Legislature(2005 - 2006)HOUSE FINANCE 519

03/14/2005 01:30 PM House FINANCE


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* first hearing in first committee of referral
+ teleconferenced
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SJR 6 FEDERAL MEDICAL ASSISTANCE REDUCTION
Moved HCS SJR 6(FIN) Out of Committee
HB 155 USE CRIMINAL FINES FOR YOUTH COURTS
Heard & Held
= SB 98 FAST TRACK SUPPLEMENTAL APPROPS/CBRF
Heard & Held
Bills Previously Heard/Scheduled
SENATE JOINT RESOLUTION NO. 6                                                                                                 
                                                                                                                                
     Relating   to  a  reduction   in  the  Federal   Medical                                                                   
     Assistance  Percentage  for  Alaskans,  and  urging  the                                                                   
     United  States Congress  to take  action to prevent  the                                                                   
     reduction.                                                                                                                 
                                                                                                                                
SENATOR GARY WILKEN, CO-CHAIR, SENATE FINANCE, read the                                                                         
sponsor statement for SJR 6:                                                                                                    
                                                                                                                                
     Senate  Joint  Resolution  6  urges  federal  action  to                                                                   
     maintain the  current level  of federal funding  for the                                                                   
     state's  Medicaid  program.    The  U.S.  Department  of                                                                   
     Health and  Human Services  recently announced  that the                                                                   
     federal share  of the medical assistance  program, known                                                                   
     as  the Federal  Medical  Assistance Percentage  (FMAP),                                                                   
     will be reduced by 7.58% on October 1, 2005.                                                                               
                                                                                                                                
     The   reduction  in   the   FMAP  will   result  in   an                                                                   
     approximately  $53  million  loss  in  federal  Medicaid                                                                   
     dollars in  fiscal year 2006  and $73 million  in fiscal                                                                   
     year 2007.                                                                                                                 
                                                                                                                                
     It  is   imperative  that   Congress  and  the   federal                                                                   
     administration  know and  understand the reasons  behind                                                                   
     the high level  of health care costs in  Alaska.  Senate                                                                   
     Joint Resolution  6 requests Congress to  take action to                                                                   
     correct the  formula flaw that resulted  in the proposed                                                                   
     substantial   FMAP  reduction   and  to  take   whatever                                                                   
     measures  necessary  to hold  Alaska  harmless from  the                                                                   
     reduction in  the Federal Medical Assistance  Percentage                                                                   
     for Alaska.                                                                                                                
                                                                                                                                
     Please join  me in support of our state  Medical program                                                                   
     and endorse Senate Joint Resolution 6.                                                                                     
                                                                                                                                
1:44:33 PM                                                                                                                    
                                                                                                                                
Representative   Weyhrauch  asked   how   7.58  percent   was                                                                   
determined and if it only applies  to Alaska.  Senator Wilken                                                                   
deferred to Commissioner Gilbertson.                                                                                            
                                                                                                                                
JOEL GILBERTSON, COMMISSIONER,  DEPARTMENT OF HEALTH & SOCIAL                                                                   
SERVICES, explained that the Medicaid  program, a partnership                                                                   
between state and federal government,  was created in 1965 to                                                                   
provide  health care coverage  and to  reimburse some  social                                                                   
services,  primarily for  needy and  low income  populations.                                                                   
Each  state has  its  own Medicaid  "match  rate" or  Federal                                                                   
Medical Assistance Percentage  (FMAP).  The formula was based                                                                   
on a state's per capita income  over a certain period of time                                                                   
and the national  per capita average. Mississippi  has always                                                                   
received the  highest level of  federal support, which  is 80                                                                   
percent.    The  lowest  amount  of  federal  support  is  50                                                                   
percent, which  is what Alaska  paid until 1997  when Senator                                                                   
Frank Murkowski had  the amount adjusted to  slightly over 40                                                                   
percent  for  three  years,  bringing   in  $100  billion  in                                                                   
additional  federal   support.    Senator   Murkowski  passed                                                                   
further legislation, a five-year  extension, which brought in                                                                   
an additional $200 billion in federal support.                                                                                  
                                                                                                                                
Commissioner  Gilbertson noted that  the Medicaid  match rate                                                                   
is not paid on  every claim.  A sizeable percent  of Medicaid                                                                   
volume goes through services provided  to Alaska Natives in a                                                                   
Native non-profit  638 or in an Indian Health  Services (IHS)                                                                   
compacted  facility, which  are  reimbursed  at 100  percent.                                                                   
The expiration  of the five-year Medicaid adjustment  is Oct.                                                                   
1,  2005,  and  Alaska's per  capita  income  has  increased.                                                                   
Those  two   factors  plus   the  fact   that  there   was  a                                                                   
recalculation of  how to determine  per capita  income, which                                                                   
involves  including  employer   contributions  to  retirement                                                                   
plans  as income earned,  have  led to a  great reduction  in                                                                   
Alaska's  Medicaid match  support  from 57.58  percent to  50                                                                   
percent.                                                                                                                        
                                                                                                                                
Commissioner  Gilbertson maintained  that  the reason  Alaska                                                                   
was so successful in getting Medicaid  match reductions twice                                                                   
before is  because the formula  is fundamentally flawed.   It                                                                   
looks solely at per capita income  and does not consider cost                                                                   
of delivering  health care, which is exponentially  higher in                                                                   
Alaska.   He suggested that  the formula should  reflect this                                                                   
higher  cost.    Senate  Joint   Resolution  6  encourages  a                                                                   
resolution to hold Alaska harmless  this year and work toward                                                                   
a solution.                                                                                                                     
                                                                                                                                
1:52:08 PM                                                                                                                    
                                                                                                                                
Commissioner Gilbertson  related that the impact  on the next                                                                   
fiscal  year would  be  a loss  of  $53 million  of  Medicaid                                                                   
support, which would have to be  replaced by general funds or                                                                   
by service  reductions.   The impact  on FY  2007 would  be a                                                                   
loss  of $73  million.   Over the  next ten  years the  total                                                                   
impact would  be $914  million.  He  noted that other  states                                                                   
are  affected, but  not by  as  much.   Wyoming's match  rate                                                                   
drops by three points.  He concluded  that Alaska's reduction                                                                   
is unprecedented in history.                                                                                                    
                                                                                                                                
Representative Hawker  referred to the chart  "Impact of FMAP                                                                   
Reduction on State Match" (copy  on file.) He argued that the                                                                   
impact of  reduction is understated  because a  linear growth                                                                   
trend for Medicaid expenditures  is being used.  He suggested                                                                   
that growth  rate has  been exponential  rather than  linear.                                                                   
Commissioner  Gilbertson  agreed  that  it  is  difficult  to                                                                   
predict  growth rate in  the Medicaid  program because  there                                                                   
are moving  targets such  as population  changes.   He called                                                                   
this chart "our  best guess" at projections.   Representative                                                                   
Hawker noted legislators could  also exacerbate the situation                                                                   
with further  additions to the  program such as  adult dental                                                                   
care.  Commissioner  Gilbertson responded that  he personally                                                                   
supports  the  dental  care  policy  and  other  preventative                                                                   
programs.  He concluded that it  is fair to say reductions in                                                                   
Medicaid programs could lead to  increases in services by the                                                                   
state outside of Medicaid.                                                                                                      
                                                                                                                                
1:56:08 PM                                                                                                                    
                                                                                                                                
Representative  Hawker  observed  that  the  federal  formula                                                                   
includes  personal income  levels and  as incomes  go up  the                                                                   
willingness  to match  goes  down.   The  assumption is  that                                                                   
state income has  increased as the per capita  has increased,                                                                   
which  is  true  everywhere  except   Alaska.    Commissioner                                                                   
Gilbertson  responded  that  the   formula  is  fundamentally                                                                   
flawed; the cost  of delivery and care has to  be included in                                                                   
it.                                                                                                                             
                                                                                                                                
Representative Croft mentioned  a recent trip to Bethel where                                                                   
members  of the committee  met  with the head  of the  Yukon-                                                                   
Kuskokwim  Health  Corporation  (YKHC).    They  visited  the                                                                   
Bethel prenatal  center, recently  taken over by  YKHC, which                                                                   
now gets  100 percent Medicaid  match.  There  was discussion                                                                   
about other areas  where that same percentage  of match could                                                                   
be   received.     He   asked   about  the   advantages   and                                                                   
disadvantages  of  moving from  partial  to  full funding  of                                                                   
Medicaid and why it is not done more often.                                                                                     
                                                                                                                                
Commissioner   Gilbertson   explained   that   Mr.   Peltola,                                                                   
President and CEO of YKHC, helped  to set up a planning group                                                                   
and  management  team  to  move   such  integration  projects                                                                   
forward in his  region.  They found that a number  of service                                                                   
delivery providers  were not eligible to receive  100 percent                                                                   
reimbursement from Medicaid.   He explained the Native Health                                                                   
Care   Improvement   Act,   which    allows   Native-operated                                                                   
facilities to bill  for services under Medicaid.   He related                                                                   
the benefits  for dual eligibility.    He noted that  a large                                                                   
portion of the current Medicaid  claim volume for services to                                                                   
Alaska Natives  goes outside of  the IHS system and  can only                                                                   
be reimbursed under  the base rate.  He stressed  that he has                                                                   
had a number  of dialogues with Alaska Native  Health Care to                                                                   
try to  built up  its system  and not  create a new,  general                                                                   
fund responsibility.   An effort  was made, with the  help of                                                                   
MR. Peltola, to  move all services under the  umbrella of one                                                                   
Native  Health  Corporation.     He  pointed  out  downstream                                                                   
benefits:  elimination of  a wait  list, increased  services,                                                                   
and general fund  savings.  He suggested that  integration of                                                                   
these  services is  a strong  opportunity  to strengthen  the                                                                   
system and save  money, but there has to be  consensus at the                                                                   
community level.  He concluded  that more opportunities would                                                                   
be  found  in rural  regions  where  there are  large  Alaska                                                                   
Native  populations and  strong  native health  corporations,                                                                   
plus local consensus.                                                                                                           
                                                                                                                                
2:05:44 PM                                                                                                                    
                                                                                                                                
Representative  Croft  asked  if  any  Alaskan  Native  could                                                                   
obtain this service and why there  would be a wait list.  Mr.                                                                   
Gilbertson replied  that the  service has to  be in  a region                                                                   
where there is a qualified Native  provider.  There has to be                                                                   
a  "dual eligible  served  by  a 638"  in  order  to get  100                                                                   
percent  reimbursement.   He pointed  out  that currently  40                                                                   
percent  of Medicaid beneficiaries  are  Alaska Native.   The                                                                   
challenge  is that  there is  no integrated  managed care  in                                                                   
this  state and  individuals  can go  wherever  they want  to                                                                   
receive health service.  He pointed  out that there is a need                                                                   
to expand services.                                                                                                             
                                                                                                                                
Commissioner   Gilbertson   informed   the   committee   that                                                                   
currently  there is  a  dispute between  the  states and  the                                                                   
federal  government   concerning   the  Native  Health   Care                                                                   
Improvement  Act.    The  Department  of  Health  and  Social                                                                   
Services believes  that Congress intended the  language which                                                                   
states,  "services  provided  through  an  IHS  facility  are                                                                   
reimbursed at 100 percent FMAT"  to also include referral and                                                                   
contract.     He  provided   examples  of  the   department's                                                                   
interpretation of the intended  language.  Greater clarity of                                                                   
this language  would make  it easier  to collect 100  percent                                                                   
reimbursement  because then  contract  and referral  networks                                                                   
could deliver the services.  Representative  Croft clarified,                                                                   
in that case,  the individual would go to the  facility, even                                                                   
if it  were not an Indian  Health provider, be  referred, and                                                                   
then be able to receive full Medicaid reimbursement.                                                                            
                                                                                                                                
2:11:29 PM                                                                                                                    
                                                                                                                                
Representative  Croft asked Commissioner  Gilbertson  to talk                                                                   
to  the  sponsor  about  encouraging  clarification  of  that                                                                   
language  before  the  resolution   goes  to  Congress.    He                                                                   
inquired  if  it   would  be  best  to  do   a  Congressional                                                                   
resolution   or   a  judicial   resolution.      Commissioner                                                                   
Gilbertson replied  that the Medicaid  match rate  is statute                                                                   
and will  not be handled  by the courts.   He opined  that it                                                                   
would  be resolved  by an  act of  Congress with  Congressman                                                                   
Young's help.                                                                                                                   
                                                                                                                                
2:13:46 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer asked if an Alaska  Native could choose either                                                                   
an  Alaska  Native  Hospital   or  Providence  Hospital  when                                                                   
medical services are the same.   Commissioner Gilbertson said                                                                   
that  is  correct.    The  state   does  not  manage  service                                                                   
delivery;  it   authorizes  the  service  and   licenses  the                                                                   
providers.                                                                                                                      
                                                                                                                                
2:15:07 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer closed public testimony.                                                                                         
                                                                                                                                
Representative  Weyhrauch  referred   to  line  11,  page  2,                                                                   
"gasoline prices  in much of rural  Alaska are close  to $6 a                                                                   
gallon" and  opined that gas is  expensive in other  areas of                                                                   
Alaska, as well.  He MOVED to  ADOPT Amendment 1, which would                                                                   
delete  "are"  and  substitute  "can be".    There  being  NO                                                                   
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
Representative  Foster  MOVED  to report  HCR  SJR  6 out  of                                                                   
Committee,  as amended,  with  the accompanying  zero  fiscal                                                                   
notes.                                                                                                                          
                                                                                                                                
HCS SJR  6 was REPORTED  out of Committee  as amended  with a                                                                   
"do  pass" recommendation  and  with four  zero fiscal  notes                                                                   
from the Department of Health and Social Services.                                                                              
                                                                                                                                
2:17:29 PM                                                                                                                    
                                                                                                                                
At ease.                                                                                                                        
                                                                                                                                
2:21:21 PM                                                                                                                    

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