Legislature(2015 - 2016)SENATE FINANCE 532
03/07/2016 09:00 AM Senate FINANCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| SB139 | |
| SB140 | |
| SB74 | |
| SB139 || SB140 | |
| Public Testimony: Juneau | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 74 | TELECONFERENCED | |
| += | SB 139 | TELECONFERENCED | |
| += | SB 140 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
SENATE BILL NO. 74
"An Act relating to permanent fund dividends; relating
to a medical assistance reform program; establishing a
personal health savings account program for medical
assistance recipients; relating to the duties of the
Department of Health and Social Services; establishing
medical assistance demonstration projects; and
relating to a study by the Department of Health and
Social Services."
9:31:18 AM
Co-Chair Kelly MOVED to ADOPT proposed committee substitute
for SB 74, Work Draft 29-LS0692\U (3/4/16, Glover).
Co-Chair MacKinnon OJBECTED for discussion.
ERIN SHINE, STAFF, SENATOR ANNA MACKINNON, discussed the CS
for SB 74, and explained that the work draft incorporated
all of the amendments that had passed the previous week.
She highlighted two additional changes reflected in the CS
and directed attention to page 39, line 15 of the bill. The
change added the word "retirees" to the draft, after it had
been inadvertently omitted in the amendment pertaining to
the Healthcare Authority study with the Department of
Administration. She pointed out another change on page 40,
lines 27 through 31 of the bill. Previously, the section
had required all of the False Claims Act to require a two-
thirds vote; after conversation with the legal department,
members decided to remove the sections that did not require
a two-thirds vote.
Co-Chair MacKinnon WITHDREW her OBJECTION. There being NO
further OBJECTION, it was so ordered.
9:33:42 AM
Co-Chair MacKinnon directed the committee's attention to an
overview document prepared by the department "DHSS Fiscal
Impacts for CSSB74(FIN), version U - with amendments,"
(copy on file). She explained that the document encompassed
all of the fiscal notes that were in draft form, but were
not anticipated to change. She thought the overview would
simplify the process of examining the fiscal impact, and
detailed that she and Senator Kelly's staff had met with
the department and LFD over the weekend to update the
fiscal notes. She furthered that she had observed a
reaction from committee members pertaining to the number of
personnel being requested by the department to implement
the Medicaid program, as well as observing less savings
than expected.
9:35:08 AM
Co-Chair MacKinnon directed attention to the FY2017 column
of the document, which reflected what the subcommittees had
already done. She noted that as the committee moved forward
with implementation of reform, it had identified savings in
various areas. Consequently the department had been unable
to reflect the savings on the fiscal note, because the
savings was not a result of direct policy in the bill. She
continued that there was explanation on the fiscal note
that explicated the situation. She anticipated savings of
over $100 million, and pointed out that the number from FY
17 was different than previously considered numbers because
the fiscal notes were not reflecting what was happening in
subcommittee in terms of cost savings on travel and other
items.
Co-Chair MacKinnon reminded the committee and the public
that the document being reviewed was only for DHSS, and did
not reflect savings in the Department of Law or other
areas.
9:37:40 AM
Co-Chair Kelly expressed appreciation for the work that was
completed over the weekend. He was in favor of
incorporating the aforementioned note in the fiscal note.
He discussed making departmental reductions to reflect
savings created through the passage of the bill as it moved
through committees.
9:38:31 AM
Co-Chair MacKinnon commented that the Senate Finance
Subcommittee on Medicaid would work with colleagues in the
House to identify additional funding sources that might be
available. She relayed that the Mental Health Trust Board
had indicated some willingness to examine the
implementation of the behavioral health changes. She
anticipated additional changes to fiscal notes and
additional collaboration during the bill process.
9:39:13 AM
Vice-Chair Micciche asked for clarification on the savings
reflected between the "Grand Total" table on the first page
of the fiscal impacts document, and the table on the second
page. He asked if the department could explain the
difference between the two tables.
9:39:58 AM
JON SHERWOOD, DEPUTY COMMISSIONER, MEDICAID AND HEALTH CARE
POLICY, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, addressed
Vice-Chair Micciche's question regarding the tables on the
fiscal impacts document. He clarified that the table on
first page of the document reflected every provision of the
bill and totaled them. The table on second page was
comprised of items which resulted in significant savings.
He noted that there were some provisions of the bill that
did not get included in the table, and was more intended as
a reference to observe cost saving measures and individual
impacts. He continued that the tables did not attempt to
incorporate every provision in every fiscal note, and there
were some expenses that would not be reflected in the
summary table on the first page.
9:41:02 AM
Mr. Sherwood relayed that the department had seriously
considered the committee's comments from the previous week,
and had examined its assumptions and timelines. Further,
the department had looked at the bill amendments and made
some significant changes, and in some cases had moved up
its timelines. He specified that with the incorporation of
the provisions proposed in the budget subcommittees, the
tribal claiming timeline was effectively moved up.
Additionally, the start of 1915(I) and 1915(K) provisions
were both moved up by six months.
Mr. Sherwood continued to discuss the bill and the fiscal
impacts sheet, noting that the department had identified
potential savings in areas of primary care case management,
telehealth, and pioneer homes (as a result of an
amendment). The department had also found some reductions
in positions and capital costs. He thought the co-chair had
done a great job of summarizing the first table, in terms
of the net effect of the bill. He pointed out that savings
totaling over $31 million in FY 17 was projected to grow in
GF to almost $114 million by FY 22. He added that the bill
also resulted in total fund reductions beginning in FY 17
and growing through FY 22.
Mr. Sherwood discussed the "Positions" table on the first
page, noting that the department reduced the total request
for positions. The department would add seven positions in
FY 17, including four positions to work on enhanced or
accelerated tribal claiming (also included in the budget
subcommittee proposal). He quantified that effectively, the
department reduced five of the positions it had asked for
previously. The amount of positions would peak at nine in
FY 18 while completing start-up work, gradually paring back
to five net positions as efficiencies were achieved as a
result of Medicaid reform.
9:43:23 AM
Co-Chair Kelly clarified that his earlier mention of 27
positions was incorrect.
Co-Chair MacKinnon explained that the subcommittee had gone
through an exercise with the department to reduce
positions, and the number had changed over time. The
subcommittee was trying to reflect the changes to create
transparency for the public.
9:44:18 AM
Mr. Sherwood discussed the "Capital Budget Costs" table on
page 1 of the document, explaining that capital costs had
gone down to a total of $9.1 million and were comprised of
90 percent federal funds. In addition to adjusting some
assumptions, the department had reallocated some costs more
appropriately. He noted that the committee might observe
some numbers had moved between fiscal note components, but
that overall there had been a net reduction.
9:44:53 AM
Co-Chair MacKinnon asked if the department had looked at
the 50-50 funding ratio on some items and consider how the
state might present a case to the federal government to
have some positions or capital costs specifically covered
at a 90-10 rate in aid of trying to work toward eliminating
fraud in the system (and other items).
Mr. Sherwood answered in the affirmative. He elaborated
that the department reviewed areas that indicated a 50-50
funding ratio. He thought the state had a substantial case
it could make to the federal government. He thought the
department's initial presentation might have been more
conservative due to caution and uncertainty.
9:45:43 AM
Co-Chair MacKinnon discussed the explanation of benefits
process for individuals receiving services through
Medicaid. She considered it was a false claims reporting
augmentation which was new to the system, and by virtue of
its inherent authentication with the patient [to help
prevent fraud] should qualify for a 90-10 split.
Mr. Sherwood concurred.
9:46:36 AM
Vice-Chair Micciche thought it was difficult to quantify
the savings at the current time without knowing the
effectiveness of the changes. He mentioned reductions in
emergency care through primary care and case management,
the Prescription Drug Monitoring Program and behavioral
health improvements, reduction of travel through
telehealth, changes to pioneer homes, and reduction in
fraud and abuse. He asked if it would take a couple of
years to observe the results of the improvements.
Mr. Sherwood stated that the department was trying to be
reasonable in its projections, and thought one of the
challenges was to avoid the double-counting savings through
different reform efforts. He used the example of saving
funds on travel through using both a tribal claiming
initiative as well as telehealth. He furthered that the
department's telehealth estimates did not include
substantial components of travel due to concerns about
double-counting.
9:48:35 AM
Co-Chair Kelly appreciated the level of scrutiny that Mr.
Sherwood had described. He discussed earlier comments
pertaining to quantifying budgets and thought Mr. Sherwood
had employed conservative thinking as he examined the
numbers.
9:49:10 AM
Co-Chair MacKinnon understood that two fiscal notes had
been eliminated. Mr. Sherwood thought one of the two fiscal
notes in question had come back. He clarified that one
fiscal note for the Administrative Services support was
gone. He had previously thought that a fiscal note for the
Division of Public Assistance could be eliminated, but the
department had realized it was necessary to show a
component in the fiscal note.
9:50:10 AM
Co-Chair MacKinnon pointed out that there were two
additional fiscal notes that needed updating. Mr. Sherwood
relayed that he would be making further comments on the
document, then would discuss the two additional fiscal
notes. He added that there one new fiscal note that could
be easily summarized in the cost savings table rather than
a more detailed discussion.
Co-Chair MacKinnon directed attention to fiscal note
component number 2077 and component number 2662; for a
Medicaid services appropriation, and an appropriation to
Medicaid services - senior disabilities.
9:51:48 AM
Mr. Sherwood highlighted the "Savings Measures (UGF)" table
on page 2 of the document, noting that the table included
the additional funds anticipated to be saved in the tribal
claiming policy change. He noted that the department had
increased and accelerated the savings in primary care case
management, and also showed savings in telehealth beginning
in FY 18. He highlighted savings of approximately $1
million GF annually as a result of an amendment the
previous week to the payment assistance language, which
would correspond the new fiscal note for the pioneer homes.
The department was also able to reduce the start-up cost
for the eligibility verification system, and identify some
operational savings in the same area.
Mr. Sherwood summarized that one thing that was not in the
fiscal notes was the impacts of the work to develop more
effective and integrated behavior health system and 1115
waiver.
9:53:27 AM
KAREN FORREST, DEPUTY COMMISSIONER, COMMISSIONER'S OFFICE,
DEPARTMENT OF HEALTH AND SOCIAL SERVICES, noted that the
department expected that behavioral health reform (as
demonstrated in the bill but not shown in the fiscal notes)
would result in significant savings in other state agencies
and municipalities across the state. She particularly
expected to see savings in the criminal justice system, the
Department of Corrections, the Alaska Court System, and the
Department of Public Safety. She thought it was hard to
quantify potential savings at the current time, and
highlighted past committee testimony regarding the
importance of behavioral health reform as it pertained to
the criminal justice reinvestment and reform.
9:54:29 AM
Co-Chair MacKinnon asked if Ms. Forrest would be giving an
indeterminate fiscal note related to a separate corrections
bill that was in the committee process. She wondered about
the possibility of additional savings that committee
members might need to take into account when considering
the bill. Ms. Forrest avowed to look into the matter.
9:54:51 AM
Mr. Sherwood directed attention to fiscal note component
number 2077 for healthcare Medicaid services, which he
explained was the largest component of the Medicaid
services and had the most features. He pointed out a very
small increase in operating cost for FY 17, but a
substantial reduction in GF. He discussed the savings to
the program that would start at over $3.7 million in FY 18,
and growing to over $28 million in FY 22. He referred to
the substantial reduction in GF, reducing from
approximately $27 million in the first year to over $60
million in FY 22.
9:56:35 AM
Mr. Sherwood continued to discuss the fiscal note, and
pointed out an error pertaining to position requests. He
reported a capital cost of $6.9 million associated with the
fiscal note. He explained that the fiscal note encompassed
a number of provisions relating to sections of the bill
relating to fraud. He mentioned savings from the False
Claims Act, savings from the self-review for overpayment,
savings from civil penalties, and projected savings from
the civil forfeiture provisions. He added that savings
would be reflected in the summary document on the first
table on the first page. He discussed primary care case
management, which showed savings beginning in FY 18. He
mentioned the health homes options, which would save the
state substantial amounts of money. He pointed out
telehealth provisions, the coordinated care demonstration
projects, and the hospital emergency room reduction
project, which were all included in the fiscal note. There
were savings associated with the tribal health travel
claiming, as well as provisions for a health information
infrastructure plan. He clarified that although the health
information infrastructure plan did involve a modest
expense, almost all of the funds were a 90-10 federal
money.
9:58:55 AM
Mr. Sherwood addressed fiscal note component number 2662,
for senior and disabilities Medicaid services, and noted
that the allocation involved three different provisions.
There would be an impact to services in the tribal claiming
change, which showed strictly as a fund source switch. The
second provision concerned 1915(k), which would create a
new home and community-based program to provide personal
care services for people who qualified for waivers, and
came with an enhanced match rate 6 percent greater than the
regular match rate. Consequently, the department would move
personal care services from the current optional service to
the 1915(k) option; and there would be a fund source switch
after receipt of enhanced federal funds. He discussed the
third provision, the 1915(i) option under Medicaid, in
which a new option would be used for home and community-
based services to cover individuals currently receiving
services through state-funded programs under the Medicaid
program. He continued that rather than paying for the
services at 100 percent general fund, the state would get a
50 percent federal match.
Mr. Sherwood continued to the fiscal note, communicating
that other fiscal notes demonstrated reductions in grant
programs that equaled the amount of increased operating
costs; the fiscal note showed $5.8 million beginning in FY
18 and growing to $17 million by FY 22. He summarized that
the fiscal note encompassed where the state would pick up
the general fund cost as well as the federal cost and
savings. He highlighted the capital cost of $1.2 million,
which was 90-10 funded; and recognized that the department
needed to allocate some of the funds that it had put in
other fiscal notes for capital projects to senior and
disability services.
10:01:43 AM
Mr. Sherwood addressed fiscal note component number 2671,
an allocation for pioneer homes, and explained that the
fiscal note reflected a change in fund source. Due to the
language in a recent amendment to the pioneer home payment
assistance program, the department believed it could
collect additional funds from the Medicaid waiver program
as opposed to having to pay for it out of the state's
payment assistance plan. The fiscal note showed a reduction
in GF, which was a reduction to the payment assistance plan
and an increase in interagency receipts that received the
federal Medicaid funds into the pioneer home budget.
10:03:33 AM
Vice-Chair Micciche asked what part of the bill the fiscal
note corresponded to. Mr. Sherwood pointed out language on
page 35, lines 21 through 23, pertaining to requiring an
individual applying for medical assistance coverage to
provide the decision letter regarding the application.
10:04:44 AM
Mr. Sherwood recalled that he misspoke earlier regarding
changes to fiscal notes. The fiscal note addressing
behavioral health administration had not been eliminated,
in aid of demonstrating reductions in staff. The department
had eliminated the Public Assistance Administration fiscal
note and combined information in to the fiscal note
component number 237 addressing the fraud component.
10:05:41 AM
Co-Chair MacKinnon expressed appreciation for the work the
department had done over the previous weekend.
Co-Chair MacKinnon reminded the public that the fiscal
impacts document being addressed was only pertaining to
DHSS and no other agencies.
10:07:08 AM
AT EASE
10:08:57 AM
RECONVENED
Vice-Chair Micciche reviewed fiscal note component number
45, for centralized administrative services in the office
of the commissioner of Department of Health and Social
Services. He listed a personal services cost of $134,600 in
FY 17, combined with a services cost of $700,000 for a
total of $834,600. He pointed out there was a further cost
in FY 18 of $33,600 in personal services, and then no cost
from FY 19 through FY 22. He clarified that the funds were
for a temporary position in FY 17 and FY 18 and there was
no capital cost.
10:10:17 AM
}John Boucher, Deputy Commissioner, Department of
Administration{ addressed the fiscal note. He understood
that the intent of the health care authority feasibility
study referenced in the fiscal note was to provide impetus
for a broader discussion of healthcare spending in the
state beyond Medicaid benefit recipients. He mentioned a
study by Commonwealth North that had quantified the total
state spend (including Medicaid) at $1.55 billion. He did
not think the total had included some of the indirect costs
through the foundation formula for teachers and other
categories. He read from the analysis section of the fiscal
note:
The Committee Substitute for SB 74 requires the
Department of Administration, in collaboration with
the Legislative Finance Committees, to procure a study
to determine the feasibility of creating a health care
authority that could coordinate health care plans and
consolidate purchasing effectiveness for all state
employees, retired state employees, retired teachers,
medical assistance recipients, University of Alaska,
state corporation, and school district employees.
Mr. Boucher continued to discuss the fiscal note, pointing
out that it required the feasibility study to be completed
on or before June 30, 2017. He relayed that the department
had looked at comparable studies the previous week, and
found that they cost around $350,000. He thought
considering the scope of the study, and the public process,
the state would need to rely on other states that had
examined the same topics. He estimated that the state could
spend up to $700,000 on the study. He specified that the
department envisioned one temporary position to manage the
study through the commissioner's office.
10:12:58 AM
Co-Chair MacKinnon clarified that Senator Dunleavy had
proposed a similar study previously. She hoped that the
administration would review the report and consider the
challenges that the legislature had faced in extracting
information needed to evaluate long-term benefits for
Alaskans. She emphasized the need for awareness of the
bargaining cycle that determined health benefits as the
state moved forward to look at health care savings.
10:13:56 AM
Senator Dunleavy asked about the fiscal note narrative, and
wondered if active teachers were included under the heading
of 'school district employees,' Mr. Boucher answered in the
affirmative, and stated that the language in the bill
referred to "direct and indirect funding by the state of
Alaska." He had not listed every group that could
potentially be covered. He thought one challenge the study
would have to meet was determining the most important scope
first. He thought it would be important to ensure that the
state received the best value out of the study.
10:15:04 AM
Co-Chair MacKinnon emphasized that the state spent an
incredible amount of money on insurance through local
governments and through state government entities.
Individual communities and larger cities were also
negotiating for health benefits. She thought that the state
had incredible buying power that had been fractured. She
thought there was a belief that with such great buying
power, the people of Alaska should not be paying some of
the costs of the benefits being received. She hoped,
through collaboration with the administration, to bring the
bargaining units together and try and get better services
with the money being spent.
10:16:09 AM
Co-Chair Kelly thought it was important to address some
comments made by Senator Dunleavy when the committee worked
on the issue three years prior. He recounted that there had
been a different financial environment at the time, and
Medicaid expansion created a much larger pool.
10:16:55 AM
Senator Dunleavy agreed that there had been a different
financial climate when the topic was discussed previously.
He referred to certain groups in opposition to health care
consolidation. He furthered that with a worsening financial
climate, he hoped that the overall benefit to the state
would take precedence over a small amount of groups that
would not benefit from such consolidation.
10:17:28 AM
Mr. Boucher stated that the department looked forward to
the challenge of moving forward with Medicaid reform, and
thought that everyone recognized that the state was
spending a tremendous amount on healthcare. He thought that
it was a good idea for the state to leverage its buying
power.
10:17:51 AM
Vice-Chair Micciche discussed fiscal note component number
2203, for criminal appeals and special prosecution in the
Department of Law's Criminal Division. He reviewed the
total operating costs from FY 17 through FY 22 at $365,000,
comprised of $273,700 in federal receipts and of $91,300 in
state funds. The fiscal note listed two full-time positions
from FY 17 through FY 22. There was a change in positive
revenues of about $500,000 per year.
10:18:40 AM
}John Skidmore, Director, Criminal Division, Department of
Law{ addressed the fiscal note, making note of one
substantive change. The department had changed the funding
from GF to statutorily designated receipts (SDR) after
responded to members concerns about the added number of
positions associated with the legislation. Additionally,
DOL had indicated that the state would be collecting
significant monies from fraud, which would serve as the new
fund source. He noted that in the first year the funds
would been split equally between GF and SDR to allow the
program to develop fully. Thereafter the funds would be 100
percent SDR.
10:20:15 AM
Senator Dunleavy cautioned careful and cognizant reflection
on the collection of department funding, and hoped it would
be done the right way. He thought a number of members would
be observing the process and listening to their
constituents on the matter.
Senator Dunleavy asked if Mr. Skidmore's division also
prosecuted permanent fund dividend (PFD) fraud.
Mr. Skidmore stated that there was a prosecutor within the
Office of Special Prosecutions that prosecuted PFD fraud.
He added that he agreed with Senator Dunleavy that
collection of fraud funds needed to be monitored carefully,
and it was not the department's intent to go after
individuals simply for the point of recovering money. He
clarified that the act [the proposed Medical Assistance
False Claim and Reporting Act] was set up so that the state
could collect attorney's fees, the same way in which one
would in most civil cases.
Senator Dunleavy used an example of other states collecting
greater and greater amounts of fees through traffic
violations. He was concerned that the collection was done
in the right way and that people were not overstepping
their authority.
10:22:15 AM
Vice-Chair Micciche appreciated Mr. Skidmore's earlier
comments, and thought he had been conservative in the
estimated change in revenues from fraud collection. He
recounted historical cases of fraud in Alaska and imagined
that a dedicated effort could result in significant savings
for the state. He expressed appreciation for Mr. Boucher's
explanation and efforts. He hoped that the message was
being conveyed regarding fraud and abuse of the Medicaid
system.
10:23:24 AM
Senator Bishop thought the sections of the bill referring
to fraud set a high bar for the burden of proof in order
for the attorney general to proceed.
Mr. Boucher stated that there was a higher burden of proof
for the claims than there was for the grand jury. He added
that there was a lower burden of proof to pursue the cases
civilly rather than criminally.
10:24:29 AM
Senator Hoffman expressed concern that the state
constitution did not allow for dedicated funds. He referred
to the potential savings of $800,000 in the first year. He
wondered if the cost would be recurring every year. He
thought there could be substantial increases to DOL's
budget and bottom line, and wondered if the SDR would
increase cumulatively over time.
Mr. Skidmore stated that DOL anticipated that in the first
year there would be initial start-up activities, and would
build momentum in the future. He specified that each year
there would be payouts of Medicaid monies. Consequently,
each year the department expected to pursue anyone that was
engaged in fraudulent activities and thereby collect
designated receipts estimated in the amount listed on the
fiscal note. The amount $91,300 was the state's portion of
funding the positions, which were 75 percent funded by the
federal government. He confirmed that the amount would be
recurring.
10:27:28 AM
AT EASE
10:28:00 AM
RECONVENED
Co-Chair Kelly thanked staff.
Co-Chair Kelly MOVED to REPORT CSSB 74(FIN) out of
committee with individual recommendations and the
accompanying fiscal notes.
There being NO OBJECTION, it was so ordered. CSSB 74(FIN)
was REPORTED out of committee with individual
recommendations and with 1 new fiscal impact note from the
Department of Administration; 1 new fiscal impact note from
the Department of Commerce, Community and Economic
Development; 1 new fiscal impact note from the Department
of Law; and 13 new fiscal impact notes from the Department
of Health and Social Services.
Co-Chair MacKinnon thanked staff // She // She hoped
10:30:49 AM
Senator Bishop briefly //
10:31:29 AM
AT EASE
10:31:41 AM
RECONVENED
Co-Chair MacKinnon discussed the schedule.
Co-Chair MacKinnon handed the gavel to Co-Chair Kelly.
10:32:49 AM
RECESSED
3:49:42 PM
RECONVENED