Legislature(2001 - 2002)

04/18/2001 01:45 PM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     ALASKA STATE LEGISLATURE                                                                                   
       SENATE HEALTH, EDUCATION & SOCIAL SERVICES COMMITTEE                                                                   
                          April 18, 2001                                                                                        
                             1:45 p.m.                                                                                          
MEMBERS PRESENT                                                                                                               
Senator Lyda Green, Chair                                                                                                       
Senator Loren Leman, Vice Chair                                                                                                 
Senator Gary Wilken                                                                                                             
Senator Jerry Ward                                                                                                              
Senator Bettye Davis                                                                                                            
MEMBERS ABSENT                                                                                                                
All Members Present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
CONTINUATION OF PRESENTATION ON MEDICAID DIRECTIONS BY THE                                                                      
DEPARTMENT OF HEALTH AND SOCIAL SERVICES - ALZHEIMER'S/DEMENTIA,                                                                
SCHOOL BASED CLAIMS, MEDICAID REFINANCING                                                                                       
SENATE JOINT RESOLUTION NO. 26                                                                                                  
Urging the President and the Congress to provide additional funding                                                             
for special education services.                                                                                                 
     MOVED CSSJR 26 OUT OF COMMITTEE                                                                                            
SENATE BILL NO. 188                                                                                                             
"An Act establishing an education fund and a land endowment for                                                                 
public education; and providing for an effective date."                                                                         
     HEARD AND HELD                                                                                                             
SENATE JOINT RESOLUTION NO. 25                                                                                                  
Proposing an amendment to the Constitution of the State of Alaska                                                               
relating to education.                                                                                                          
     HEARD AND HELD                                                                                                             
PREVIOUS SENATE COMMITTEE ACTION                                                                                              
SJR 26 - No previous action.                                                                                                    
SB 188 - No previous action.                                                                                                    
SJR 25 - No previous action.                                                                                                    
Presentation on Medicaid Directions - See HESS minutes dated 4/9/01                                                             
and 4/11/01.                                                                                                                    
WITNESS REGISTER                                                                                                              
CONTINUATION OF MEDICAID PRESENTATION BY:                                                                                       
Mr. Bob Labbe, Director                                                                                                         
Division of Medical Assistance                                                                                                  
Department  of Health &                                                                                                         
  Social Services                                                                                                               
PO Box 110601                                                                                                                   
Juneau, AK   99801-0601                                                                                                         
Mr. John Sherwood                                                                                                               
Division of Medical Assistance                                                                                                  
Department  of Health &                                                                                                         
  Social Services                                                                                                               
PO Box 110601                                                                                                                   
Juneau, AK   99801-0601                                                                                                         
Ms. Alison Elgee                                                                                                                
Deputy Commissioner                                                                                                             
Department of Administration                                                                                                    
PO Box 110200                                                                                                                   
Juneau, AK   99811-0200                                                                                                         
Mr. Greg Maloney                                                                                                                
Director of Special Education                                                                                                   
Department of Education &                                                                                                       
 Early Development                                                                                                              
801 W 10 St.                                                                                                                    
Juneau, AK   99801-1894                                                                                                         
OTHER WITNESSES:                                                                                                                
Mr. Jerry Burnett                                                                                                               
Staff to Senator  Green                                                                                                         
Alaska State Capitol                                                                                                            
Juneau, AK   99801-1182                                                                                                         
POSITION STATEMENT:  Explained the provisions of SJR 26.                                                                      
Ms. Sandy Altland                                                                                                               
Staff to Senator Ward                                                                                                           
Alaska State Capitol                                                                                                            
Juneau, AK   99801-1182                                                                                                         
POSITION STATEMENT:  Explained the provisions of SB 188 and SJR 25.                                                           
Dick Mylius                                                                                                                     
Division of Mining, Land, & Water                                                                                               
Department of Natural Resources                                                                                                 
550 W 7th Ave., Suite 1050                                                                                                      
Anchorage, AK  99501-3579                                                                                                       
POSITION STATEMENT:  Opposed to SB 188.                                                                                       
Mr. Jim Hansen                                                                                                                  
Division of Oil and Gas                                                                                                         
Department of Natural Resources                                                                                                 
550 W. 7th Ave., Suite 800                                                                                                      
Anchorage, AK  99501-3560                                                                                                     
POSITION STATEMENT:  Opposed to SB 188.                                                                                       
ACTION NARRATIVE                                                                                                              
TAPE 01-34, SIDE A                                                                                                            
Number 001                                                                                                                      
CHAIRWOMAN LYDA  GREEN called the Senate Health, Education  & Social                                                          
Services Committee meeting  to order at 1:45 p.m.  She asked Mr. Bob                                                            
Labbe to continue his presentation on Medicaid.                                                                                 
                        MEDICAID DIRECTIONS                                                                                 
MR.  BOB LABBE,  Director  of the  Division of  Medical Assistance,                                                             
Department of Health and  Social Services (DHSS) introduced Mr. John                                                            
Sherwood  of the Division,  and made the  following statement.   The                                                            
state, as a payer,  has the option of changing the  criteria it uses                                                            
to control nursing  home admissions. The state has  certain policies                                                            
to manage utilization,  one being to decide who can use the service.                                                            
A Medicaid  client  is not  necessarily  eligible  for all  Medicaid                                                            
services.   Historically,  the eligibility  rules  for nursing  home                                                            
admission have  been crafted narrowly.   Because the focus  has been                                                            
medically oriented, access  to community based care has been limited                                                            
because the same  standard must be used for both.   Changes to these                                                            
rules will  be an adjustment to policy  regarding which clients  can                                                            
have access  to nursing  home care  based on  their condition  under                                                            
CHAIRWOMAN  GREEN  asked  if  people can  qualify  for  Medicaid  by                                                            
service or by the person's circumstances.                                                                                       
MR. LABBE  explained  that to qualify  for Medicaid,  a person  must                                                            
meet certain requirements.   If a person qualifies,  the state has a                                                            
benefit package  that contains different services.   However, within                                                            
the program  for each service,  DHSS has  criteria, such as  whether                                                            
the service is  medically necessary.  One example  of such a service                                                            
would be cosmetic  procedures.   He  views those policies  as a form                                                            
of utilization  control.  The Alzheime'sr/dementia  issue is tied to                                                            
that.  Other   states  have  standards   that  allow  persons   with                                                            
Alzheimer's  to access  nursing  or home  or community  based  care,                                                            
while  Alaska's  standard   is  very  tight.    It  is  tight  as  a                                                            
utilization  control, not  because DHSS  feels those  people do  not                                                            
need services but because  there is a cost implication.  States have                                                            
flexibility within the federal structure to make those policies.                                                                
CHAIRWOMAN  GREEN asked  if states  present  a plan  to the  federal                                                            
government  for approval  or  whether  states must  provide  certain                                                            
services before it can choose others.                                                                                           
MR. LABBE explained  that in some  cases, the federal government  is                                                            
very  prescriptive  but in  other  cases the  state  submits a  plan                                                            
saying  what it  will cover  and how  the  program will  work.   The                                                            
federal  agency  may  ask questions  and  want  to  negotiate  about                                                            
certain aspects,  but there  is quite a bit  of variation among  the                                                            
states' programs.   He pointed out  it is not a "top-down"  exercise                                                            
and that court action can also take place.                                                                                      
CHAIRWOMAN GREEN asked  Mr. Labbe whether DHSS could choose to cover                                                            
services for  Alzheimer's Disease  and dementia without legislative                                                             
MR. LABBE  said DHSS's  position has  been that  it could make  this                                                            
change  through   a  regulation  but  to  do  so  would   have  cost                                                            
implications.    During discussions  about  that  possibility,  DHSS                                                            
staff thought it would  need some other control mechanism, which may                                                            
need  to be  legislated.   He  asked that  Mr. Sherwood  and  Deputy                                                            
Commissioner Alison  Elgee of the Department of Administration  join                                                            
in this discussion.                                                                                                             
MR. SHERWOOD,  Division  of Medical  Assistance,  DHSS, referred  to                                                            
some  handouts he  distributed  to committee  members,  one being  a                                                            
summary  of the Long  Term Care  Task Force,  another being  options                                                            
under Medicaid  for approaching  the  issue of long  term care.   He                                                            
pointed out  that people with Alzheimer's  and related dementias  as                                                            
their primary  diagnosis are not prohibited from receiving  Medicaid                                                            
services  available to other  Medicaid beneficiaries.   People  with                                                            
Alzheimers'   disease,  if  they   meet  the  Medicaid  eligibility                                                             
criteria, can  be treated by physicians, receive prescription  drugs                                                            
and get  personal care  services.   The issue  of Medicaid  coverage                                                            
arises  with regard  to coverage  of nursing  facility services  and                                                            
home and community  based waivers because to receive  services under                                                            
a  waiver,  a client  must  be  eligible  to  receive  nursing  home                                                            
CHAIRWOMAN GREEN  asked Mr. Sherwood to further explain  the waiver.                                                            
MR. SHERWOOD  explained that the home  and community based  services                                                            
waiver  offers  a  number of  services  which  are  community  based                                                            
alternatives  to nursing facility  services.  Those include  respite                                                            
care, chore services, environmental  modifications and care provided                                                            
in an assisted living setting.                                                                                                  
CHAIRWOMAN  GREEN asked if the waiver  is for something besides  the                                                            
cost of living in a facility.                                                                                                   
MR. SHERWOOD explained  that it could be for visiting care or for an                                                            
assisted living setting  where someone still has to pay the room and                                                            
board but Medicaid will pay for the services provided.                                                                          
MR. SHERWOOD  said  that under  Alaska's nursing  facility level  of                                                            
care standard, people must  require medical supervision or intensive                                                            
rehabilitation  services   to  qualify.    Very  often  people  with                                                            
Alzheimer's  and related  dementia don't  need medical supervision.                                                             
They may be physically  healthy or their health needs  are such that                                                            
most people could  manage themselves.  He noted this  same situation                                                            
applies to other cognitive impairments.                                                                                         
CHAIRWOMAN GREEN asked how that group is categorized.                                                                           
MR. SHERWOOD said sometimes  it is described as functionally limited                                                            
and cognitively  impaired.   He noted  the vast  majority of  people                                                            
with dementias  and these  types of impairments  in advanced  stages                                                            
meet the nursing facility  level of care requirements.  They tend to                                                            
be older and have  other health needs.  If they cannot  manage their                                                            
own medication,  they will need medical supervision.   They comprise                                                            
a small  subset of  Medicaid clients.   Many are  covered for  other                                                            
reasons and, in addition  the Pioneers' Homes provide services for a                                                            
number of people with dementia.                                                                                                 
CHAIRWOMAN GREEN  asked if Medicaid pays for room  and board for any                                                            
clients in the Pioneers Homes.                                                                                                  
MR. SHERWOOD  said it  does not.   He pointed  out the other  factor                                                            
that complicates  this  issue is that  under the  Medicaid law,  the                                                            
financial eligibility criteria  that Alaska uses for people who need                                                            
an institutional  level of care is  higher than for people  who live                                                            
in the community  without receiving that care.  The  income level is                                                            
about $1600 per month for  an individual; the spouse's income is not                                                            
included.    That   category    also    includes   community-spouse                                                             
impoverishment protections  that prevent people from having to spend                                                            
down all of their assets.                                                                                                       
CHAIRWOMAN  GREEN noted an individual  would have to have  an income                                                            
of less than $20,000 per year.                                                                                                  
MR. SHERWOOD  said that is correct.   He explained that is  a higher                                                            
standard because for an  individual over 65 to qualify for Medicaid,                                                            
the income standard  is $984 per month.  That is the  standard under                                                            
which aged  and disabled  are determined  to be  eligible for  Adult                                                            
Public Assistance.                                                                                                              
CHAIRWOMAN  GREEN asked how the standard  income level of  $1600 was                                                            
MR.  SHERWOOD  said  DHSS uses  the  maximum  amount  allowed  under                                                            
federal law, which  is three times the federal monthly  supplemental                                                            
security income (SSI) payment.                                                                                                  
CHAIRWOMAN GREEN  asked if Alaska has a percentage  added into that.                                                            
MR. SHERWOOD  said it does  not.  Because  that payment is  the same                                                            
for all 50  states, there is no Alaska  adjustment as there  is with                                                            
the poverty level.   He stated that, according to  the last research                                                            
DHSS  did, Alaska  is one  of  only two  states whose  criteria  for                                                            
admission  to nursing  homes  is based  strictly  on medical  needs.                                                            
Most other  states have  made some  provision to  cover people  with                                                            
cognitive or functional limitations.                                                                                            
CHAIRWOMAN GREEN asked why Alaska has not done that.                                                                            
MR. SHERWOOD said he believes  that policy was made with a series of                                                            
decisions.  Part of Alaska's policy  was based on the fact  that the                                                            
Pioneers  Homes   have  been  available   to  provide  care,   other                                                            
investments  have been made in the  senior population and  there are                                                            
cost  impacts  involved  in  expanding   coverage  to  nursing  home                                                            
services  in Alaska.  Alaska also  provides limited  funds for  care                                                            
coordination and caregiver  support through the Commission on Aging.                                                            
Part  of those  funds  come  from  the Alaska  Mental  Health  Trust                                                            
Authority (AMHTA).                                                                                                              
CHAIRWOMAN GREEN asked if that is a minimal amount of money.                                                                    
MS.  ALISON  ELGEE,   Deputy  Commissioner  of  the  Department   of                                                            
Administration  (DOA),  said those  funds  have been  available  for                                                            
about  seven years.   There  have been  minimal  increases in  those                                                            
funds over  the last seven years so  as the population grows,  fewer                                                            
needs  can  be met.    DOA  has care  coordination  grants  in  four                                                            
communities.    Western  Alaska  gets  no  care  coordination  grant                                                            
coverage.   DOA has 12 adult day facilities  around the state;  they                                                            
have been available  since the inception of the program.   DOA works                                                            
in partnership  with Medicaid, in  terms of providing the  services,                                                            
so that  people that  are Medicaid  eligible, but  attend adult  day                                                            
centers  or are in  need of  care coordination,  can  use that  as a                                                            
financing  mechanism  as opposed  to the grant.   DOA  is trying  to                                                            
leverage what is available  to communities with the use of both fund                                                            
CHAIRWOMAN  GREEN asked for  an example of  a service that  would be                                                            
funded through the home and community based services program.                                                                   
MS. ELGEE said adult day care programs are included.                                                                            
CHAIRWOMAN GREEN asked  if those are free to people who are Medicaid                                                            
MS.  ELGEE  explained that  the  adult  day care  programs  have  an                                                            
established fee based on a sliding fee scale.                                                                                   
CHAIRWOMAN  GREEN asked  if Medicaid  pays if a  person is  Medicaid                                                            
MS. ELGEE said  in actuality a sliding  fee scale is used  but it is                                                            
difficult  to do the income  analysis necessary  to force people  to                                                            
pay so it almost  ends up to be voluntary on the part  of the people                                                            
who have the ability  and willingness to pay.  That  fee is used for                                                            
reimbursement  for Medicaid-eligible  clients.   She said the  state                                                            
grants are  the foundation  for these programs  and were used  to do                                                            
the  startup.   Medicaid  came along  later.   All  of the  programs                                                            
struggle with limited funding.   One problem is insufficient funding                                                            
to provide services  for the entire day, so the centers  may be open                                                            
from  9:00  a.m.   to  3:00  p.m.,  for  example.    That   provides                                                            
difficulties  for family members who  need to work.  The  problem is                                                            
not  only getting  more  funding  to  provide  more adult  day  care                                                            
centers  around  the state,  but  also  to expand  the  services  at                                                            
existing centers.  Some  of the other programs included in that same                                                            
component are  respite care services  and care coordination  grants.                                                            
CHAIRWOMAN  GREEN asked  if some  of those  are  run through  senior                                                            
MS. ELGEE said yes, a number  of the senior centers are also service                                                            
providers for other community based services.                                                                                   
COMMISSIONER  KAREN PERDUE,  DHSS, informed  the committee  that the                                                            
needs of the  elderly population are  overwhelming, so DHSS  and DOA                                                            
have tried to limit the  number of nursing home beds and develop the                                                            
community care  options. DHSS and DOA believe people  prefer to stay                                                            
in their own  homes and communities  and it is more cost  effective.                                                            
The Long  Term Care  Task Force asked  DHSS and  DOA to look  at the                                                            
option of including  coverage for nursing home care  under Medicaid,                                                            
an exception to  the direction that DHSS and DOA was  heading.  DHSS                                                            
and DOA  have been  trying to get  the best return  for the  dollars                                                            
they spend.                                                                                                                     
MR. SHERWOOD  told the  committee  he would discuss  how this  issue                                                            
could be  addressed with  Medicaid.  The first  option is to  change                                                            
the nursing  facility  eligibility criteria  and  come more in  line                                                            
with  the  other  48 states.    That  would  require  rewriting  the                                                            
regulations  to  allow  people who  have  cognitive  and  functional                                                            
limitations  to be  served  in nursing  facilities  under a  waiver.                                                            
DHSS  believes  it  would  make  sense   to  make  that  change  via                                                            
regulation  if a good  assessment  process takes  place up front  so                                                            
that people are appropriately  determined eligible and made aware of                                                            
their choices.   The second option would allow DHSS  to cover people                                                            
who  are 65  and older  with functional  or  cognitive impairments.                                                             
Under the federal  option, states can define the services  they want                                                            
to provide.                                                                                                                     
CHAIRWOMAN GREEN  asked if an assisted living home  is a small group                                                            
MR. SHERWOOD  said that is  correct.  He  explained the significant                                                             
difference in the second  option is that it is limited to people who                                                            
are age  65 and older.   If the nursing  home criteria is  expanded,                                                            
higher income  standards could be  used.  If DHSS puts someone  on a                                                            
waiver, that person must  be offered the choice between nursing home                                                            
care  or home  and  community  based  services.   Under  the  second                                                            
option,  the person  is not  offered  a choice.   He  noted the  two                                                            
problems with  the second option are  that in limiting it  to people                                                            
who are  65 and older,  the issue  of providing  services to  people                                                            
with early  onset dementia or other  cognitive impairments  will not                                                            
be  addressed.   Those  people  are  typically  unable to  meet  the                                                            
nursing  home criteria  so they would  fall out  of any safety  net.                                                            
The  second problem  is  eligibility  so you  face the  prospect  of                                                            
impoverishing a spouse.                                                                                                         
CHAIRWOMAN  GREEN asked if the assumption  is that these  people, if                                                            
they  chose to  liquidate, could  afford  their own  services.   She                                                            
asked why there is a financial ceiling.                                                                                         
MR. SHERWOOD explained  that the second option grew  out of a set of                                                            
circumstances in the Medicaid  program that do not apply today.  Ten                                                            
years ago,  DHSS was severely restricted  by the federal  government                                                            
in the number  of people  it could put on  home and community  based                                                            
waivers. This  was an option that  could be done in addition  to the                                                            
waiver to get  around that limit.   That is what made it  attractive                                                            
to states. It is still on the books.                                                                                            
CHAIRWOMAN  GREEN asked  if Congress  may  phase that  out. She  was                                                            
under the impression  that these programs  were no longer  requiring                                                            
people to spend down and lose everything.                                                                                       
COMMISSIONER PERDUE said  Alaska does not cover the medically needy,                                                            
so  that a  retired  teacher,  for  example,  could not  spend  down                                                            
assets. That  teacher is automatically  disqualified each  and every                                                            
month. That  is one thing other states  have done to protect  people                                                            
who have some assets.                                                                                                           
CHAIRWOMAN GREEN asked how that is done.                                                                                        
COMMISSIONER  PERDUE said another  asset test would be submitted  to                                                            
the federal agency  for approval.  She added that  nursing home care                                                            
in Alaska costs  about $80,000 to $100,000 per person  per year.  If                                                            
Alaska  did  not have  the  spousal  impoverishment  protections,  a                                                            
person could lose all assets very quickly.                                                                                      
CHAIRWOMAN  GREEN asked if that is  what Mr. Sherwood was  referring                                                            
to when he mentioned the income level of $1600 per month.                                                                       
MR. SHERWOOD said  that is the higher income standard  but there are                                                            
also provisions  that allow the client  to set aside assets  for his                                                            
or her spouse (about $87,000).   The home is exempt, but if a person                                                            
doesn't have assets, he  or she cannot maintain a house.  For people                                                            
in nursing  homes, their  income,  other than about  a $75  personal                                                            
needs allowance,  goes to  pay for their cost  of care in a  nursing                                                            
home.  If they have a spouse,  they can use their spouse's income up                                                            
to  $2200 per  month.   Very  often that  is important  because  one                                                            
household member has most of the pension income.                                                                                
Number 1825                                                                                                                     
SENATOR DAVIS  asked if the cost of  $80,000 per year for  a nursing                                                            
home stay is a special Medicaid rate.                                                                                           
COMMISSIONER PERDUE said it is.                                                                                                 
SENATOR DAVIS asked if the public rate is more.                                                                                 
COMMISSIONER PERDUE said she didn't know.                                                                                       
MR. LABBE said  that he believes,  for the most part, that  Alaska's                                                            
Medicaid rate  is comparable to the private rate.   DHSS sets a rate                                                            
for each facility in the state.                                                                                                 
COMMISSIONER PERDUE  said that very few people can  afford it, which                                                            
is why  about  80 percent  of the  people  in nursing  homes are  on                                                            
CHAIRWOMAN GREEN asked how that compares to other states.                                                                       
COMMISSIONER PERDUE  said it is probably double.   However, Alaska's                                                            
nursing  homes in  rural  areas are  very  small compared  to  other                                                            
states.  The fixed  costs are spread over 10 beds  as opposed to 150                                                            
MR. SHERWOOD  said, regarding  the number of  people and the  costs,                                                            
DHSS does not  know how many people  are falling through  the cracks                                                            
right now.   His best  guess is  that number is  around 100  and the                                                            
number  would grow  by about  50 people  per  year.   He noted  that                                                            
anytime something  new is offered,  people who are just managing  on                                                            
their  own  without  services  would  seek  services  if  they  were                                                            
available.   DHSS  usually hears  about people  when  they are  at a                                                            
crisis  stage.   The  program  would eventually  spend,  after  five                                                            
years, about  $12 million  of which $5 million  would come  from the                                                            
general fund.                                                                                                                   
SENATOR WILKEN  noted that Mr. Sherwood  was giving the description                                                             
of the first option.                                                                                                            
MR. SHERWOOD  said the projected  costs for  the second option  will                                                            
not cost  as much because  it does not reach  as many people.   That                                                            
option  also does  not pay  for nursing  home care  and, while  most                                                            
people prefer  to stay at  home for as long  as possible, there  are                                                            
some people who are better off in a facility.                                                                                   
CHAIRWOMAN  GREEN  asked,  if one  of these  options  were  adopted,                                                            
whether  a corresponding  reduction  in costs would  occur in  other                                                            
programs funded by the state, such as at Pioneers' Homes.                                                                       
MS. ELGEE said  she would not anticipate a decrease  in the costs of                                                            
the  Pioneers  Homes  because  of  the  projected  increase  in  the                                                            
population.   There  may be people  who are  entering the  Pioneers'                                                            
Homes today who  could live in a community setting  longer with some                                                            
assistance that  is not currently available, but the  people seeking                                                            
admission  to  Pioneers'  Homes now  have  exhausted  the  community                                                            
resource capacity.   Either the assisted  living home can  no longer                                                            
handle the  behaviors or the family  has exhausted its energy.   She                                                            
pointed out that  DOA did look at whether it could  design admission                                                            
criteria for the Pioneers'  Homes that would allow individuals under                                                            
the age of 65  that suffer from early onset Alzheimer's  admittance.                                                            
The Department  of Law told  DOA that it  can discriminate  based on                                                            
condition or age, but not both.                                                                                                 
MR. SHERWOOD  said the issue  is about keeping  up with the  growth.                                                            
This population  presents itself to other places in  our system when                                                            
their care situations fail:  Adult Protective Services or the public                                                            
guardians' office.                                                                                                              
CHAIRWOMAN  GREEN  asked if  the  projected  impact of  adding  this                                                            
program  to the general  fund reflects  the bigger  picture in  that                                                            
less money might be spent elsewhere.                                                                                            
MR. SHERWOOD  said there  may be a  dollar you  don't have to  spend                                                            
somewhere else in the future.                                                                                                   
SENATOR  WILKEN  commented  that  whenever  the  topic  of  covering                                                            
Alzheimer's patients under  Medicaid was raised during the Long Term                                                            
Care  Task  Force  meetings,  no one  knew  what  that  would  cost.                                                            
Someone suggested $20 to  $40 million.  He expressed appreciation to                                                            
Mr. Labbe  and Mr.  Sherwood for  getting some  numbers together  so                                                            
that  perhaps,  this program  can  be funded  in  the  future.   The                                                            
Legislature now knows the  cost will be closer to $5 to $10 million.                                                            
CHAIRWOMAN GREEN  thanked Mr. Labbe and Mr. Sherwood  and asked Greg                                                            
Maloney to discuss school based claims.                                                                                         
Number 2311                                                                                                                     
MR.  GREG   MALONEY,  Special  Education   Section,  Department   of                                                            
Education  and Early  Development  (DOEED), informed  the  committee                                                            
that under the  Individuals with Disabilities Act  (IDEA) as amended                                                            
in 1997, Medicaid  and other federal services that  are available to                                                            
student are  not superceded  by the funding  provided to states  for                                                            
special education services.                                                                                                     
CHAIRWOMAN GREEN asked if they are in addition to.                                                                              
MR. MALONEY  said they  are.  He  explained that  services that  are                                                            
reimbursable at the federal  level can be claimed for reimbursement.                                                            
There  are two  kinds  of services  that  can  be billed  for  under                                                            
Medicaid:  direct  services  or  administrative   costs  related  to                                                            
Medicaid  services in the  district.  DOEED  sends a survey  to each                                                            
district,  which is reviewed  by DOEED and  DHSS.  Both departments                                                             
determine  what costs  are  reimbursable under  Medicaid.   For  the                                                            
current year,  the total  reimbursement for  Medicaid costs  was $5,                                                            
TAPE 01-34, SIDE B                                                                                                              
MR. MALONEY continued.   The result of that determination  is that a                                                            
total of $2,442,670  was sent out  to districts on a prorated  basis                                                            
to cover Medicaid  administrative  costs.  Those funds do  not cover                                                            
direct services  such as speech pathology, or other  related medical                                                            
services.  He  explained that the administrative services  fund pays                                                            
for  salaries  and  other  expenses  related  to  students  who  are                                                            
Medicaid eligible.                                                                                                              
CHAIRWOMAN  GREEN asked for  an example of  something the  Anchorage                                                            
School District would do to qualify for these funds.                                                                            
MR. MALONEY  said case planning would  be an example.  He  explained                                                            
that the  federal law allows  reimbursement  for Medicaid but  it is                                                            
based on  state plans.   Alaska's current  state plan reflects  this                                                            
arrangement.    However,   districts  have  said  this   funding  is                                                            
insufficient  because  more students  have increased  medical  needs                                                            
and, as  a result of the  Cedar Rapids case,  medical services  that                                                            
can be  provided in  the school  need to be  provided during  school                                                            
hours.  Alaska's current  arrangement was designed to get some needs                                                            
met while avoiding  some of the pitfalls  associated with  Medicaid.                                                            
He  felt  this  issue  warrants  more  discussion   among  education                                                            
agencies and Medicaid because these costs continue to increase.                                                                 
Some of the issues that  need to be addressed in the next state plan                                                            
include sources of matching  funds and what mechanism to use to bill                                                            
for  Medicaid expenses.    Three billing  options  exist, two  being                                                            
direct billing  or bundled billing  for each category of  service or                                                            
for each type of disability.                                                                                                    
CHAIRWOMAN  GREEN asked  if a  block grant  approach  has ever  been                                                            
MR.  MALONEY  said to  his  understanding,  it has  not.   He  noted                                                            
another topic  for discussion is Alaska's Medicaid  policy regarding                                                            
out-of-state placement  costs.  When students are sent out-of-state,                                                            
education costs  are incurred but Medicaid does not  currently cover                                                            
those costs.                                                                                                                    
CHAIRWOMAN GREEN asked  if an Alaskan student went out-of-state, the                                                            
cost would be borne by DOEED with state funds.                                                                                  
MR. MALONEY  said each district is  required to provide those  funds                                                            
through  foundation  formula   funds,  federal  funds,  or  under  a                                                            
category called  intensive funds.   The intensive funds are  usually                                                            
insufficient  to meet out-of-state  costs,  which range from  $40 to                                                            
$70 per day.                                                                                                                    
MR. MALONEY pointed out  that limitations would have to be addressed                                                            
on both the state  and federal level regarding what  allowable costs                                                            
are.   DOEED  wants to  look at  what has  worked  in other  states.                                                            
DOEED's  goal  is to  work  with  DHSS  to discuss  whether  or  not                                                            
Alaska's  Medicaid  plan should  be  revised because  districts  are                                                            
coming under heavier  financial obligations.  DOEED  wants to see if                                                            
the plan  could be revised  to support districts  to provide  better                                                            
CHAIRWOMAN GREEN asked if any legislation would be required.                                                                    
MR. LABBE  said  he does  not think  so; he believes  the  revisions                                                            
could be done through regulation changes.                                                                                       
Number 2083                                                                                                                     
CHAIRWOMAN  GREEN noted  the  Senate HESS  Committee  might want  to                                                            
discuss this issue during  the interim.  She asked Mr. Maloney if it                                                            
is profitable for school districts to provide direct services.                                                                  
MR.  MALONEY  said  he worked  for  a  co-op  that  provided  direct                                                            
services to  school districts in Illinois.   It was able  to capture                                                            
$200,000, which  was a significant  portion of its budget.   In that                                                            
arrangement,  several districts banded  together to support  a co-op                                                            
made up  of school  psychologists,  speech pathologists,  and  other                                                            
related service providers.                                                                                                      
CHAIRWOMAN  GREEN said  she  believes such  a discussion  has  merit                                                            
because,  for once,  the Medicaid  money would flow  back to  school                                                            
districts, rather than used to fund vendor services.                                                                            
SENATOR DAVIS asked what the third type of billing method is.                                                                   
MR.  MALONEY   said  the  third  way   is  billing  method   is  for                                                            
administrative costs, which is what DOEED current does.                                                                         
SENATOR  WILKEN asked  if the state  receives $22,500  per year  for                                                            
each student who is categorized as needing intensive funding.                                                                   
MR. MALONEY  said under IDEA 97 and  state regulations, there  is no                                                            
category for  significance of impairment.   A category, for  example                                                            
mental retardation, contains  a continuum of severity.  The IEP team                                                            
develops an  appropriate program and  what level of service  will be                                                            
required.  The intensive  funding category in the general fund is in                                                            
addition  to  the  foundation  formula.    There  is  no  individual                                                            
reimbursement  anymore based on disability under the  state formula.                                                            
However,  for certain students  who meet  seven criteria, one  being                                                            
the need for ongoing assistance,  there is an additional amount that                                                            
is five times the ADM, which equals about $20,000 per student.                                                                  
SENATOR WILKEN asked who determined the criteria.                                                                               
MR. MALONEY said the criteria was set by the state.                                                                             
SENATOR  WILKEN asked  if the additional  funds  are used for  named                                                            
MR. MALONEY said that is correct.                                                                                               
SENATOR WILKEN  noted that Mr. Maloney  said the intensive  funds do                                                            
not cover the entire costs  but, according to his calculation of $70                                                            
times 270 school days, the cost would be about $19,000.                                                                         
MR. MALONEY  explained  that he  was referring  to the out-of-state                                                             
placement cost.   He pointed out that those students  typically need                                                            
year-round services  but he noted that not every student  that needs                                                            
services  out-of-state has  been identified  as a special  education                                                            
CHAIRWOMAN  GREEN pointed out that  a student might be sent  out-of-                                                            
state for treatment for behavioral or emotional problems.                                                                       
MR. MALONEY  said that is one of the  areas in which DHSS  and DOEED                                                            
do not have similar  criteria so that a student might  be considered                                                            
severely  emotionally  disturbed by  DHSS but  not by  DOEED.   That                                                            
criteria  is  one  of the  issues  that  both  departments  need  to                                                            
CHAIRWOMAN  GREEN  thanked   Mr. Maloney   and  announced  that  the                                                            
committee  would take up  SJR 26, which is  sponsored by the  Senate                                                            
HESS Committee.                                                                                                                 
             SJR 26-FEDERAL AID FOR SPECIAL EDUCATION                                                                       
MR.  JERRY BURNETT,  staff  to  Senator Green,  read  the  following                                                            
sponsor statement.                                                                                                              
     In 1976,  the United States Congress  passed PL 94-142,  a                                                                 
     portion  of the Individuals  with  Disabilities Education                                                                  
     Act, providing  a national framework  for providing  free,                                                                 
     appropriate  public education  to all students regardless                                                                  
     of the  level or severity of  disability.  Along with  the                                                                 
     guarantee  of  appropriate  education,  Congress promised                                                                  
     states  that it would  provide funding  for 40 percent  of                                                                 
     these special education services.                                                                                          
     Since  the passage  of the Individuals  with Disabilities                                                                  
     Education  Act, Alaska has provided the special  education                                                                 
     services required  by federal law.  However, Congress  has                                                                 
     failed  to  live  up  to  its  promise  of providing   the                                                                 
     necessary  funding  to cover  the costs  of this mandate,                                                                  
      instead providing between 12 and 15 percent annually of                                                                   
     Alaska's special education costs.                                                                                          
         SJR 26 petitions the U.S. Congress to provide the                                                                      
     promised level of funding for special services.                                                                            
MR. BURNETT explained that  for the current fiscal year, the federal                                                            
appropriation  is  about  15  percent  of  special  education  costs                                                            
nationwide.  The  budget proposed by President Bush  for FY 02 is at                                                            
17 percent.                                                                                                                     
SENATOR LEMAN asked if  the resolution asks Congress to fill the gap                                                            
between 15 and 40 percent.                                                                                                      
MR. BURNETT said  it does. He pointed out the state  currently funds                                                            
that amount.                                                                                                                    
SENATOR LEMAN  asked for clarification of the phrase,  "significant,                                                            
genuine assistance" on page 2, line 12.                                                                                         
MR. BURNETT said genuine  assistance means up to the level promised,                                                            
and that SJR 26  was patterned after a resolution  passed in another                                                            
SENATOR LEMAN  moved to amend  SJR 26 (Amendment  1) so that  copies                                                            
are also sent  to U.S. Representative John Boehner,  Chairman of the                                                            
House Committee  on Education  and the Workforce,  and U.S.  Senator                                                            
James  Jeffords,  Chairman   of the  Senate   Committee  on  Health,                                                            
Education, Labor and Pensions.   There being no objection, Amendment                                                            
1 was adopted.                                                                                                                  
SENATOR  LEMAN moved CSSJR  26(HES) from  committee with  individual                                                            
recommendations and its  accompanying zero fiscal note.  There being                                                            
no objection, the motion carried.                                                                                               
               SB 188-EDUCATION FUND/ LAND ENDOWMENT                                                                        
CHAIRWOMAN GREEN announced SB 188 to be up for consideration.                                                                   
MS.  SANDY  ALTLAND, staff  to  Senator  Ward,  sponsor of  SB  188,                                                            
explained  that SB 188  establishes  an education  fund from  a land                                                            
endowment of 5  million acres for public education  and provides for                                                            
an effective  date.  The education  fund would be separate  from the                                                            
general  fund:  the principal  of  the  fund  would be  funded  from                                                            
legislative appropriations,  gifts, bequests, and contributions from                                                            
individuals.   The principal  would be invested  and the  investment                                                            
income would be  appropriated for public schools and  the University                                                            
of Alaska.   SB 188 sets  up an education  fund board and  describes                                                            
the board's make-up,  its powers and duties.  SB 188  also defines a                                                            
timeline for  appropriating 5 million  acres to the education  fund.                                                            
The board would oversee  the management and disposition of the land.                                                            
SENATOR WARD moved Amendment 1, which reads as follows.                                                                         
     On page 2, following line 31 insert:                                                                                       
          2) a member of the Board of Regents of the University of                                                              
Alaska appointed by the Governor.                                                                                               
SENATOR WARD  noted its omission was  on oversight on his  part when                                                            
he drafted the bill.                                                                                                            
CHAIRWOMAN GREEN  announced that with no objection,  Amendment 1 was                                                            
adopted.  She then took public testimony.                                                                                       
Number 1440                                                                                                                     
MR.  DICK  MYLIUS,  Division  of  Mining,  Land  and  Water  of  the                                                            
Department of  Natural Resources (DNR), said that  under SB 188, DNR                                                            
will have  11 years to  transfer 5 million  acres, which amounts  to                                                            
455,000 acres  of land  per year, assuming  that the constitutional                                                             
amendment as  put forth in SJR 25  is approved.  The education  fund                                                            
cannot  select existing  oil, gas  and mineral  properties, but  can                                                            
select most of the general  grant state land, except for land within                                                            
state  parks.   DNR believes  this bill  will be  very expensive  to                                                            
implement  and  will   not  generate  additional  revenue   to  fund                                                            
education.   The bill will first result  in a transfer of  land from                                                            
one state agency  to another and it  will require DOEED to  become a                                                            
land management  agency.   DNR  has identified  several significant                                                             
concerns with SB 188:                                                                                                           
   · The endowment of lands is not likely to ever generate                                                                      
     sufficient  revenue  to fund education  needs  in Alaska.   The                                                            
     state's  education  budget is  about  100 times  the amount  of                                                            
     money that this fund will be able to generate.                                                                             
   · The transfer process will be very expensive.  DNR estimates                                                                
     the cost to be over  $12 million per year, primarily to pay for                                                            
     the  survey of the  5 million  acres.  The  bill establishes  a                                                            
     land management  program within DOEED which will  duplicate the                                                            
     existing functions  of DNR.  A land management program in DOEED                                                            
     could cost as much  as $2 million per year.  SB 188 reduces the                                                            
     legislature's  ability  to direct  state spending  as  revenues                                                            
     from state  public domain lands  currently go into the  general                                                            
     fund for appropriations.                                                                                                   
   · Identifying the 5 million acres will be time consuming and                                                                 
     contentious.   DNR and the University of Alaska  recently spent                                                            
     6 months  attempting to negotiate  a settlement of the  250,000                                                            
     acres  granted  to the  University  as  a substitute  for  last                                                            
     year's SB 7.                                                                                                               
   · SB 188 allows the education fund to acquire lands that are                                                                 
     important  for  public  use,  including  lands that  have  been                                                            
     legislatively designated  as state game refuges, state critical                                                            
     habitat   areas,  public  use  areas  and  the  Susitna   River                                                            
     recreational corridor.   The existing school trust is currently                                                            
     in  litigation.    SB  188  could  impair   the  prospects  for                                                            
     resolving that litigation.                                                                                                 
   · The state already has existing obligations to transfer over                                                                
     600,000 acres  of land to municipalities and,  depending on how                                                            
     litigation over the  University land trust is resolved, DNR may                                                            
     need  to identify 250,000  acres to  convey to the University.                                                             
     The  state   should  fulfill   its  current  land  entitlement                                                             
     obligations  before  it creates a  new one.   In addition,  the                                                            
     education  fund is likely to select in the unorganized  borough                                                            
     that  would otherwise  be  selected by  future municipalities,                                                             
     thereby  limiting  their  selection  options and  reducing  the                                                            
      incentive of local residents to form local governments.                                                                   
   · SB 188 will impede resource development.  Developers will be                                                               
     reluctant  to start  projects when  they are  not sure  whether                                                            
     land will be owned  by DNR or the education fund, and a new set                                                            
     of  rules will  need to be  generated for  managing the  fund's                                                            
     lands. Uncertain land  tenure complicates resource development.                                                            
      Alaska  has experienced  this  with the  prolonged  litigation                                                            
     over Alaska Mental Health Trust Lands.                                                                                     
   · SB 188 requires the education fund to allow mineral leasing                                                                
     procedures  similar  to AS 38.05.185  and AS  38.05.275.   This                                                            
     overly  broad statement implies  that leaseable minerals,  such                                                            
     as oil, gas and coal,  could be acquired through the staking of                                                            
     mining claims.  DNR  presumes this is not the sponsor's intent.                                                            
MR. MYLIUS noted  that Mr. Jim Hansen would also like  to comment on                                                            
the bill.                                                                                                                       
Number 1120                                                                                                                     
MR. JIM  HANSEN, Chief  Geophysicist  with the Division  of Oil  and                                                            
Gas, DNR,  stated SB 188  does not allow  selection of lands  within                                                            
the 5 year program  for lands permitted or leased.   SB 188 contains                                                            
a three year provision  in that the selected lands  must not include                                                            
exploration  but exploration could  be included at some point  after                                                            
that.   Currently, DNR has  a license over  the Copper River  Basin.                                                            
Should the education fund  board select land in the vicinity of that                                                            
license, DNR would  have to convey that land after  three years even                                                            
though  that land  still  may have  oil and  gas potential.    DNR's                                                            
concern  is with  the transfer  over of  management  of oil and  gas                                                            
lands  that  could   be  producing,  especially   in  light  of  the                                                            
possibility  of a gas pipeline coming  to the North Slope.   If that                                                            
plan  is finalized,  DNR expects  exploration  to  become much  more                                                            
involved  in Alaska.  DNR  currently has  one license, two  pending,                                                            
and  has received  two  others this  month for  other  parts of  the                                                            
state.  This  program is picking up  steam fast and DNR is  expected                                                            
to see much more activity  over the next two years.  Another problem                                                            
he sees with SB 188 is  that it does not address the fact that lands                                                            
could potentially  have natural gas leases on them.   DOEED does not                                                            
have the expertise to deal with natural gas leasing.                                                                            
SENATOR WARD commented  that he does not share the  same concerns as                                                            
the  two previous  speakers  but SB  188 has  been  referred to  the                                                            
Senate Resources  Committee. He explained that he  introduced SB 188                                                            
because the  state is currently  spending $830  million per  year of                                                            
general   funds  for  education   from   kindergarten  through   the                                                            
university level.  He tried  to put forth a similar plan in 1982 but                                                            
was told  it would  take seven  to 10 years  to get  this kind  of a                                                            
project  off  of the  ground.    He wants  to  bring  the  education                                                            
community  an  endowment comprised  of  5  million of  Alaska's  103                                                            
million acres.   That would make Alaska's  endowment the  largest in                                                            
the world.   If  this bill is  successful,  Senator Murkowski  would                                                            
consider  trying  to add  5 million  acres of  federal  land to  the                                                            
endowment.  SB 188 is not  an immediate fix, but had it been enacted                                                            
in 1982,  Alaska may  not be in the  position it  is in today.   His                                                            
constituents  tell him the Legislature  is not putting enough  money                                                            
into  education.   SB 188  does take  education funding  out of  the                                                            
legislative  appropriation  process,  which  is  troubling,  but  in                                                            
exchange,  Alaska will develop  some of its  103 million acres.   He                                                            
said he  does not favor  using the Permanent  Fund and he  disagrees                                                            
wholeheartedly that the  approach in SB 188 will not make money.  He                                                            
knows the  people in his  district would develop  some land  to fund                                                            
education,  and it would  be developed in  an environmentally  sound                                                            
way.   He believes  SB 188  is a mixture  of  two philosophies:  one                                                            
being to develop 5 million  acres to supply jobs and a tax base; and                                                            
second it will  slowly relieve the  education commitments  the state                                                            
has  under its  Constitution.    He believes  this  is  a good  step                                                            
forward.  He  pointed out the difference  between SB 188  and a bill                                                            
introduced  last year  is that  SB 188  does not  contain a  voucher                                                            
proposal and it covers funding for the University.                                                                              
Number 654                                                                                                                      
CHAIRWOMAN  GREEN commented  that throughout  the conflict  with the                                                            
university  lands  bill, a  lot of  work was  done  to minimize  the                                                            
conflict over land claims.   She asked if that was incorporated into                                                            
SB 188.                                                                                                                         
SENATOR WARD said, "This  sets up a mechanism to let it happen."  He                                                            
does not  believe Alaska  has had any significant  land development                                                             
and some have been frustrated  about an inability to get some of the                                                            
state's lands  out of the state coffers.   He feels a disservice  is                                                            
being  done to  the  education community  because  it  is not  being                                                            
funded adequately.                                                                                                              
CHAIRWOMAN  GREEN said she  will hold SB 188  until Friday  and that                                                            
the committee will take up SJR 25.                                                                                              
                 SJR 25-CONST. AM: EDUCATION FUND                                                                           
MS.  SANDY  ALTLAND, staff  to  Senator  Ward,  sponsor of  SJR  25,                                                            
explained  that   SJR  25  proposes  an  amendment   to  the  Alaska                                                            
Constitution relating to  education.  It is the companion resolution                                                            
to  SB  188.     The  constitutional   amendment  would   allow  the                                                            
legislature to  create and education fund as a separate  fund in the                                                            
state  treasury.   It addresses  the source  of funds  and what  the                                                            
income from the fund may be used for.                                                                                           
CHAIRWOMAN  GREEN   announced  that  there  were  no   questions  or                                                            
testimony on  SJR 25 and that she  would hold it in committee  until                                                            
Friday.  She announced  that on Friday, the committee  would hear SB
178,  SB 11,  HB  99, HB  203,  SB 41,  and  a continuation  of  the                                                            
presentation on Medicaid.                                                                                                       
SENATOR LEMAN  noted that in response  to a comment made  earlier by                                                            
Senator Ward,  the state spends quite  a bit more than $830  million                                                            
per year  on education because  that amount  does not include  pupil                                                            
transportation services and others.                                                                                             
SENATOR WARD  said he does not disagree  and that it makes  no sense                                                            
to him to not develop the state's resources.                                                                                    
There being no further  business to come before the committee, VICE-                                                            
CHAIRMAN LEMAN adjourned the meeting at 3:15 p.m.                                                                               

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