to work part-time. People with mental health,
drug or alcohol issues should be required to undergo treatment as
a part of that plan.
SENATOR TAYLOR noted that the way the regulations are now
written, an exemption is provided so that substance abusers do
not have to comply. He said that is one of the most backward
policies he has ever heard of.
MR. NORDLUND said the confusion stems from the fact that when the
regulations were adopted, DHSS didn't want to require substance
abusers to participate in work activity because they would not be
good employees. However, the regulations did not require
participation in a treatment program; that is the change that
will be made.
SENATOR TAYLOR asked if that regulatory change is being made now.
MR. NORDLUND said it is.
MS. HOBACK continued and explained the next recommendation
requires clients who claim a disability to file for federal
disability benefits. The Supplemental Security Income (SSI)
program is federally funded. If, in fact, a person is too
disabled to participate in a work program, that person should be
required to file for those benefits.
MR. NORDLUND indicated that policy is being changed. He added
that the SSI benefits are a little more generous than ATAP
benefits and not time limited.
SENATOR TAYLOR asked if ATAP benefits will be cutoff if the
client does not apply for SSI disability status.
MR. NORDLUND said it will probably be an element of their family
self-sufficiency plan so that anyone who does not comply with
that plan could get sanctioned. He cautioned that these are
truly the neediest of clients so DHSS would want to make sure
they do not fall through the cracks.
SENATOR TAYLOR expressed concern that 65 to 70 percent of SSI
applicants will be denied because the federal government has
stringent standards for that program. He cautioned that
requirement may not provide any significant help to them or to
the state.
CHAIRWOMAN GREEN said the fact they are denied SSI payments would
not disqualify them for state benefits.
MR. NORDLUND said that is correct and added that many people who
are denied are accepted on appeal. DHSS would just want to make
sure they go through the application process.
MS. HOBACK said the last recommendation is to reduce the 12-month
exemption period for parents of infants to 16 weeks. The parental
leave law in Alaska allows up to 16 weeks of leave. It is
inconsistent that ATAP clients are not required to do anything
for 12 months. Most states have reduced the exemption period to
the amount provided in their parental leave laws.
MR. NORDLUND said DHSS is pursuing that change in regulation as
well. He pointed out that change will create an increased need
for childcare, which is not easily available for infants.
DEPUTY COMMISSIONER CHASE stated the difficulty of finding infant
care and childcare during non-traditional hours will have to be
remedied. That remedy might require providing incentives for
providers.
CHAIRWOMAN GREEN acknowledged that dilemma in the Mat-Su Valley.
DEPUTY COMMISSIONER CHASE said she believes that most of the
providers who are not licensed could be licensed fairly easily.
DOEED has also been working to reduce the amount of paperwork
involved.
SENATOR TAYLOR said childcare is a critical component of welfare
reform, which is why he is very concerned about current policy.
His district has actually lost daycare providers because of that
policy. He is seeing fewer children placed in daycare while
DOEED's policy is to enhance and increase daycare facilities.
DEPUTY COMMISSIONER CHASE offered to review the specifics of
Senator Taylor's district but noted that slight modifications
were made to the staffing ratios. DOEED did go back and make
some adjustments so she believes the final regulations that were
adopted did not contain the numbers that Senator Taylor expressed
concern about. DOEED also provided incentives and increases for
licensed providers who care for infants and toddlers.
CHAIRWOMAN GREEN asked if they need to mold something a little
different for the childcare piece since it is not K-12.
DEPUTY COMMISSIONER CHASE replied that they are working through
that in the department and are looking at readiness and safety
for children.
MR. NORDLUND said they are in the process of doing intensive
staffing as the first families to hit the 60-month limit will do
so next July. Each client needs a case manager, eligibility
technician and a social worker.
SENATOR TAYLOR asked about the geographic factor. He asked if
DHSS assumes clients don't have to find work because there just
isn't any work out there. He had the feeling that the only people
who would be cut off of welfare are folks in Wrangell, Petersburg
and Ketchikan and that a lot of people out in the villages
wouldn't be cut off.
MR. NORDLUND replied that the geographic distinction is in
federal law and says that Indian reservations and Alaska Native
villages with effective unemployment rates over 50 percent and
families living in those villages, Native or not, are exempt from
the five-year limit. They are still required to pursue self-
sufficiency activities, like some community work experience.
There is limited effectiveness in how well they apply that
policy.
SENATOR TAYLOR asked how to get classified as a Native village,
because that's what his district needs.
MR. NORDLUND replied that they are the villages listed under
ANCSA.
SENATOR TAYLOR commented on the disproportionate aspects of
ANCSA.
MR. NORDLUND said this administration played virtually no role in
that. It was a federal decision driven more by reservations in
the Lower 48. Our congressional delegation made sure Alaskan
villages were included. It is recognized by many people in the
Native community as a double-edged sword. He added there is a lot
more they could do to get folks in the villages to contribute to
the community, by using the school districts for instance.
An unidentified male speaker said with that in mind, he favors
performance standards for staff and performance based contracting
so that employees are rewarded for the number of job contracts
rather than the number of cases they handle.
MR. NORLUND said they take those things to heart and those are
the things they are most enthusiastic about in this report. They
plan to hire a consultant to help improve their case management
system. One of the key issues is to establish true performance
measures that work with associated penalties and bonuses.
MS. HOBACK said these issues really have to do with
accountability and Mr. Nordlund has been very receptive. She
thought they could increase the utilization of [indisc] training
in the villages and more community service things. She thought
they should merge the food stamp program into the DPH policy unit
because there is a difference in philosophies in the two
departments around the importance of employment. The easiest way
to have a common philosophy would be to merge those units.
CHAIRWOMAN GREEN asked if any state distributes welfare benefits
in the form of no-interest loans versus grants.
MR. NORDLUND said he didn't know of anything like that. Ms.
Hoback said she didn't either, but some states offer low-interest
housing loans as incentives to people as opposed to the cash
grant program.
SENATOR TAYLOR thanked Ms. Hoback and the American Institute for
Full Employment for everything they had done and Mr. Nordlund and
his staff. He believed they have made a conscientious and
professional effort to figure out a way around some of these
problems.
9:19 a.m.
MS. KAREN PEARSON, Director, Division of Public Health, DHSS,
introduced Dr. Beth Funk, physician and manager of Infectious
Disease Control, and Dr. Lynn Lucher, Ph.D, who does lab tests on
all specimens that have come to the DHSS lab. She thanked the
legislature for helping DHSS get a new lab. Without it, their
specimens would have been sent to another state and put in line
when they were trying to figure out how to let communities know
what to do in case of a bio-terrorism attack.
TAPE 01-52, SIDE A
9:49 a.m.
MS. PEARSON said local communities don't have to know who all of
the players are. They support the 24/7 operation of the
Emergency Coordinating Center because it is a central point of
contact any time of the day or night. However, in the process of
dealing with the bio-terrorism threat, the legislature needs to
make sure that it doesn't "drop the ball" on other diseases. They
need to discuss what sort of minimum capacity needs to be
maintained in Fairbanks, so that if the Anchorage lab went down,
another would be available.
She said the public perception of the public health system has
been changing with the events of 9/11. The system in Alaska has
been stretched very thin since then and DHSS has a 50 percent
vacancy rate in staff positions. The job is getting done, but
discussions are needed.
CHAIRWOMAN GREEN asked her if the vacancy rate is due to
attrition.
MS. PEARSON answered it's because of the lag in salaries; 50
percent means seven positions - laboratory RNs, a tech and
microbiologists 1, 2, and 3. She explained that to deal with the
situation, DHSS has gone into an emergency mode and created
exempt temporary positions. It can raise salaries a bit, do some
serious recruiting and not "burn out" and lose the staff it has.
CHAIRWOMAN GREEN asked if staff is on contract.
MS. PEARSON replied that they are temporary positions.
CHAIRWOMAN GREEN asked what the typical salary is.
MS. PEARSON replied range 14 - 16 with 18 being the top. Those
are pretty low ranges when the low range has a Ph.D.
CHAIRWOMAN GREEN asked if they have requested a salary study be
done.
MS. PEARSON replied that DHSS just requested one from the
administration and hopes to have it done within a year.
CHAIRWOMAN GREEN asked if it would be a statewide employee
review.
MS. PEARSON replied that the request came from DHSS, but she
understands that it would look at every department with people in
that classification.
CHAIRWOMAN GREEN commented that a legislator's salary equates to
a range 8.
MS. PEARSON responded, "Well then, we'll all work on this
together."
CHAIRWOMAN GREEN said her concern is that bio-terrorism could
happen, but it might not. In the meantime, TB and other
infectious diseases, which could be the equivalent of bio-
terrorism - especially in Alaska where some populations are in
third-world conditions, are on the increase. She asked how to
make sure the state is at least staying even with those.
MS. PEARSON said that is a good question. DHSS tried to address
that last year because it does not believe it has the basic
capacity to respond to all the infectious disease in Alaska or to
do testing and checking to prevent outbreaks. She said DHSS would
be asking for this funding and terrorist funding at the same
time.
SENATOR TAYLOR said that for the past 20 years, Alaska has had
emergency response teams and a tremendous amount of bureaucracy
to make sure that every token individual within a community that
might have any level of authority would be included within the
plan, which was generated by the Exxon Valdez incident. He
thought that they should be able to apply information from that
process, like communication systems. He asked if she had thought
about using systems already in place.
MS. PEARSON replied that everyone is at the table with this
issue. The EMS people have been a part of the bio-terrorism
planning team. A lot of things are in place, but people need new
and additional training to be able to respond to something
different.
SENATOR TAYLOR said his other concern is if an unforeseen event
occurs, Alaskans are so dependent on air travel, i.e., the
hospital in Ketchikan gets medications delivered every other day
by airplane. His staff found that no one coordinates
transportation of blood and other medical supplies in Southeast.
DR. FUNK said they are working on those kinds of things now. She
works with one program within the section of epidemiology with
the infectious disease program, which includes TB and other
diseases like gastrointestinal flu borne illness outbreaks or
hepatitis. They have worked for the last two years with other
sections in the Division of Public Health, other partners
throughout the state and other systems, Anchorage in particular,
to start setting up an infrastructure for responding to bio-
terrorism. Everyone was caught by surprise.
The Division of Public Health has found that the relationships
they have been working on are really paying off. At the State
Emergency Coordination Center (SECC) she helped complete a survey
and write up to send into the Department of Justice about the
infrastructure for emergency and public health response in
communities statewide. As a result, they will receive $1.2
million from the Department of Justice for communications and
other emergency equipment.
SENATOR TAYLOR asked if anyone is assessing private industry.
DR. FUNK said to her understanding, not many private contractors
have level B suits needed to go into a chemically contaminated
area. Those are issues they will have to focus on.
An unidentified male said the question is why would Alaska be
attacked. He answered it is because of the oil pipeline and our
military capacity. He said we have to ask what will make us safer
and what will work best with Alaska's cool temperatures and wind
patterns.
DR. FUNK said that every climate has some of those issues, but
even if Alaska isn't a target, we have to "be in the game"
because of the mobility of the population. A biological agent has
an incubation period of a few days to several weeks.
DR. LUCHER said her job has been to make sure the state
laboratory is prepared to do the testing necessary to confirm the
presence of bacteria distributed by CDC as being those of
greatest concern for intentional release in bio-terrorism. Every
state lab has a CDC trainee to do tests, but it's up to her
office to train other key personnel to test as well. They also
must to get the word out to hospital laboratories because, in the
case of a covert release, they would do the initial patient
specimen work. This new focus has increased and improved their
relationship with other clinical laboratories in the state.
One problem, from a disease surveillance standpoint, occurs when
specimens or bacteria isolated from specimens get sent out of
state to another reference lab, it is difficult to capture
important information. This is a problem in some parts of the
state more than others. If DHSS builds on the terrorist
initiative to improve its working relationship with clinical
laboratories, they will hopefully get more specimens that should
be coming to them anyway and allow DHSS to keep better track of
disease incidents in the state.
SENATOR TAYLOR asked if there isn't a practical difficulty in
achieving that since Southeast has historically shipped its
specimens south because it's cheaper.
MS. LUCHER said that is true, and if they can't improve increased
specimen flow to the state lab, they want to at least make sure
the information comes to them or epidemiology, especially
regarding certain types of food borne diseases like e. coli
0157h7. One other thing she helped work on at the state lab is
molecular subtyping of bacteria because it's important to know if
five cases are really caused by the same organism or not. Getting
key bacteria would definitely improve disease surveillance.
CHAIRWOMAN GREEN asked what kind of networks are available to
communicate with the private sector in an emergency.
MS. LUCHER answered that the best example to illustrate that
concept is the way they are working to engage hospital
laboratories in looking for bio-terrorism agents. Hospital labs
can take cultures, reduce the choices, and then send it to the
DHSS lab where the bacteria can be identified.
CHAIRWOMAN GREEN asked how many hospital labs are in Alaska.
MS. LUCHER replied there are about 26 distributed across the
state.
SENATOR TAYLOR remarked that everything they are talking about
today is dependent upon an airplane transportation system that is
working. He assumed they had some sort of protocol set up.
MS. LUCHER replied they do with the military.
CHAIRWOMAN GREEN said they are doing a wonderful job and
encouraged them to keep up the good work.
11:36 a.m.
MR. DAVID PIERCE, Health Planner, said he is also known as the
CON (CON) Coordinator and that the CON office has been active
since 1976. Most states established CON offices in the 1970s; 74
percent of states still have CON programs.
CHAIRWOMAN GREEN interrupted him to say the reason they are
talking about it at all today is because it's tied in to
Medicaid.
MR. PIERCE explained that some of the big issues CON deals with
are rational development of health care, quality of care, access,
decreasing unnecessary duplication and cost containment. It also
has a public involvement component where people who are involved
in the projects have input into the process. Most projects are
approved, but over the past 20 years about 500 nursing home beds
were proposed and not built. If all those beds had been built, it
would save about $60 million per year.
Other states like Texas and California contract for certain
numbers of beds rather than review projects as they come in.
Other states have also put moratoriums on construction to limit
growth. CON programs vary by state depending on the need. One of
the key issues to think about in Alaska is that the small
populations are served.
CHAIRWOMAN GREEN asked him to explain that further.
MR. PIERCE replied that some types of care will only be
accessible in the larger communities. Alaska doesn't have a CAT
scanner, a type of radiology that detects cancer.
TAPE 02-52, SIDE B
There must be a certain level of use to be able to support a
piece of equipment financially. Also, certain types of services,
like open-heart surgery, need to be used enough to maintain the
skill level of the physicians or there will be more complications
with those surgeries.
MR. PIERCE said that approximately 86 percent of the nursing home
bed care is Medicaid related. The average cost of a day in a
nursing home statewide is $306. So, basically, every 10 nursing
home beds is going to cost $1 million to Medicaid.
CHAIRWOMAN GREEN asked for an example of [indisc] versus long-
term care.
MR. PIERCE replied the Mary Conrad Center has 90 beds and they
are all full.
CHAIRWOMAN GREEN asked if anyone who walks through the door and
qualifies for Medicaid can stay in that bed.
MR. PIERCE replied no. There are two kinds of payments. The other
14 percent of people are private pay or Veterans Administration.
CHAIRWOMAN GREEN asked if they are not in the CON process and
Mary Conrad needed 10 more beds, Medicaid would have the ability
to say the beds weren't approved therefore they wouldn't pay.
MR. PIERCE said no, because once a place is licensed as a
Medicaid provider, it is able to take patients.
CHAIRWOMAN GREEN asked why they would then need a CON.
MS. JANET CLARKE, Department of Health and Social Services, said
Mr. Pierce was talking about licensing, which comes after the CON
process, which comes prior to construction. Long-term care has
been the concern of the Alaskan legislature, which declared a
moratorium on it for a number of years. "When David says that
once you're licensed, if someone comes in they are eligible for
that is correct, but the CON process is where the review
happens."
Typically, a person needing skilled long-term nursing care is not
eligible right away because they have to spend down some of their
assets.
SENATOR TAYLOR commented that we have to bankrupt them first.
MS. CLARKE said that was right.
CHAIRWOMAN GREEN said she didn't want to be protected by the
government all the time and she finds it strange that someone in
an office in Juneau can determine how many CAT scanners can be in
the state of Alaska. A hospital should be able to go out and buy
one - and go broke if that's what happens.
MS. CLARKE replied that a few years ago the legislature passed
amendments to the CON law making care more stringent requirements
for long-term care - because the legislature was concerned about
the implications for Medicaid.
CHAIRWOMAN GREEN said there had been three major attempts to
revise the process.
MS. CLARKE said she understands what the Senator is getting at,
but:
What I was trying to get at is that the CON program as
far as considering cost implications to Medicaid -
based on the law - can only do that for long-term care.
For the other parts, acute care or CAT scans, they
can't consider the implications for Medicaid or cost.
It's based on need and access, etc. The way the
legislature has structured the law, there are two
different review standards, and I think, because of the
implications for Medicaid.
MR. PIERCE said one important thing to remember is that there's
only one market in the state, Anchorage, where there's
competition between hospitals. In most of the other communities
there is one facility. In these cases, if someone goes bankrupt,
you end up with people not having anything.
SENATOR TAYLOR said he wanted to get away from the Medicaid
aspects of this.
Why should anyone have to go through the process if
economically they believe it's a good investment for
them to put in an MRI or should they tell all patients
in Ketchikan you can't have an MRI here. You need to
buy a $350 - $400 airplane ticket and fly up to Juneau
and use Juneau's machine, which, by the way, hasn't
been approved yet, either.
CHAIRWOMAN GREEN asked if he knew of any case where people had
been denied access to Providence.
MR. PIERCE replied that he didn't know of any circumstance like
that.
MS. CLARKE reminded everyone that CON applies to capital
construction of over $1 million; it's not for operating costs.
MR. PIERCE said a lot of health care is moving from the in-
patient to the out-patient areas. He said, "Hospitals do a
variety of things that some of them get more money than what they
pay out in costs for the service."
CHAIRWOMAN GREEN asked for an example.
MR. PIERCE replied a critical care unit or an ICU or maybe in-
patient services.
CHAIRWOMAN GREEN commented that this was more discouraging to her
than encouraging.
MR. RICK JOHNSON, Valley Hospital Operating Board of Directors,
said he thought what Mr. Pierce was trying to say is that there
is a concern about "cherry picking." He said:
If you open up an out-patient surgery center and are in
direct competition with Valley Hospital where we have
to accept a reduced rate for Medicaid and Medicare,
then all those services are going to go elsewhere where
we make some money to be able to support our community
hospital - that's going to be gone.
CHAIRWOMAN GREEN said everyone understands that. She was
concerned that hospitals operate under a different set of rules
when it comes time to make their reports to the federal
government and when they pay taxes.
MR. JOHNSON said that was correct.
CHAIRWOMAN GREEN said she was perfectly willing to have his Board
make decisions and not have an office telling them what they can
and can't do.
MR. JOHNSON asked what happens when they don't have a CON process
and someone opens up a shop "out here" and takes everything away
from Valley Hospital that makes money.
I'm not saying that we shouldn't be efficient and being
able to compete, but we need to be able to do that -
but they take everything else away from Valley Hospital
and we don't have an opportunity, because we have to
take everybody that walks through the door. We have to
take Medicare and Medicaid patients at a lower
reimbursement level and the only way that we can
support ourselves is through profit centers. These
other folks that open up a facility out here, they
don't have to take Medicaid or Medicare.
CHAIRWOMAN GREEN asked:
Who's to say that they don't want to take low pay, co-
pay private - just like the whole raft of assortment
that you ... Are you saying that because the law
doesn't require them to do that?
MR. JOHNSON said that was correct.
CHAIRWOMAN GREEN said maybe that is the point they need to
address. She found it strange that he would turn over his
decision-making ability to an agency in state government.
MR. JOHNSON agreed and said it is a strange paradox.
12:25
SENATOR TAYLOR expressed concern about the different rates
charged for the same service. He noted:
Because they have a ticket to play, they are the only
game in town and that CON becomes how do we protect our
monopoly to make certain that nobody else does come in
and cherry pick. There's never been a level playing
field; there's not going to be one.
MR. JOHNSON responded:
But, we have requirements, but how do we correct those
federal requirements, the state requirements that we
have…We only get x amount of reimbursement on those
particular things and we have to accept everybody who
walks through the door and somebody can go down the
street and open up a shop and they don't have to take
them.
SENATOR TAYLOR said, "You have my complete sympathy; I
understand. I was just trying to clarify the reality of where we
are at today."
CHAIRWOMAN GREEN said she thought they could set aside the
federal requirements. She doesn't have any delusion about making
any substantive change in the CON process.
MR. JOHNSON said he is just looking for a level playing field.
CHAIRWOMAN GREEN said the problem is how to get there.
MR. JOHNSON said their strategic plan is to build a new facility
to double their capacity and he doesn't want to have to go
through the CON process. He is concerned that other people can
build a facility and not have the same requirements that his
hospital does.
MR. PIERCE said they are trying to educate administrators on how
to get up to speed on the CON process.
SENATOR DAVIS asked if 74 percent of the states use the CON. Mr.
Johnson said that is correct.
SENATOR DAVIS asked if he knew what the other states did who did
not use that process and what kind of problems did they have.
MR. JOHNSON said he could get her some information.
SENATOR DAVIS said information on things that are working in
other states might help the situation in Alaska.
MS. CLARKE said some other states might contract for a certain
number of beds and that's all Medicaid will pay for.
SENATOR DAVIS responded:
Are we going to address the Medicaid issue here or are
we going to address the CON issue. The Medicaid is
something we can fix ourselves, because it's the
state…. The CON has to do with the hospitals building
new buildings or not allowing someone else to buy a
piece of equipment. That's where the problem is.
MS. CLARKE responded that the CON program was developed in the
'70s to look at health planning and that's still the construct of
the state statute. "It's a health planning process and actually
some communities find it helpful..."
She said they could give the committee information on what is
working in other states, but they didn't have it with them today.
REPRESENTATIVE DYSON said he talked to some doctors who said if
they are given tax free status, they would be glad to take all
clients.
SENATOR TAYLOR said the federal government provides a system of
public health and a system of veterans health and native health
centers. Each of those is a form of socialized medicine with the
doctors working on a salary. The private enterprise system starts
to get involved with the CON process. He asked if the CON
application had been approved for the Sitka hospital.
MS. CLARKE said they are always looking for ways to improve the
system.
SENATOR DAVIS said she would like to see some recommendations
from her Department.
MS. CLARKE replied that she didn't have recommendations because
they are in the midst of implementing regulations from the last
major change to the long-term care part of the CON statute from
1999. She said they received a lot of comments and they would be
renoticing those regulations. She would be interested in talking
about the rest of the program, however.
CHAIRWOMAN GREEN said she really appreciated everyone's comments
and asked people to send her their opinions and suggestions on
this issue.
MR. ROB GOULD, Fairbanks Memorial Hospital, said:
The cherry picking is what really concerns the
facilities. The fact of the matter is, I understand we
are talking about Medicaid, but most facilities or most
people who want to put in a surgery center or an MRI,
they aren't doing it to target Medicare and Medicaid,
because those payers do not pay costs. They want
private insurance where they can negotiate and bill
what they think is reasonable and get a reimbursement
that either makes a profit or at least pays costs. So,
one of the big issues is that for health care
facilities and I'll just take out a hospital, for
example, and an MRI. Let's say it was open and
realistically for around $1 million you can get an MRI,
give or take $100,000. If there was not a CON required
for over $1 million and there were five in this
community, we would not be able to have an MRI at this
facility. The others are not going to be open 24 hours
a day.
We are required to take patients 24 hours a day; we are
required to take every patient regardless of their
ability to pay and that's where the playing field is
not fair. It's not an Alaskan issue; it's a societal
issue of how are you going to level the playing field.
Nobody would do long-term care beds; nobody would do
in-patient beds, because they don't pay for themselves.
The overhead is too great; you have to have other
services to complement them. The problem is that there
are very few industries in the United States where the
government can dictate what they're going to pay you.
If you're going to buy 100 trucks, you don't go to Ford
and say we're going to pay you $50 per truck; they go
to Ford and GM and five others and do a bidding
process; but this is such a large portion of our
population that the government is paying for that they
can't do that - especially in small rural communities
of which a majority of Alaska is. They don't have that
ability and you loose some critical services in these
rural communities when you let people start cherry
picking.
CHAIRWOMAN GREEN asked him for an example of a small community.
MR. GOULD replied that Fairbanks is considered urban, but they
don't have the volume for cardiac services. They do not have
enough heart cases for a cardiac surgeon to remain proficient.
His hospital is open 24 hours a day and staffed to accept a
patient at any time. Surgery centers shut their doors at 5:00 and
patients with complications from a surgery would end up on his
doorstep.
TAPE 01-53, SIDE A
MR. GOULD said if they go through the CON process, it's because
they want the Medicaid dollars. But they really want the private
insurance companies that pay the majority of the costs, because
government only pays about 80 percent of costs. Private insurance
companies pay about 125 percent of costs. He stated:
So, any of us that are insured by insurance are
subsidizing anybody that is on the government system,
whether it be Medicaid or Medicare, because of the fact
it has become so expensive it is very difficult to pay
costs when you are such a large payer. We're lucky. We
have a young healthy population compared to many states
and our Medicare population is very low… But it is
difficult in those kind of communities to operate where
you are only getting Medicare reimbursement.
MR. GOULD said he is having trouble staffing his own rooms right
now. If another place opens, they have to find the staff for it.
He guesses that they will try to pay higher wages and take from
Fairbanks Memorial Hospital. He thought they needed most help in
work force development.
CHAIRWOMAN GREEN said she expected a letter from him, but didn't
expect to get letters from patients who signed the form on the
counter at his hospital.
MR. GOULD said he was not aware of that.
CHAIRWOMAN GREEN said she wondered whether the hospital
associations chose to provide services that are actually
functions of the social service arm of the State of Alaska or of
the community. She didn't want them to use that as ammunition
against someone else providing competition.
MR. GOULD said, "We don't even have an HMO in Alaska, because
there is no way to have a profitable HMO in this state…. We don't
have a large enough population to spread the risk."
CHAIRWOMAN GREEN asked if HMOs are forbidden by law in Alaska.
MR. GOULD replied no. He understood that two companies had asked
for the license package, but haven't responded. Experts say that
it takes between a half million and one million people in an HMO
plan for it to be financially viable.
MR. RICK JOHNSON said he is also an insurance agent and that HMOs
are not prohibited, but there isn't enough population.
12:36 - 1:36 p.m. LUNCH BREAK
CHAIRWOMAN GREEN recapped that they are trying to see how
Medicaid works within the greater scheme of lots of things that
impact costs of doing business in Alaska. One thing that
continues to come up is access to insurance for the general
population. Policy makers often have to mandate coverage. They
tried to find a private plan for Kid Care, but weren't able to do
that. Currently, there is legislation at the federal level that
may increase that program which again increases Medicaid and
reduces our pool in the State of Alaska. If Congress decides at
some point they don't want to pay, who picks up that difference,
she asked. She said the State of Alaska already has the ACIA and
wondered if the definition of ACIA could be expanded.
MR. CECIL BYKERK, Executive Vice President and Chief Actuary,
Mutual of Omaha, said he is also Chairman of ACIA and has been
with it since 1992. He said that ACIA had been reasonably
successful at providing coverage for a modest number of
individuals who had been unable to get insurance. They began
issuing policies in 1993, grew to 175 people in the middle of
1995 and grew at a very slow rate after that. Beginning in late
1998, they began to grow more rapidly and in late 2000, they
started almost jumping. They are not completely sure of all the
factors that impact them.
However, more carriers are getting out of the
individual market, not just in Alaska, but nation-wide.
Healthcare costs and, as a result of that, premiums are
going up dramatically across the country and in Alaska
as well. We're routinely seeing in the individual
market premium increases of 20 - 25 and in some cases
30 percent a year on a premium that was already fairly
hefty. We have that sort of market environment that is
out there. Alaska has obviously many unique
characteristics. I think that the individual private
insurance market place in Alaska is probably for the
most part somewhat [indisc] of what's going on around
the country.
ACIA is the mechanism by which the state met the
federal law that's commonly called HIPA, which attempts
to provide affordability to individuals who had
employer coverage or church coverage or government
coverage and were loosing that coverage for one reason
or another. Those individuals can come in to ACIA
without being a high risk individual as a result of
that approach in that legislation. We have some people
coming in under that arrangement.
MR. BYKERK said they have an annual board meeting at which people
testify and it is rewarding when they can provide coverage. Even
though the individuals are paying a premium for their coverage,
the intent is not to compete with the private market, but to add
on to it with people who are otherwise uninsurable.
However, besides paying that premium, there's a
shortfall, which is picked up by assessing all of the
insurance companies that provide major medical
insurance in the state. That assessment base is limited
to insured plans. Employers that use self-funded plans
do not contribute to the assessment. We are only
allowed to actually assess on the basis of the actual
insurance premiums. We currently in Alaska are
assessing the carriers around 1.5 percent of the
premium. While on the surface this is 1.5 percent that
the insurance carriers have to pay out, in essence it's
1.5 percent of additional premium that the insureds
will end up paying - because they have to in effect pay
the bill. So, we have the phenomenon that the healthier
insured people are to some degree footing the bill for
the uninsured. That's the way our high risk pools work
across the country and that's how their intended.
However, the fact that Alaska has reached 1.5 percent
in the premium assessment is of concern to the Board.
Typically, insurance carriers across the country feel
that they are well to have assessments get to about one
percent. They really feel that above that they're
really starting to add on additional premium to their
customers, which the customers are already paying
enough. That is one area of concern for us. There are
mechanisms that perhaps we can address. As all of you
know, ARISA prevents us from assessing self insured
ARISA plans, but there are some mechanisms that two or
three other states have used that have gotten around
that so that those states have a broader assessment
base. In a different time we would be happy to expand
on how some of that is structured.
With respect to managing the association, we are making
every attempt to provide good coverage, but at the same
time trying to manage that coverage. We've had a couple
of law changes over the years - the most recent one
which was to allow us to negotiate discounts in some
cases for a preferred provider. Networks - we
implemented that and we're trying to use that to
further reduce our overall expenditures or costs of
reimbursement for the services that are provided to our
policyholders. So, the Board is fully aware of all of
the costs.
Just to go on for a second further, I might add to how
high risk pools might be used to address some of the
other issues mentioned in the introduction. Some states
have subsidies for individuals who can't afford the
premium, but it still allows some of those individuals
with some subsidization to at least be an insured
person rather than being an uninsured person and a
responsibility of the state.
I'm involved with the Board in Montana that has passed
a law that allows the Board to seek funds other than
state funds to try and support low-income subsidies. We
have made some inroads with the federal government that
are now questionable because of all the other things
that are going on whether we're going to get some seed
money for that. I think there are possibilities there.
Of course, it still comes back to the comments if you
are dependent on federal money, it can always be pulled
out from under you…
CHAIRWOMAN GREEN asked what ACIA means.
MR.BYKERK said it is the Alaska Comprehensive Insurance
Association. He said it was originally an Act.
CHAIRWOMAN GREEN asked if it could be expanded to become more of
a high-risk pool with the ability to combine with private sector
insurance to cover people who might otherwise need additional
Medicaid.
MR. BYKERK answered that ACIA could be expanded to cover a number
of segments of the population. Typically uninsured people are
that way for two reasons - one is that they're uninsurable and
the other is that they can't afford the premium. ACIA is a place
for them to be enrolled which could be done by a subsidization
process. If they are healthy enough to get insurance from the
private sector but don't have the money to pay for it, he
suggests that they be subsidized to buy in the private market,
not by ACIA. It is set up to manage people who are unhealthy. To
the extent they would subsidize someone who is healthy through
ACIA, they would be competing with the private market. The
private market wants to sell them insurance, but at some point if
a person becomes unhealthy enough that they are uninsurable,
that's when ACIA should have a role. There is a small number of
uninsureds who just aren't interested.
REPRESENTATIVE DYSON said a number of non-profit writers who
contract with the state to provide services are having trouble
attracting and keeping qualified staff and the issue is not being
able to provide health insurance for the non-profits. He, Karen
Perdue and Commissioner Duncan wanted to find a way to qualify
like-state employees. He thought it was a good idea, but he
didn't know if there was a downside from the private industry
point of view.
MR. BYKERK said he might not be the right person to comment, but
if there's no other vehicle to provide them coverage, one would
have to think of that.
MR. JOHNSON said he is on the Board of Health Underwriters as
well as the Valley Hospital in Wasilla. As far as ACIA goes, he
asked if they have access only by high-risk personnel.
MR. BYKERK replied except by those people who would be coming in
as HIPA eligible or federally eligible individuals. This
basically means if they are with an employer for 18 months, they
could come in to ACIA whether they are uninsurable or not.
MR. JOHNSON asked if essentially everybody has access to health
care in the State of Alaska via insurance, ACIA, or presenting to
the emergency room.
MR. BYKERK responded that in general that's true.
MR. JOHNSON said there was some discussion about competition and
that Alaska is loosing insurance carriers and asked what could
help that.
MR. BYKERK replied that the Division of Insurance has created a
good environment and that's not what is driving it away. He
thought it was because a number of carriers in the United States
are getting out of the business completely. Others might be
withdrawing because they can't get enough business to provide the
overhead to stay here.
MR. JOHNSON said it is the perception of his over 1,500 clients
that health insurers are gouging consumers and asked what kind of
income they are making from health insurance products in Alaska.
MR. BYKERK said he couldn't limit himself to the state of Alaska,
but his company lost over $25 million on individual major medical
business. Not every company is in that boat, but almost no one is
making much of a profit. "Insurance companies aren't gouging
people, but the fact is that health care costs are just
skyrocketing everywhere ..."
Their profit margin is 1 - 3 percent of gross premium. He said
they weren't getting that and he didn't think very many carriers
were. One of the companies in the midst of withdrawing from
Alaska lost $50 million last year in the individual market.
REPRESENTATIVE DYSON asked if people were getting medical care
that they might not elect to get if they were spending their own
money and asked what the legislature could do to help.
MR. BYKERK replied that there were more and more sophisticated
things. Last year the pharmaceuticals increased considerably. He
explained that in the year 2000, ACIA had 395 policy holders; 89
of which had a $5,000 deductible; 25 had a $10,000 deductible;
107 had $1,500 deductible; and their lowest deductible of $500
was held by 31 people. He thought that people were trying to
carry their weight. He said they are losing the litigation on
denial of services and certifications to do certain things to the
point where companies are gun-shy to deny a service because
they're afraid they're going to get sued whether they're at fault
of not. Doctors and hospitals are in the same boat. If they don't
prescribe every possible drug and try every technique or service,
they are potentially at risk for not doing their job.
REPRESENTATIVE DYSON asked if the tort reform legislation they
passed several years ago helped at all.
MR. BYKERK said he didn't know.
REPRESENTATIVE DYSON again asked what the legislature could do to
help.
MR. BYKERK said he really didn't know the particulars on the
state of Alaska.
TAPE 01-53, SIDE B
2:17 p.m.
In his company he is trying to encourage a greater presence
because he thinks there is opportunity, but if ACIA could get a
broader base of assessment that would help keep down the price of
insurance premium in the state.
MR. JOHNSON said that ACIA appeals to him a little bit. He said
that it is not a state funded program; its mandated by law and is
funded by the insurance carriers here. This is reflected in
premiums. The committee needs to know that every time there is a
state mandate requiring insurance companies to provide a certain
service, there is an attendant cost to everybody along the road.
Estimates for mental health parity are about 1 percent and that
is way off base. It should be purchased by people who want that
service and not be passed to everyone.
CHAIRWOMAN GREEN asked how other states get around the ARISA
restrictions of creating sources of premium dollars.
CHAIRWOMAN GREEN said they have time constraints and will get
back to him on this issue. She also wanted to discuss what worked
in other states and if there was another mechanism to provide
health care to the 20,000 children in Denali Kid Care.
MR. JOHNSON said he understood that federal funding for Denali
Kid Care would be diminishing and asked if the State of Alaska
would pick up that share.
CHAIRWOMAN GREEN indicated she didn't think they would.
MR. JOHNSON said his inclination was to have a needs based
program that some folks could pursue at the state level to
provide funding for private insurance for those folks who are
working, but can't quite afford health insurance coverage - at
least a safety net program.
CHAIRWOMAN GREEN asked if that could be made into something that
worked for not only children, but for young couples.
MR. JOHNSON replied that he thought it could, but they have hard
and steadfast rules right now with regard to Medicaid and income
levels. "Either you're in or you're out." He said he would be
happy to work with them on this.
MS. NICOLE SALINAS, Aetna Accounts Executive, said they have
looking at forming associations of small groups to let them band
together to access more affordable health care.
CHAIRWOMAN GREEN said she is very concerned about resolving these
issues.
MR. BYKERK said that he would be available to help.
MR. JOHNSON said he has concerns about the competition in the
state of Alaska.
REPRESENTATIVE DYSON asked what they could do.
MR. JOHNSON replied that they could get rid of the state mandates
or at least make them optional. Those people who have the need
can pay the extra cost.
REPRESENTATIVE DYSON asked if more tort reform was needed.
MR. JOHNSON answered yes.
REPRESENTATIVE DYSON asked what he thought about people getting
care that they really didn't need if they were paying for it
themselves.
CHAIRWOMAN GREEN asked about a co-pay option.
MR. JOHNSON said he thought that would be great and he thought a
co-pay on Medicaid would be great, higher than we have now.
This again is my personal opinion. You've got people
standing in line for a carton of cigarettes and they
only have to pay a $5 co-pay when they go to the
doctor's office and they're the same people. If they
can afford to pay for that, they can afford to pay a
higher co-pay on Medicaid.
CHAIRWOMAN GREEN said she appreciated their efforts and announced
that finished the presentations and she would not take questions.
MR. BOB LOHR, Division of Insurance, said he wanted to know if
they got the one-page fact sheet, which incorporates the
division's result from the 2000 survey on health insurance. In
this survey there is one insurer, Blue Cross, that provides
almost 90 percent of the individual health insurance in Alaska.
Mutual of Omaha is next with about 9 percent. "The market is
highly concentrated."
In the small employer market, there are three insurers that
provide more than 85 percent of the insurance - Blue Cross, Aetna
and Principal. He said there are barriers to writing health
insurance in Alaska because basically it's a small remote
population and administrative costs are very high. It's a wide-
spread population and less than two-tenths of one percent of the
indemnity market in the United States. It's hard to establish
relationships and contracts with health care providers. He said
that SB 37, that would allow collective negotiation by doctors,
is emphatically not part of the solution; it would make things
much worse not better.
MR. LOHR attempted to explain the barriers to Alaskans for
purchasing health insurance. ACIA coverage for the uninsurable is
an extremely successful program and he wanted to thank Mr. Bykerk
for his involvement in it.
There are two insurers in the standard market and many are not
able to afford the premiums. According to the most recent census
data, although it's not totally reliable, approximately 19
percent of Alaskans in 2000 were uninsured and that number has
grown from previous years. Lack of affordability is the key
reason why that's the case. He said there's no free lunch with
health insurance. Direct or indirect premium subsidies or other
assistance programs are essential and he thought the private
insurance market is the best way to provide those. Programs that
reinforce the market are preferable to government run programs.
Mr. Bykerk touched on a couple of specific ACIA type mechanisms
that could assist. The premium assessment rising to 1.5 percent
of total health insurance premiums that are subject to that
assessment is a serious concern.
Having the cost of the uninsurable paid by the healthy
is kind of a death spiral. When you get to the 1.5
percent level, you're seriously influencing the cost of
health care for everyone, which drives companies out of
the market. It's not being avoided; it's simply being
paid by a very limited sector of the market. If there
isn't some way to broaden the base of that assessment,
and there are a number of models out there that have
proven very successful in other states and I believe it
would be well worth the committee's time to examine
those and we would cooperate with any kind of effort to
explore alternative mechanisms to the direct assessment
on individual health insurers.
CHAIRWOMAN GREEN thanked him and said the committee would work to
resolve these issues.
REPRESENTATIVE DYSON said that President Bush is talking about
tax credits for people who are making contributions to health
insurance and urged the committee to consider that.
CHAIRWOMAN GREEN replied that he was looking at the wrong person.
Expanding Kid Care to include families is the opposite of what
would bring about any long-term solution in the state. "I think
we could invest our money to assist people locally in requiring
involvement locally and do something that gets people into
private coverage versus Medicaid…"
MR. LOHR said the Denali Commission indicated its mandate had
been amended to focus on health facilities funding. If their
charge was further amended to add the next step of going to
health program funding and dealing with some of the intractable
problems they have just discussed, there would be funding from
the federal government with an Alaskan specific solution being
developed.
CHAIRWOMAN GREEN said they should have their staff get together
and work on language for that.
MS. MARJORIE LINDER said she is representing herself and tomorrow
is her 57th birthday. She received a birthday present from her
health insurance company - a notice saying that December 15 she
would be paying $830.88 per month in premiums for a policy with a
$2,500 deductible. This is an increase in rates since May 2000 of
$293.57.
REPRESENTATIVE DYSON said he assumed there was no change in her
coverage.
MS. LINDER said it was not related to that. She added that this
is more than her daughter pays for rent and second only to her
mortgage and twice as high as her food costs. After she has paid
her premiums and $2,500 deductible, she has paid $12,470.56
annually. "I have been contributing to the state since 1978 as a
self-employed person and I have faithfully paid all my bills to
Mutual of Omaha and I am in really a tough situation…"
She said she cannot afford to pay for additional health care.
Last year she had shoulder surgery and they declined to pay 40
percent of the bill. Mutual of Omaha "suckered me into a
particular pool at a reasonable rate in 1993." In May of 1996 she
only paid $188.13 per month; in April of 1997 she paid $226 and
they closed the pool. She said it was important to realize that
pools are time sensitive and they get closed and decrease in
size. The insurance industry is defining the small pools; she is
not electing to get into a small pool. In 5.5 years, her premiums
have gone up 441 percent.
MS. LINDER had an article from Alaska Economic Trends, June 2001,
that showed the percent of change from the previous year for
medical care. It shows that in a year in which the percent of
medical care costs changed 2 percent in Alaska, her premium was
driven up 30 percent. In a year in which the change was 4.3
percent, her premium went up 41 percent from the previous year.
I'm really trying to say there is something rotten in
[indisc.]. There is some problem we have in this
particular state that makes this really unfair,
unaffordable. As hard as I try and as hard as I work,
there is not much of a way that I can afford to keep
going.
She said she is turning to ACIA, which has become the dumping
ground for folks like her. There really is no open market in
Alaska. She said she has to wait six months for her preexisting
conditions to be covered by ACIA. She wanted them to consider a
way they can have bigger pools of people like herself that are
not time sensitive and are not age related.
An insurance agent spoke up and said the insurance concept is
spreading of risk. In his office alone in health insurance, he
has had a $1.2 million claim, and an $800,000 claim in the last
ten years. That has to be spread out amongst everybody else.
These claims were for unborn premature deliveries.
MS. LINDER said she didn't have maternity insurance. She wanted a
bigger group that wasn't time or age sensitive.
CHAIRWOMAN GREEN thanked her for her testimony.
MR. RODMAN WILSON said he is a retired internist in Anchorage and
ran the Health Department in the '80s and it's a shame that the
United States hasn't figured out how to take care of its health
care. Most of the other industrialized nations have done so. It's
a shame that Alaska doesn't figure out a way to take care of
everybody's health care.
TAPE 01-54, SIDE A
3:06 p.m.
He said that lawmakers should devise a system that theoretically
would be universal.
You wouldn't have to join it, but it would be there for
everybody. It would be a single payer system where all
medical bills went to a central clearinghouse and they
would turn around and within two weeks or less and pay
the bill. It would be a system that would allow full
free choice of who you want to go to and the hospital
and etc. It is a system that would be governed overall
by a budget. You've got to have a ceiling on things. If
you start to exceed the ceiling quarter by quarter as
these things are monitored, you cut back on the
payments to the provider until you get back in line.
One thing that might be used as a very important
feature of this would be to say, 'Okay, if you want to
surrender your Permanent Fund dividend and that of all
your family, strictly voluntary, we'll give you health
care. If it's a family, that's approaching $8,000. That
might just do family.
I think you need a committee to design a system and
cost a system. The committee would have to have staff
enough to ferret out all the numbers. I used to have
the numbers, but they're out of date and see what it
would cost. It might turn out that it cost too much; it
might be that it costs $10,000 per person and that's $1
billion and that's too much. It's more than that; it's
$6 billion for 600,000 folks. It might be that by
spreading the risk again and by taking care of
everybody in the universal system, the cost would only
be $4,000 per person. I think if you could simplify the
administration and stop the wrangle over who pays what
part of the bill, you could provide care universally to
Alaskans.
Administrative costs across the country because of all
the country, because of all the different players,
amounts to 25 percent of the health care dollar. If you
reduce that down to 10 percent, you could take care of
most of the folks that don't get taken care of.
MS. RENEE MASON said she has lived in Alaska since 1975 and has
raised seven children. Currently she is helping a friend who is
77 years old who is involved with the Medicaid and Medicare
system and living at Providence Horizon House, an assisted living
center. She would like to see Medicaid as it is come to an end.
She is intrigued by the possibilities. She wanted to call their
attention to approximately 20 young adults who are homeless and
because they have no address or phone number, they can't get
jobs. Some of them are still under age and not eligible for
services. She stated:
The young men end up stealing and dealing drugs; the
young women end up getting pregnant in order to have
services available to themselves, because when you have
a child, you qualify. Some families have just enough
income to not qualify for services and yet not enough
income to provide the services for themselves. The
persons who are in need are quite often those people
least able to help themselves. They are ill and if
you've ever been ill for any length of time or in the
hospital, you know you just do not feel up to dealing
with bureaucracy and the paperwork and the confusion
that comes with Medicaid and Medicare. These people are
often elderly. My friend in the last three years has
ended up in the hospital three times with heart attacks
because of concerns over her financial situation - part
of that is Medicaid and Medicare problems. The other
group that falls into this category are the uneducated,
often the poor. The reason they are uneducated is
partially because they are poor. The reason they're
poor is because they're uneducated. It becomes a
vicious cycle and generation after generation these
people are the ones who are vulnerable to abuse and
misuse of the system. They do not understand the
statutes and regulations and are intimidated by the
bureaucracy that goes with it.
I was intrigued by the suggestion of a one large door
type of agency where one caseworker handles a family
and is therefore able to coordinate all of the services
that are available.
MS. MASON pointed out that sometimes people have no idea what
services are available to them. She liked the housing waiver for
the elderly as it helped her friend do as much as she is capable
of doing. She thought it might be worthwhile to look at a similar
kind of housing waiver for young adults who need counseling, job
training, day care and minimal health care that might get them
into the work force, off of welfare and hopefully out of the
Medicaid system in the future.
MS. MASON said she believes that money spent on intervention and
preventive care will be a long-term cost saver.
MS. KAREN NUGEN-LOGAN, Executive Director, Nugen's Ranch, said
they offer health insurance to their employees. They are a small
non-profit organization that contracts with the state. In October
they were told their premiums were going to go up by $346 per
employee, a 52 percent increase from last year. The facility is
now paying $999.01 for each employee on the plan. They were told
the premium increased because she hired older people and that her
group had more health problems. This is devastating to employees
who are contributing to part of the increase, but she is still on
the verge of losing full coverage for everybody because she can't
afford it. Affordable insurance is very important to the
employees.
CHAIRWOMAN GREEN asked what her annual premium was.
MR. LOGAN replied that before October it was $652.85 per employee
and she had 15 at that time. The company is Aetna and it is the
only company that would take the group in 1996. Her company only
covers the employee, not their families.
MR. JERRY NEAR said he is a long-time insurance agent and a
student of this issue for a long time. He thought mandated costs
and mental health parity are issues. He believes that on the
Kenai, more than 20 percent of the people are uninsured. He put
out a web page at aktelecare.org that outlines Mr. Rodman's
testimony. One concern has been the escalating cost of state
participation in Medicaid. The cost of health insurance is so
high that many people can't handle it any more and the Medicaid
program is picking up the slack. The state might soon have to
carry the cost of the Denali Kid Care program and he's not sure
how it will do that.
REPRESENTATIVE DYSON thanked him for his advice and efforts.
MS. MARY GRISCO, All Alaska Pediatric Partnership, said that the
Partnership is a unique collaborative effort among the medical
group at Fort Richardson, the Alaska Native Tribal Health
Consortium and Children's Hospital at Providence, the
Municipality of Anchorage, the Department of Social Services, and
Valley Hospital at Fairbanks Memorial. They are encouraged by
Denali Kid Care. It gives children of working parents a medical
home, a term the American Academy of Pediatrics Policy says is a
place where comprehensive continuously accessible family centered
coordinated and affordable care is available for [indisc] by
qualified children's health specialists. This means that people
don't doctor-hop, which means that expenses go down for clinics
and emergency rooms. It means that parents have accessibility to
care for primary health needs like shots.
Health insurance for a lot of working parents simply isn't there.
Either employers do not provide it, because they figure the
employee can find it somewhere else, or the employee sponsored
private care has gaps in the benefits or high cost sharing
obligations. A parent who has a medical home for their child has
less stress and will therefore be a better worker on the job. The
Partnership appreciates concerns about fraud and is interested in
streamlining accountability without increasing operating costs.
MS. MARILYN KASPER, Alaska Primary Care Association, said she
wanted to talk to them about the Community Health Center Program,
which is playing an increasingly important role in the state. In
1995, Alaska had a single Ph.D. in Anchorage and that number has
grown to 9 non-tribal and tribal organizations with 29 sites
statewide. All of these places see people who would not otherwise
have access to basic primary health care. President Bush has
shown his commitment to the program with his plan to double the
number of health centers in the country and double the number of
people they serve. She thought they would see a $175 million
increase in appropriations for the program. Senators Stevens and
Murkowski have also recognized the importance of health centers
and are working hard to strengthen the program here. Statistics
from 1999 indicate that Alaska has five community health center
organizations and clinics in 13 communities. The program has
doubled since then. In 1999, on average, 37 percent of the
patients at the centers were uninsured and some centers exceeded
50 percent. Thirty-four of the people were insured by Medicaid,
Denali Kid Care or Medicare (5 percent) and 29 percent had
private insurance. Now that the health centers are serving people
in 29 communities it's too early to tell what the numbers are,
but they have become a major source of care for people in the
state. This is important since the cost of medical service in
Alaska is 60 percent more than it is nationally and the cost of
providing medical care has risen nearly 200 percent in the last
20 years. Financial barriers to obtaining health care coverage
are considerable, even if someone has insurance.
She pointed out that health centers save the system money and by
providing that ounce of prevention, they are saving pounds of
cure later. The impacts are significant in terms of lower
hospital admission rates, shorter lengths of stay, lessen
appropriate use of the emergency rooms and significantly lower
infant mortality and morbidity rates. Studies over the last
decade have found nationally that Medicaid patients who use
health centers receive care of greater quality that costs less
than those who use the private primary care providers, such as
hospitals, outpatient units and private physicians. These
findings are consistent with dozens of studies on the cost
effectiveness and quality of care.
MS. KASPER said the cost of technology is a major driver in the
rapidly escalating cost of health care. The reasonable
reimbursement system for Medicaid patients is changing to a
system that will start costing health centers money to see the
patients that they are serving. She urged the legislature to
continue to support health centers.
REPRESENTATIVE DYSON asked if the big hospitals belong to her
group.
MS. KASPER replied no and that the Hospital and Nursing Home
Association represents them. Health centers are private not-for-
profit agencies.
REPRESENTATIVE DYSON asked if they get some of their revenue from
fees for service.
MS. KASPER's answer was indiscernible.
REPRESENTATIVE DYSON asked if they are a trade association or a
lobby group.
MS. KASPER replied they are a membership association of people in
the health care field, but they are not a lobbying organization
in the traditional sense. She said, "Our mission is to promote
access to health care for people who don't have it."
REPRESENTATIVE DYSON asked if it is just for the members of her
association.
MS. KASPER replied no; it is for people who live in the state of
Alaska.
REPRESENTATIVE DYSON asked who pays for her services.
MS. KASPER replied they get some federal funding and membership
dues and they provide services like grant writing and conference
formation, etc.
REPRESENTATIVE DYSON asked who pays the dues.
MS. KASPER replied that for the membership organizations - the
community health centers, the rural health clinics, community
clinics and some institutional members - the dues are not
significant. Dues are $200 - $400 for an organizational member;
$100 for an institutional member; $10 for a student and $50 for
an individual member. They also have a sliding scale policy for
dues.
MS. SUSAN MASON, Sunshine Community Health Center, said Sunshine
is a non-profit family qualified health center located in
Talkeetna. It is a critical safety net provider for the northern
region of the Mat-Su Valley. Statistics from 1999 indicate that
35 percent of individuals in Willow and 26 percent in Trapper
Creek live below 200 percent of the poverty level. Analysis of
patient data indicates that 40 - 50 percent of their patient
population has no medical insurance. They also have an increasing
number of underinsured patients who mostly have catastrophic
insurance coverage or their deductibles are so high that they are
virtually without insurance. They have a difficult time getting
providers in her area and this is a critical and growing problem
for rural Alaska. Community health centers play a crucial role in
providing overall health care for Alaskans. She applauded the
committee's commitment to ensure careful and comprehensive
planning for our state's Medicaid plans and urged them to
consider the negative impacts on some of the safety net
providers.
MS. SARAH JACKSON, manager, St. Francis House, said they provide
basic emergency services to economically struggling families in
Anchorage. Many people they work with have medical problems that
contribute to their poverty. Also, a lot of people who are
working can't take care of their families. In addition, they
answer the statewide 24-hour information and referral hotline.
She is a member of the Anchorage Access to Health Care Coalition
because she believes, based on her experiences, there is a high
correlation between inadequate access to health care and poverty.
She is concerned that Denali Kid Care is going to be compromised
and asked them to do everything in their power to protect the
minimal health programs they have in place. She stated:
As it is, these programs are woefully inadequate and
there are thousands of working Alaskans who do not have
access to affordable health insurance and only receive
health care in times of an emergency... Many of these
people who are treated in this way have no means to
fill the prescriptions they receive. This is an
ineffective way to deal with health care needs.
MS. ANGELA GONZALEZ, consumer member of the Medical Care Advisory
Committee, said they advise the Commissioner on all aspects of
the medical industry. Her three children have been on the Denali
Kid Care system since it started and she is a believer in
preventive care. Before Denali Kid Care they had to go to the
emergency room quite a bit. She had comments from mothers who had
children with health issues or had prenatal care through Denali
Kid Care who are very grateful. A lot of the children were born
healthy and a lot of them who had medical problems were covered,
which made it possible for them to become healthy.
3:45 - 3:52 p.m. BREAK
CHAIRWOMAN GREEN said this committee is a jumping off place for
this issue and welcomed comments or suggestions. She thanked
everyone for attending and adjourned the meeting at 3:55 p.m.
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