HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE February 23, 1994 3:00 p.m. MEMBERS PRESENT Rep. Cynthia Toohey, Co-Chair Rep. Con Bunde, Co-Chair Rep. Gary Davis, Vice Chair Rep. Al Vezey Rep. Pete Kott Rep. Harley Olberg Rep. Irene Nicholia Rep. Tom Brice MEMBERS ABSENT Rep. Bettye Davis OTHER LEGISLATORS PRESENT Rep. John Davies COMMITTEE CALENDAR HB 139: "An Act establishing a loan guarantee and interest rate subsidy program for assistive technology." PASSED OUT OF COMMITTEE *HB 451: "An Act establishing the Alaska Health Insurance Corporation and requiring licensed health care providers to comply with certain statutes and regulations relating to the corporation; relating to disability insurance claims processing and to approval of rates for disability insurance, including health insurance; and providing for an effective date." HEARD AND HELD (* First public hearing.) WITNESS REGISTER RUPE ANDREWS, Representative American Association of Retired Persons 9416 Long Run Dr. Juneau, Alaska 99801 Phone: (907) 789-7422 Position Statement: Testified in support of HB 139 STAN RIDGEWAY, Deputy Director Division of Vocational Rehabilitation Department of Education 801 W. 10th St., Ste. 200 Juneau, Alaska 99801-1894 Phone: (907) 465-6932 Position Statement: Testified in support of HB 139 DR. THOMAS NIGHSWANDER, Chairman Health System Reform Work Group 255 Gambell St. Anchorage, Alaska 99501 Phone: (907) 257-1234 Position Statement: Testified in support of HB 451 NANCY CORNWELL, Member Health System Reform Work Group 2411 West 69th Ave. Anchorage, Alaska 99502 Phone: (907) 243-8326 Position Statement: Answered questions on HB 451 PREVIOUS ACTION BILL: HB 139 SHORT TITLE: ASSISTIVE TECHNOLOGY LOAN GUARANTEES SPONSOR(S): REPRESENTATIVE(S) DAVIES,Brice,Brown,B.Davis, Grussendorf,James,Larson,Nordlund,Sitton,Ulmer,Menard, Hudson,Mackie,MacLean,Porter,Foster,Hanley,Kott JRN-DATE JRN-PG ACTION 05/01/03 (S) JUD AT 12:00 PM BELTZ ROOM 211 02/08/93 254 (H) READ THE FIRST TIME/REFERRAL(S) 02/08/93 254 (H) L&C, HES, JUDICIARY, FINANCE 03/25/93 (H) L&C AT 03:00 PM CAPITOL 124 03/25/93 (H) MINUTE(L&C) 03/26/93 784 (H) L&C RPT CS(L&C) 5DP 03/26/93 784 (H) DP: GREEN, WILLIAMS,MULDER, SITTON,HUDSON 03/26/93 784 (H) -FISCAL NOTE (DOE) 3/26/93 05/01/93 (S) JUD AT 00:00 AM BELTZ ROOM 211 01/21/94 2127 (H) COSPONSOR(S): MACKIE 02/03/94 2247 (H) COSPONSOR(S): MACLEAN 02/09/94 2327 (H) COSPONSOR(S): PORTER,FOSTER, HANLEY,KOTT 02/23/94 (H) HES AT 03:00 PM CAPITOL 106 BILL: HB 451 SHORT TITLE: COMPREHENSIVE HEALTH INSURANCE ACT SPONSOR(S): HEALTH, EDUCATION AND SOCIAL SERVICES BY REQUEST JRN-DATE JRN-PG ACTION 02/09/94 2315 (H) READ THE FIRST TIME/REFERRAL(S) 02/09/94 2315 (H) HES, LABOR & COMMERCE, FINANCE 02/23/94 (H) HES AT 03:00 PM CAPITOL 106 ACTION NARRATIVE TAPE 94-27, SIDE A Number 000 CHAIR TOOHEY called the meeting to order at 3:06 p.m., noted members present and announced the calendar. She brought HB 139 to the table. HB 139 - ASSISTIVE TECHNOLOGY LOAN GUARANTEES REP. JOHN DAVIES, Prime Sponsor of HB 139, addressed the bill. He stated that people with disabilities often have difficulties qualifying for conventional loans to purchase assistive technology. Assistive technology includes items such as hearing aids, walkers, talking computers, wheel chairs, and wheel chair lift equipment. He explained that HB 139 would set up a fund to guarantee up to 90% of a bank loan received by a qualified individual for the purpose of purchasing needed assisted technology. In addition, the state could subsidize on a needs basis or part of the interest on the loan. He said the fund would be capitalized with $100,000 of federal money, as indicated on the fiscal note. He further mentioned that there could possibly be some additions to the fiscal note if the program is reauthorized; more funds may be available in the out years. He maintained that this year's fiscal note would not be affected. He said the National Multiple Sclerosis Society, Denali State Bank, Deaf Community Services, and Access Alaska support the legislation. REP. DAVIES said that the Department of Education (DOE) estimates that there are at least 4000 people in Alaska that would benefit from the proposed legislation. He provided a committee substitute (CS) that indicated changes on page 2 where loans for businesses have been omitted. Also, on page 2, line 15, there is a provision which allows for loans to modify vehicles but not to purchase a vehicle. He further stated that page 2, line 18, establishes the loan technology committee. Number 173 CHAIR TOOHEY asked if there was any other conduit that people with disabilities could use to obtain the needed funds. REP. DAVIES replied that the bill requests that people exhaust all other possible conduits first before utilizing this program. He said one of the features of the bill is that it allows the interest rate to be brought down out of the loan funds, thereby making the loan more affordable. Number 185 CHAIR TOOHEY asked how many people in Alaska would benefit from the proposal. REP. DAVIES reiterated that the Department of Education estimates there to be 4000 eligible people. CHAIR TOOHEY asked if there were enough funds available for that number of people. REP. DAVIES said the average loan application would be for $700. He said it is a type of revolving loan as people would pay the loan back as money becomes available. CHAIR TOOHEY asked what happens when people default on the loan. REP. DAVIES responded that the funds are guaranteed by the federal government, and the loans are made by private lending institutions. He explained that other states have experienced very low default rates on these types of loan. Number 249 REP. VEZEY, after explaining the high cost to a lending institution for granting small amount loans, asked if many lending institutions are interested in the program. REP. DAVIES indicated a letter of support from Gary Roth, President and Chief Executive Officer of Denali State Bank, Fairbanks. He said Mr. Roth was very enthusiastic about the program. He further stated that the loans would be made at standard private bank rates, and if the individual could not afford the interest rate, the fund would be allowed to buy down the interest rate. Number 329 REP. VEZEY asked what the origination costs of the loans would be. REP. DAVIES said he did not know what the specific rates were. He explained that the loan is processed through a bank at standard rates. REP. VEZEY asked why there were no administrative costs listed in the fiscal note. REP. DAVIES responded that the Division of Vocational Rehabilitation, Department of Education, estimates that their existing personnel can handle the required administration. Number 390 REP. VEZEY asked how fast $100,000 would be depleted. REP. DAVIES explained that it would depend on the decisions of the committees and banks as to how many loans need to be subsidized, what the default rates are, etc. He further stated that the Clinton Administration has just reauthorized the program, requesting an additional $3 million nationwide. He said at least three to five years of federal money could be expected to go into the program, on an annual basis. REP. VEZEY asked if the $100,000 was currently available. REP. DAVIES answered yes. REP. VEZEY asked why the fiscal note was $100,000. REP. DAVIES said it represents federal receipts. Number 431 REP. G. DAVIS asked if the director referred to on page 2, line 18, was the director of the Division of Vocational and Rehabilitation, DOE. REP. DAVIES said yes. Number 441 CHAIR TOOHEY asked if there was a time frame for the program or would it go on indefinitely. REP. DAVIES said it would go on forever as long as the federal program exists. He also said that private monies are allowed into the program. He further stated that with a certain amount of federal money going into the program each year, the program would operate somewhat like a revolving loan fund. CHAIR TOOHEY asked if there would be a limit on how low the funds could become before loans would no longer be granted. REP. DAVIES said if there is no money the program does not exist. CHAIR TOOHEY asked Rep. Olberg if it would be prudent to not grant loans until the fund has been replenished. REP. OLBERG responded no. He explained that the funds are to guarantee a bank that they will be repaid. CHAIR TOOHEY asked if, once the amount is encumbered, no more loans would be granted. REP. OLBERG agreed and said that the entire $100,000 could be encumbered without any problems. CHAIR TOOHEY said that nothing would be encumbered over the $100,00 amount. REP. OLBERG commented not if the loans are to be guaranteed. Number 498 REP. BRICE said that as payments are received on the loans the amount would be replenished accordingly. REP. OLBERG, as a former colleague of Gary Roth, spoke to Mr. Roth's professionalism and expertise. He stated that the program must have a great deal of merit if Mr. Roth was endorsing it. Number 525 REP. DAVIES said the committee that the director shall establish will include a representative of a financial institution. The committee would establish the percentage of money that may be used for subsidizing interest rates. Number 546 RUPE ANDREWS, Representative, American Association of Retired Persons (AARP), testified in support of HB 139. He stated that the state legislative committee is in full support of the proposal. He said the bill would ensure access to quality living for all generations, not just senior citizens. CHAIR TOOHEY asked if senior citizens would be using the program. REP. DAVIES said there are no age restrictions. (CHAIR TOOHEY stated for the record that Rep. Olberg arrived at 3:08 p.m., Rep. Kott arrived at 3:23 p.m., and Rep. Brice arrived at 3:10 p.m.) Number 589 STAN RIDGEWAY, Deputy Director, Division of Vocational Rehabilitation, Department of Education, testified in support of HB 139. He stated that within the Division of Vocational Rehabilitation there is a program called Assistive Technologies of Alaska. He said assistive technology is the mechanism that allows federal funds to the state to fund the loan program. He said President Clinton had just signed the reauthorization for the federal program, and with that information he foresees the program being funded for the next five years with a minimum of $100,000. He said it was good leverage to make loans with. Mr. Ridgeway said the program is not a revolving loan, it's a loan guarantee. He further stated that the $100,000 that would be set aside in the treasury would be a guarantee to back the loans. He indicated that there were several ways for the loans to be leveraged. He explained there is an estimate that the $100,000 would leverage approximately $750,000 in loans, depending how much money the loan committee would set aside to buy down interest rates. He said there are 42 other states with the program, and three states are fully funded by the federal government. He said the banks would incur either the same cost or less to make the assistive loans. He indicated that most states have a limit of $5000 on the loans. Number 583 REP. VEZEY commented that if $100,000 is leveraged for $750,000 in loans, the state could be responsible for $650,000 in defaulted loans. He said it's either a loan guarantee or not. MR. RIDGEWAY agreed, saying that one of the possibilities on loan guarantee is that part of the $100,000 could be used to buy "an insurance policy that would guarantee those loans." He said the committee could decide to loan $100,000 against $100,000 for the first year. REP. VEZEY asked if Mr. Ridgeway had any experience with loan insurance. MR. RIDGEWAY answered that he had a report that he could extract that information from. REP. VEZEY commented that Alaska has had such a terrible loss experience with loan insurance that he did not think loan insurance policies would be available at a reasonable cost. Number 759 REP. G. DAVIS stated if all the money was allocated and there were no defaults, it would be conceivable that the $100,000 could accumulate up to $500,000. REP. DAVIES concurred. Number 777 CHAIR TOOHEY asked the pleasure of the committee. REP. VEZEY asked if the bill was before the committee for amendment. After some discussion, Rep. Vezey moved to adopt the committee substitute for HB 139. CHAIR TOOHEY, hearing no objections, said the CS for HB 139 was so moved. Number 799 REP. VEZEY said the CS should be amended to ensure that the state would not be responsible for any defaults on loans. CHAIR TOOHEY suggested that Rep. Vezey and Rep. Davies get together to address that issue and that the bill would be brought up again at a future time. REP. BRICE suggested that the bill be passed out of committee to the Finance Committee. He felt that financial decisions would be better made there. REP. VEZEY said to amend the bill would take a total of two days. REP. BRICE recommended sending the amendment on to Finance. Number 853 REP. KOTT said he would work with Rep. Vezey on the amendment and offer the amendment to the Judiciary Committee, the next committee of referral. REP. G. DAVIS concurred with Rep. Kott. Number 874 CHAIR TOOHEY asked the pleasure of the committee. REP. G. DAVIS made a motion to pass the CS for HB 139 out of committee to the Judiciary committee with attached fiscal notes and individual recommendations. CHAIR TOOHEY, hearing no objections, declared the bill was so moved. She then brought HB 451 to the table. HB 451 - COMPREHENSIVE HEALTH INSURANCE ACT CHAIR TOOHEY stated that Dr. Nighswander would join the meeting via offnet from Anchorage, and Nancy Cornwell would be available for technical questions in Juneau. She indicated that the meeting was being teleconferenced for observers only. Number 902 DR. NIGHSWANDER, Chairman, Health System Reform Work Group, testified on HB 451. He gave a history of the process behind HB 451 that lead up to the committee meeting. He said the primary concern of the work group was to keep Alaskan's healthy and to direct people in need of services of quality care at a reasonable cost. He said the fundamental issue was whether to take action now or wait to see what happens at the federal level. He felt the question should be what is right for Alaskans and listed some major points of concern. Dr. Nighswander stated that the issues of long term care and access of services to rural communities continue to be of keen interest to everyone. He said there are 76,000 Alaskans that are completely uninsured. DR. NIGHSWANDER said a total of six very public meetings had taken place prior to the day's meeting. He said there was a large cross-section of the public and of professionals in attendance at those meetings. He felt it was a very healthy exchange. DR. NIGHSWANDER stated that the bill does not define a benefit package, therefore there is no "sticker price" for the plan. He said the legislation does suggest some financing options, but it does not specify those options. He explained that the bill is a phased approach in considering health reform. It proscribes a very public concept that provides universal coverage of a standard benefit package to all residents of the state. He stated that there is a well defined public health initiative within the bill that focuses on wellness and prevention. He further stated that the bill would allow persons to choose their own physician. DR. NIGHSWANDER stated that a voluntary cost control mechanism is provided for in the legislation. Also, he said a peer group would be established to monitor quality and utilization of health care. He said the bill would not prohibit an individual from buying services that would not be covered by the state plan. DR. NIGHSWANDER asserted that the bill would establish the Alaska Health Corporation, which would be separated from the federal government as much as possible. He said the board would have public representation and would act independently of government concerns. TAPE 94-27, SIDE B Number 000 DR. NIGHSWANDER said the corporation would collect data from all health care providers regarding the services being rendered and relative costs. The proposal requires state waivers to obtain that information from the federal government. He further stated that the corporation would be charged with developing a benefit package and reviewing any options for financing, and subsequently the findings would be presented to the legislature. He said there are incentives within the bill for rural providers. DR. NIGHSWANDER addressed the issues of cost control concepts. He felt that Alaska could accomplish many things in this area that no other state could. For example, he maintained that all orthopedic surgeons or ophthalmologists could be gathered around one table to discuss cost, quality, and utilization of services. DR. NIGHSWANDER explained the term market-based single-payer system. He said the single-payer system is straight forward. He said money for health care that includes deductibles and co-payments that is provided by the individual would be funnelled through a single payer. The market base would allow for providers to publish price lists of their services and descriptions of the services they provide. He said this would enable a person to cost shop. He said a statewide health expenditure target is provided for in the proposal. The target would be based upon the data that would be collected early on by the corporation, focusing on cost and utilization of services. He said from the data an accurate assessment could be made as to how much is being spent on health care. He asserted that the target could be adjusted based on various factors; i.e., the consumer price index (CPI). He further stated that the plan provides for voluntary compliance to the expenditure target. Number 250 CHAIR TOOHEY asked if there were comments or questions for Dr. Nighswander. DR. NIGHSWANDER said the question remains as to when the action would be taken on health care. Number 296 REP. BRICE asked how the proposal would dovetail with the federal providers. DR. NIGHSWANDER stated that Senator Ted Stevens perceives the potential of a "seamless system" in the future whereby both federal care and private care would be amalgamated into a single (seamless) system. Number 362 CHAIR TOOHEY said the Oregon plan, which went into effect in January in the state of Oregon, has become three times larger than the state had anticipated. She said that caution must be used before a plan is implemented in Alaska. DR. NIGHSWANDER said that was an appropriate concern and needed to be addressed as soon as possible. Number 413 REP. NICHOLIA asked what type of impact HB 451 would have on Indian Health Services. DR. NIGHSWANDER said there might be a change in financing, but relatively there would be little impact. He felt there would be more of an impact in urban areas. He indicated that problems with corporations in the rural areas are addressed by President Clinton's health care plan. REP. NICHOLIA asked what the problem was that Dr. Nighswander referred to regarding corporations in the rural areas. DR. NIGHSWANDER explained that in some rural areas there are no hospitals or providers. Number 534 REP. G. DAVIS suggested that perhaps those people who are not insured choose not to be insured. DR. NIGHSWANDER deferred to Nancy Cornwell to answer the question. Number 545 NANCY CORNWELL, Member, Health System Reform Work Group, answered questions on HB 451. She acknowledged that there are some individuals who make the judgement that health care is not a priority. She asserted that a great concern was for the low income individuals that are faced with the problem of not being able to afford health care. She indicated that the percentage of a family's income that is devoted to health care had increased from 9% to 12%, and it is projected to be closer to 16% in the year 2000. She felt there was little research to indicate the number of Alaskans who go without health care coverage for long periods of time. Ms. Cornwell said there is an overall decline in the United States of those who have health care coverage. Number 632 DR. NIGHSWANDER asked where the 76,000 figure came from regarding the number of Alaskans with no coverage. MS. CORNWELL said the number was derived from the current population survey. The number was derived by combining three years of data obtained from the Bureau of the Census. CHAIR TOOHEY asked what time of year the population survey was taken, indicating that there is a larger population at work in the summer. MS. CORNWELL said the population survey is ongoing. She said the survey referred to as the March Supplement is where the statistics originate from and the survey is taken in the month of March. CHAIR TOOHEY said one half of those people would be employed in June. She then asked what the percentage was of people who do not want to purchase coverage. MS. CORNWELL said she did not know, and said it is very difficult information to obtain. She further stated that only 9% of the 76,000 are unemployed. She also said that people who work in small businesses have a difficult time receiving health care coverage through their employer. Number 708 DR. NIGHSWANDER agreed with Ms. Cornwell. He related to the committee the scenario of a youth who is uninsured and is involved in a serious car accident. He said the result of situations like that is cost shifting. REP. G. DAVIS asked about volume control as opposed to cost control from the standpoint of prevention. Number 750 DR. NIGHSWANDER stated that utilization could be controlled by the process of co-payments. He also said the bill allows for less expensive options; i.e., nurse practitioners and physicians' assistants (PAs). Number 791 MS. CORNWELL referred to page 18, line 2, and said that the peer review process would review the utilization, quality, and prices of health care services, after the fact. Through the peer review process, there would be self-regulation. She said the process was modeled after the Maine Medical Assessment Foundation. She explained that the process would cut down on much unwarranted medical procedures. REP. G. DAVIS agreed. DR. NIGHSWANDER indicated there would be a claims clearing house. REP. G. DAVIS said that Indian Health Services (IHS) was making strides in that area. DR. NIGHSWANDER said that information is shared with other states. Number 877 MS. CORNWELL asserted that the proposal would enable all claims to be brought into a single clearing house in the state, which would provide a tremendous amount of information not only for the corporation but everyone in the state. She felt certain that the information would be a significant part of the information highway. CHAIR TOOHEY asked who would be responsible for the fiscal note. No one had an answer to that question. Number 920 REP. G. DAVIS referred to the presentation made by the trial lawyers, and asked Dr. Nighswander what the focal points were. DR. NIGHSWANDER stated that the main focus was tort reform and malpractice reform. CHAIR TOOHEY said that the trial lawyers would be presenting two bills to the HESS Committee the following week. She urged Dr. Nighswander to observe and stay abreast of the issues. She asked for further questions. REP. G. DAVIS said that it was his hope that much of the proposed legislation within HB 451 would be retained and implemented if a "final product" should come about. He thanked Dr. Nighswander for his efforts. DR. NIGHSWANDER thanked the committee. CHAIR TOOHEY expressed her appreciation to both Dr. Nighswander and Nancy Cornwell for their efforts. DR. NIGHSWANDER said he was inspired by the whole process. CHAIR TOOHEY stated that now they both know how much educating needs to be done so that people can make informed choices pertaining to health care. Seeing no further business before the committee, CHAIR TOOHEY ADJOURNED the meeting at 4:22 p.m.