Legislature(2023 - 2024)BUTROVICH 205
02/16/2023 03:30 PM Senate HEALTH & SOCIAL SERVICES
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| Audio | Topic |
|---|---|
| Start | |
| SB58 | |
| Presentation Governor's Council on Disabilities and Special Education | |
| SB8 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 8 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| += | SB 58 | TELECONFERENCED | |
SB 8-REPEAL CERTIFICATE OF NEED PROGRAM
4:16:49 PM
CHAIR WILSON reconvened the meeting and announced the
consideration of SENATE BILL NO. 8 "An Act repealing the
certificate of need program for health care facilities; making
conforming amendments; and providing for an effective date."
4:18:00 PM
CHAIR WILSON said SB 8 would repeal certificate of need (CON)
laws. SB 8 provides a three-year window before taking effect so
that companies and the state can prepare for needed changes. He
stated that his office had examined historical and current
arguments for certificate of need (CON) laws and determined they
do not provide an economic justification for depriving customers
of an open healthcare market. He stated that health care does
not follow the same principles as a free market but should be as
accessible as possible. He opined that Alaska's certificate of
need program substantially threatens the proper performance of
healthcare market services. There are examples of abuse taking
place in Alaska. SB 8 is one of the most studied pieces of
legislation heard at the Capitol. He stated that his office is
willing to share information and studies.
4:20:37 PM
GARY ZEPP, Staff, Senator David Wilson, Alaska State
Legislature, Juneau, Alaska, said SB 8 speaks for Alaskans
working and raising families that don't have time to follow
legislation, hire a lobbyist or a special interest group to
represent them. Competition matters for Alaskan consumers; data,
peer-reviewed research, and analysis reflect this.
4:21:25 PM
MR. ZEPP turned to slide 1 and spoke to the following:
[Original punctuation provided.]
The concept of repealing Alaska's certificate of need
program is not meant in any way, shape, or form to
dishonor, disrespect, or minimize how important our
healthcare providers are to Alaskans!
They are our friends, family members, and neighbors,
our loved ones.
But government laws and regulations have suppressed
competition, caused constrained healthcare markets,
disallowed new entrants, new technologies, and
disincentivized innovation. Data/Research shows,
without competition, the incentive to lower prices and
improve quality and innovation diminishes.
4:22:30 PM
MR. ZEPP advanced to slide 3, What is a Certificate of Need and
provided information as follows:
[Original punctuation provided.]
Certificate of Need (CON) laws are state regulatory
mechanisms for approving major capital expenditures
and projects for new health care facilities, expansion
of existing facilities, adding new equipment and
technology, and providing new or the expansion of
existing healthcare services.
Healthcare entities must obtain government permission
before proceeding, this permission is based on a
1970's (53 years ago) model.
Note: Alaska's current CON threshold for approval is
$1.5 million.
The original Certificate of Need laws were created to
contain rising healthcare costs (this was during the
Great Inflation period, from 1965 thru 1982 the rate
of inflation reached as high as 15% in 1980), prevent
over-supply of medical infrastructure and services,
and improve access to care, especially for indigent
populations or in underserved areas.
Note: Over forty years of peer reviewed data shows CON
has failed and has not delivered on the promises made
in the 1970s. Even the Federal Government realized the
national law they passed did not work. They mandated
this in 1982 (tied to federal funding) and repealed in
1987, it lasted a whopping five years. CON laws in
Alaska require healthcare entities to obtain
government permission for healthcare facilities,
equipment, technology, and services for over 20
medical categories.
Note: Alaska's CON approval process is not done by
health care professionals like doctors and nurses,
it's a government entity that decides what health care
facilities, services, equipment, and new technologies
should be available to you, your family, and friends.
Certificate of Need laws have not worked how it
originally was intended. It protects the incumbent
healthcare providers. This is not good for Alaskans
and it's time to repeal!
4:24:52 PM
MR. ZEPP advanced to slide 4 and provided the following
statistics on the status of states and CON programs:
35 States have CON programs
• 13 require review when ownership of a facility or
large practice is transferred.
• 9 states require a CON approval for expanding hospice,
nursing home, or home health agency services.
•
3 States do not operate a CON but have a variation of a CON
program as follows:
• Arizona - ambulance services and ambulances
• Minnesota - moratorium on hospitals and beds; nursing
home beds; intermediate care facilities; radiation
therapy facilities in certain counties
• Wisconsin long-term care; moratorium on nursing home
and hospital beds
12 states that have fully repealed their CON:
• California, Idaho, Utah, Wyoming, Colorado, New
Mexico, North Dakota, South Dakota, Kansas, Texas,
Pennsylvania, New Hampshire.
• These twelve states represent 31 percent of the US
population, or 101 million people living without a
CON.
States with current legislation to repeal all or part of CON:
• Connecticut, Iowa, Kentucky, Montana, Mississippi,
Oklahoma, South Carolina, Tennessee, West Virginia
4:27:07 PM
MR. ZEPP said 35 states still have some form of CON. A major
challenge facing those states is lobbying efforts, even though
the federal government repealed the CON mandate in 1987.
Lobbying efforts in Alaska have risen 152 percent over the last
four years. Alaska passed its first CON law in 1976. In 1990 the
state began charging for the submission of an application when
seeking approval for a CON. January 2008 was the last major
attempt to repeal CON in Alaska. At the time, the Commission of
Health and Social Services stated, "?that the CON program was
put in place to increase access to care and to keep the cost of
facility care down; however, better tools to serve these
purposes are now available." There were nine active lawsuits
against the state's CON program.
4:28:47 PM
MR. ZEPP turned to slide 5, Alaska's Legislative History of
Certificate of Need, and spoke to the following laws:
[Original punctuation provided.]
The following is a past summary of enacted legislation
passed by the Alaska Legislature regarding the
certificate of need program:
1976: HB 665 (Ch. 275, SLA 1976), which repealed and
replaced all of AS 18.07 to establish the certificate
of need program and regulation of healthcare.
1982: HB 591 (Ch. 59, SLA 1982), covers only a
temporary but not an emergency certificate of need for
a health care facility and added a definition of
certificate of need dealing with the issuance of
certificates. 1982: HB 591 (Ch. 25, SLA 1981),
clarified that Pioneer Homes are not subject to
certificate of need.
1983: SB 85 (Ch. 95, SLA 1983), added a $1,000,000
($1.0 million) floor for requiring a certificate of
need.
1990: HB 85 (Ch. 85, SLA 1990), provided authorization
to Dept. of Health & Social Services to charge a fee
for the certificate of need.
1991: SB 86 (Ch. 21, SLA 1991), deleted the federal
statutes and changed the title section.
1996: HB 528 (Ch. 84, SLA 96), Placed a moratorium on
nursing home beds and established a legislative
working group on long-term care. 2004: HB 511 (Ch. 48,
SLA 04), Included Residential Psychiatric Treatment
Centers.
4:28:46 PM
MR. ZEPP turned to slide 6 and said repealing CON is a battle
between regulators and competing healthcare organizations
fighting over who should receive the government's franchise for
Alaska's newest technology and facilities. Alaskans have no
choice. He stated the following are data and research points
derived from various studies that support the repeal of CON:
• There have been 93 peer reviewed studies of CON containing
115 tests; Mercatus published approximately 10 percent.
• 3.5 times as many tests find CON is associated with lower
quality than states without CON.
• 10.5 times as many studies find CON is associated with
worse cost, spending, and efficiency outcomes than states
without CON.
• 16.5 times as many studies find CON is associated with
diminished access than states without CON.
• CON programs limit the introduction and expansion of
medical services & equipment, rehabilitation centers,
nursing home beds, and medical imaging technologies.
• Data and research show that rural hospital closures have
nothing to do with having CON, but instead are related to:
• Low patient volume
• Challenging payer mix of Medicare and Medicaid
patients, which pay less.
• Geographic Isolation
• Workforce shortages
• Data and research indicate that deaths from treatable
complications following surgeries and mortality from heart
failure, pneumonia, and heart attacks are significantly
higher in CON states.
• Studies have shown no evidence that charity care is higher
in CON states. In fact, racial disparities seem to increase
in CON states due to the lack of access.
• CON programs grant a government-protected monopoly to
incumbent providers. According to a Milliman Group report
on behalf of Primera Insurance Company, hospital margins in
Alaska can range as much as 223 percent higher than states
in the Lower 48.
4:32:20 PM
SENATOR DUNBAR asked for more information about the nine CON-
related lawsuits in 2008.
4:32:50 PM
MR. ZEPP replied that he would provide the committee with
additional information. He noted Mr. Mitchell and Ms. Cavanaugh
were also available to answer questions.
4:33:25 PM
MR. ZEPP moved to slide 7 and said Alaskans deserve a choice in
healthcare. CON was designed to restrain healthcare costs.
However, CON regulations' effect on costs has shown a consistent
tendency to increase the costs of healthcare services. A
Milliman report prepared for the Alaska Health Care Commission
and two other reports provide points to consider regarding
Alaska's healthcare markets:
• Alaska’s general cost of living ranks seventh among states
but has among the highest health care costs in the world.
• Healthcare premiums in Alaska are 130 percent higher than
the comparable states of Washington, Oregon, Idaho,
Wyoming, and North Dakota.
• Average hospital costs are 138 percent higher than
comparable states.
• Position payment levels are 148 percent higher than the
national average.
• Hospital payments are 56 percent higher than the national
average.
• Hospital margin averages in Alaska are approximately 15.6
percent. In Anchorage the margins can be 20 percent or
greater. This is 5 percent higher than San Francisco.
4:35:12 PM
MR. ZEPP moved to slide 8 and stated that from 1991 to 2017, the
Anchorage consumer price index was up 77 percent while medical
care was up 210 percent. Hospital payments are 1.7 times the
national average. Using shoulder surgery as an example of
Alaska's high costs, he reckoned Alaskans would pay
approximately $16,000 out-of-pocket while other states would pay
$4,000. Medical expenses are a leading cause of personal
bankruptcy.
4:36:46 PM
MR. ZEPP turned to slide 9 and said twenty-four states suspended
CON laws and regulations during the COVID pandemic, which
enabled healthcare providers flexibility regarding capacity and
equipment. Alaska was without CON regulations for approximately
11 months. There was one application related to a certificate of
need during this period. Proponents of CON laws say they are
necessary for "health and safety." Yet the industry could meet
the health care demand during a crisis without CON approval. He
opined that getting through a pandemic without CON is evidence
that Alaska does not need it.
4:37:54 PM
MR. ZEPP advanced to slide 10 and said CON had not held
healthcare costs down in Alaska. Alaska has one of the world's
highest healthcare costs, which continue to rise. The CON
process can cause legal battles and conflicts between an
incumbent and an entrant seeking to bring new healthcare
facilities or services to Alaska. He opined that this is not
good for Alaska as it wastes money better spent investing in
healthcare innovation, facilities, and access. Allowing
incumbents and entrants to provide additional quality healthcare
services for Alaskans is better. Territorial fights over who
earns the high-profit margins do not improve or provide Alaskans
with better healthcare. US Presidents G.W. Bush, Clinton, Obama,
and Trump supported the repeal of CON. Governor Walker also
supported its repeal. He likened the CON process to insider
trading because it unfairly exposes healthcare facilities,
services, and technology to competitors for review, objection,
and filing legal proceedings. The data supporting the repeal of
CON is voluminous. He opined that committee members should read
the overwhelming peer-reviewed research and data to realize the
support for its repeal.
4:39:53 PM
MR. ZEPP advanced to slide 11 and stated the Alaska Hospital and
Healthcare Association (AHHA) sponsored a consultant to protect
the profit levels of some healthcare entities and responded to
the sponsor's efforts to repeal CON. Not surprisingly its
response favors the position of AHHA and claims the Mercatus
Center's research is not peer reviewed. However, the research is
one of many peer-reviewed studies favoring the repeal of CON.
Studies supporting the repeal of CON have been done by reputable
entities, several of whom have testified before the legislature
in support of SB 8:
[Original punctuation provided.]
The Federal Trade Commission/Dept. of Justice; the
Mercatus Center-George Mason University; the Centers
for Medicaid/Medicare; the U.S. Department of Health &
Human Services; the U.S. Department of the Treasury;
the U.S. Department of Labor; The U.S. Government
Accountability Office (GAO); the State of Alaska
Department of Health & Social Services and the
Department of Commerce, Community & Economic
Development; UAA Institute of Social and Economic
Research; American Medical Association; The American
Journal of Medicine; American College of Emergency
Physicians; the American Hospital Association;
National Institute for Health Care Reform; National
Academy for State Health Policy; Rutgers University-
Center for Health Policy; Harvard Medical School; The
Sanford School of Public Policy-Duke University; Brown
University; Temple University; Columbia University
School of Law; University of Maryland; Cecil G, Shep
Center for Health Services Research-University of
North Carolina; Providence Veterans Medical Center;
Institute for Justice; 2018 Bipartisan Blueprint for
Improving Our Nation's Health System Performance-
Governors from Colorado, Ohio, Alaska, Pennsylvania,
and Nevada; Millman Group-Primera Insurance Company;
Becker's Hospital review
4:41:21 PM
MR. ZEPP moved to slide 12 and stated that CON is not in the
best interest of Alaskans because it silences their voice. He
reiterated that some individuals in healthcare and lobbyists
will say horror will happen if CON is repealed. Ask for data to
back up the statements. Health care in Alaska needs to be more
available, cheaper, and of higher quality. CON regulations do
not help Alaska achieve what is needed to make healthcare more
available, affordable, and of higher quality. SB 8 provides an
opportunity for Alaskans to have a choice in health care and
health care services.
4:44:11 PM
CHAIR WILSON opened invited testimony on SB 8.
4:44:20 PM
MATTHEW D. MITCHELL, Senior Research Fellow, Knee Center, West
Virginia University, Morgantown, West Virginia, said CON is
well-studied because of its history. The federal government
repealed the CON mandate in 1987. Thirty-five states soon after
repealed CON, which created many opportunities to compare its
effects. There have been 93 peer-review studies comparing CON
states to non-CON states. Evidence shows that states that
repealed CON have better quality and access to healthcare. He
provided numerous statistics supporting the elimination of CON
to improve access, quality, and cost. The research is consistent
with the basic economic theory that when supply is restricted,
lower supplies result. Anti-trust authorities at the US
Department of Justice and the Federal Trade Commission
consistently make the case that certificate of need laws do not
achieve intended goals.
4:49:14 PM
SENATOR DUNBAR asked if Florida repealed its CON laws.
4:49:28 PM
MR. MITCHELL responded that Florida had repealed most of its CON
laws. Its repeal of laws pertaining to hospitals and hospital
beds was of major significance.
4:49:53 PM
SENATOR DUNBAR said the map on slide 4 shows Florida as a CON
state, and he was only seeking clarity.
4:50:03 PM
CHAIR WILSON opined that Florida appears as a CON state because
of its partial repeal.
4:50:10 PM
MR. ZEPP responded that a state would be categorized as a CON
state if it has at least one service requiring a certificate of
need.
4:50:34 PM
SENATOR KAUFMAN asked for the most thoroughly tabulated study
comparing CON and non-CON states addressing availability, cost,
and quality.
4:51:24 PM
MR. MITCHELL suggested that everyone should be skeptical of
studies but have confidence in pieces of literature that point
in the same direction. He advised members to read The Effects of
Certificate of Need Laws on the Quality of Hospital Medical
Services since it used a cross-border design and looked for a
variety of outcomes.
4:53:22 PM
CHAIR WILSON said his office would distribute the study to
members.
4:53:54 PM
JAMIE CAVANAUGH, Attorney, Institute for Justice, Arlington,
Virginia, stated that the Institute for Justice has worked to
end certificate of need laws through litigation and legislation.
She said she published a policy report in 2020 about why
repealing CON laws will decrease state spending. She conducted a
survey in 2020 when states adjusted CON laws due to the pandemic
and concluded that if CON laws created greater access to health
care, then states would have needed more CON laws during the
pandemic. However, the opposite was true. States had to suspend
CON laws to allow hospitals to add beds and services; this
happened in Alaska. In the Fall of 2022, some states also
suspended CON laws for Respiratory Syncytial Virus (RSV) to
allow healthcare providers the flexibility to respond to real-
time patient needs. Doctors and patients should be deciding when
care is necessary, not bureaucrats.
MS. CAVANAUGH said another key point from her report is that CON
laws did not prevent rural hospital closures. She shared the
following findings:
• Alabama, Oregon, Tennessee, and Washington have CON laws
that do not apply to rural areas, presumably to encourage
the expansion of healthcare facilities.
• Idaho, North Dakota, South Dakota, and Wyoming have no CON
laws and are among the most rural US states.
• Utah and Colorado have no CON laws and have not experienced
a rural hospital closure since 2005.
4:56:26 PM
MS. CAVANAUGH stated that CON laws are known to increase
healthcare costs, which leads to increased state and personal
healthcare spending. North Carolina State Treasurer Dale Folwell
filed a friend of the court brief with the North Carolina
Supreme Court because rising health care costs are challenging
the solvency of the teacher and state employer health care plan.
She noted that the plan is partially funded by taxpayers and had
almost $4 million in expenditures in FY 2022. She quoted his
reasoning for filing the lawsuit as follows:
"Con laws contribute to consolidated health care
monopolies by distorting market power in favor of
large institutional hospitals. This illegal distortion
of market power then results in higher prices, lower
quality, and less availability of health care
services. In turn, large institutional hospitals
create incredible excess revenue while failing to earn
their tax except status through the provisions of
charity care and engage in businesses practices
harmful to North Carolinians."
MS. CAVANAUGH stated that the content of this quote occurs in
every state with CON laws. It is happening in Alaska. Repealing
CON is one way to begin correcting the problems.
4:58:03 PM
CHAIR WILSON held SB 8 in committee.