Legislature(2013 - 2014)HOUSE FINANCE 519

04/07/2014 08:30 AM House FINANCE

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HOUSE BILL NO. 376                                                                                                            
     "An Act extending the termination date of the Alaska                                                                       
     Health Care Commission; and providing for an effective                                                                     
9:18:26 AM                                                                                                                    
REPRESENTATIVE   PETE  HIGGINS,   SPONSOR,  introduced   the                                                                    
legislation.  He discussed  that  health care  costs in  the                                                                    
state  were high  and  noted the  importance  of the  Alaska                                                                    
Healthcare  Commission. The  commission  was established  to                                                                    
address  affordability  and  access  to  healthcare  and  to                                                                    
identify  strategies   for  improving  the  health   of  all                                                                    
Alaskans. He  stressed the importance  of the  commission in                                                                    
gathering  information,  which  enabled the  legislature  to                                                                    
make more  informed decisions on  the issue  and recommended                                                                    
the commission's extension.                                                                                                     
KRIS  CURTIS,   LEGISLATIVE  AUDITOR,  ALASKA   DIVISION  OF                                                                    
LEGISLATIVE  AUDIT, stated  that  the sunset  review of  the                                                                    
commission was  performed on May,  2013. The purpose  of the                                                                    
audit was  to determine  whether the commission  was serving                                                                    
the public's interest and whether  the sunset date should be                                                                    
extended.  Background  information  on  the  commission  was                                                                    
included on page  5 of the report because the  audit was the                                                                    
first sunset  review of the  commission. The  commission was                                                                    
established  by   administrative  order  in  2008   and  re-                                                                    
established  in statue  in  2010.  The legislature  intended                                                                    
that  the  commission  accomplish  reform  by  developing  a                                                                    
statewide  health  plan.  The original  commission  believed                                                                    
that it  was not its  responsibility to develop  a statewide                                                                    
plan  and   instead  focused   on  making   specific  policy                                                                    
recommendations.   In  2010,   the  commission   decided  to                                                                    
continue   the   prior   commissions  work   and   collected                                                                    
information for  various cost studies, developed  high level                                                                    
policy recommendations, and  established general priorities,                                                                    
which  evolved into  a  strategic  framework. The  strategic                                                                    
framework was included in the  audit report as "Appendix A."                                                                    
The  audit concluded  that the  commission  operated in  the                                                                    
public  interest but  improvements in  the development  of a                                                                    
state  health plan  was necessary  to justify  its continued                                                                    
existence.  She  reiterated  that the  legislature  proposed                                                                    
that  the commission  develop  a  comprehensive health  care                                                                    
plan  in  conjunction  with the  Department  of  Health  and                                                                    
Social Services (DHSS).                                                                                                         
Ms.   Curtis   continued   that  although   various   policy                                                                    
recommendations  were  developed  the commission  failed  to                                                                    
develop a  statewide health plan and  collaborate with DHSS.                                                                    
The  audit  recommended   a  three-year  extension  allowing                                                                    
adequate  time to  develop a  comprehensive plan.  The audit                                                                    
concluded that the commission  was active, conducted several                                                                    
studies,  and  developed  the  foundation  of  a  plan.  The                                                                    
framework  lacked components  necessary for  implementation:                                                                    
specific  actions  were  not identified,  no  timeframe  for                                                                    
completion,   no  entities   responsible   for  action   was                                                                    
identified,  no  definitions  of  successful  outcomes  were                                                                    
included,  or  plans  for   measuring  progress.  The  audit                                                                    
further concluded that without  a health plan the commission                                                                    
may  not affectively  change healthcare  in  the state.  The                                                                    
audit recommended  that the  commission coordinate  with the                                                                    
commissioner  of   DHSS  to  identify  agencies   roles  and                                                                    
responsibilities   in  developing   a   plan  and   initiate                                                                    
development   of  the   plan.   She  identified   additional                                                                    
administrative  recommendations to  improve the  noticing of                                                                    
public meetings  and to ensure that  annual reports included                                                                    
all statutorily required elements.                                                                                              
Co-Chair   Stoltze  questioned   the   criticism  that   the                                                                    
commission was not  coordinating with DHSS "when  a top DHSS                                                                    
official was heading the commission."                                                                                           
Ms.  Curtis  stated  that   the  department  only  partially                                                                    
concurred   with  the   audit's  findings.   The  department                                                                    
considered that  the commission's  progress was  much closer                                                                    
to a comprehensive plan. She  agreed that the commission was                                                                    
active and  the foundation was complete  but reiterated that                                                                    
what was developed  did not meet the requirements  of a plan                                                                    
and more  coordination with the department  was necessary to                                                                    
achieve the outcome.                                                                                                            
Representative Wilson  wondered why the audit  recommended a                                                                    
three-year extension instead of a  one year extension due to                                                                    
failure to develop the plan.                                                                                                    
Ms.   Curtis   stated   that  the   recommendation   was   a                                                                    
collaborative   effort   with   the   commission   and   the                                                                    
department, who concluded that three  years was necessary to                                                                    
bring a  plan forward.  She explained  that the  issues were                                                                    
complex and  that although much  work was  accomplished more                                                                    
was needed in order to establish a plan.                                                                                        
Co-Chair  Austerman asked  whether the  original legislation                                                                    
included any timeframes for developing a plan.                                                                                  
Ms. Curtis answered that no time limit was designated.                                                                          
Co-Chair  Austerman  asked   whether  the  legislation  only                                                                    
addressed the creation of a plan.                                                                                               
Ms.  Curtis  replied  that  the  language  in  the  original                                                                    
legislation required  that the commission  should coordinate                                                                    
with  DHSS  and  "may"  develop the  plan.  The  legislative                                                                    
intent  stipulated   that  DHSS  and  the   commission  work                                                                    
together to create a plan,  but the language was "not strong                                                                    
in a  definitive sense  to require"  development of  a plan.                                                                    
However,  the purpose  of the  commission's creation  was to                                                                    
create a healthcare plan.                                                                                                       
9:28:26 AM                                                                                                                    
DR. WARD HURLBURT, MD, CHIEF  MEDICAL OFFICER, DEPARTMENT OF                                                                    
HEALTH AND SOCIAL  SERVICES, noted that he was  the chair of                                                                    
the commission. He stated that  the commission felt that the                                                                    
audit process was very constructive.  He maintained that the                                                                    
health care commission did not  interpret the legislation as                                                                    
mandating   establishment  of   a  plan.   He  opined   that                                                                    
healthcare  plans "become  documents that  sit on  a shelf."                                                                    
The focus of the commission  for the previous five years was                                                                    
to  provide  clear  and specific  recommendations  regarding                                                                    
health care. The audit findings  were taken seriously by the                                                                    
commission.  The commission  was  working  closely with  the                                                                    
commissioner to develop a beneficial  plan. He believed that                                                                    
the commission's work was valuable to the legislature.                                                                          
Dr. Hurlburt related that the  average increase in teacher's                                                                    
salaries in the  Anchorage School District over  the last 15                                                                    
years increased 1  percent per year and the  cost of medical                                                                    
care   coverage  for   school  district   employee  coverage                                                                    
increased  15 percent  above inflation  over  the same  time                                                                    
period. He pointed out that  the reason the state was facing                                                                    
financial  challenges  was  largely   due  to  increases  in                                                                    
medical care  costs similar to the  increases experienced by                                                                    
the   school   district.   The  federal   government   spent                                                                    
approximately  18  percent  of the  Gross  Domestic  Product                                                                    
(GDP) of the United States  (US) on healthcare and the state                                                                    
spent 21  percent to  22 percent of  its GDP  on healthcare.                                                                    
Other industrialized  countries spent  between 9  percent to                                                                    
l2 percent of  their GDP in comparable ratios.  The US would                                                                    
have saved approximately $15 trillion  if the US expended as                                                                    
much on healthcare as Switzerland or Norway.                                                                                    
Dr.  Hurlburt continued  that the  only state  spending more                                                                    
than   Alaska  was   Massachusetts   which   had  an   older                                                                    
population.  He  added  that  97  percent  of  Massachusetts                                                                    
residents were insured due to  its "Romney Care" program and                                                                    
the state had  more physicians than any  other state. Alaska                                                                    
was  mid-range  among  the  states in  terms  of  number  of                                                                    
physicians.  He  relayed  that  studies  revealed  the  main                                                                    
reason  Massachusetts  had  the  most  expensive  healthcare                                                                    
costs was the rapid increase in pricing.                                                                                        
Dr.  Hurlburt  cited  the   Milliman  study  concluded  that                                                                    
Alaska's high cost  statistics were also due  to pricing. He                                                                    
explained  that the  members of  the Health  Care Commission                                                                    
were   comprised   of   representatives   from   physicians,                                                                    
hospitals,   nursing   homes,  behavioral   health,   health                                                                    
insurers,  tribal  health,  federal health  care,  community                                                                    
clinics,    the   public,    the   legislature,    and   the                                                                    
administration.  He  voiced  that  the members  had  done  a                                                                    
commendable  job  sharing  their knowledge  and  working  on                                                                    
behalf  of  all  Alaskans.   He  communicated  that  British                                                                    
Columbia  had   a  population  of  4.8   million  and  spent                                                                    
approximately $25 billion less than  the US would have spent                                                                    
on the  same number  of people. The  information illustrated                                                                    
that the  US was forced to  make choices on how  to allocate                                                                    
all  funding   needs  to  accommodate  the   high  costs  of                                                                    
healthcare.  The commission  was searching  for an  American                                                                    
market-based solution.  The commission  gathered information                                                                    
and  analysis and  provided a  set  of recommendations  each                                                                    
year in January  in an annual report to  the legislature and                                                                    
governor. He reported that  the commission collaborated with                                                                    
other  groups  and  human   resource  directors  for  larger                                                                    
employers  to  reach  out to  the  business  community.  The                                                                    
commission   identified   regulations  and   statutes   that                                                                    
"mitigated against  a free marketplace in  negations between                                                                    
providers and  payers." He offered that  the state purchased                                                                    
about  $2.6  billion  in  healthcare  per  year.  There  had                                                                    
historically  been  relatively little  coordination  between                                                                    
agencies,  but  recently  collaboration had  increased.  The                                                                    
state had  a "lot of  potential leverage" as a  purchaser of                                                                    
healthcare as opposed to a regulator of healthcare.                                                                             
Dr.  Hurlburt  voiced  that  the  state  needed  a  "robust"                                                                    
healthcare system in light of  the valuable service provided                                                                    
by  committed healthcare  professionals.  He concluded  that                                                                    
healthcare   in   Alaska    was   priced   excessively   and                                                                    
unsustainably high  and correcting  the problem  would cause                                                                    
"tensions."  Unique ethical and  moral dimensions existed in                                                                    
the  healthcare  industry  even   though  healthcare  was  a                                                                    
business.  The  commission  believed  that  because  of  the                                                                    
ethical  and  moral  dimensions the  leadership  needed  for                                                                    
change   would   come   from  within   the   industry.   The                                                                    
commission's  efforts  assisted   in  facilitating  industry                                                                    
Co-Chair  Stoltze asked  whether  the commission's  workload                                                                    
was  proactive  in  defining efficiencies  or  "reactive  to                                                                    
external  policies from  other political  jurisdictions" and                                                                    
how   the  workload   was  apportioned   in  attaining   the                                                                    
committee's goals.                                                                                                              
Dr. Hurlburt  responded that  the commission  as established                                                                    
by  Governor Palin  was  smaller, and  was  expanded by  the                                                                    
legislature. Much effort and time  was expended in gathering                                                                    
information  and  analysis  and educating  the  commission's                                                                    
members  and the  public.  He saw  education  as an  ongoing                                                                    
responsibility  of  the  commission.  The  commission  would                                                                    
continue  its efforts  to reach  out  to identify  different                                                                    
entities for collaboration. He saw  the commission's role to                                                                    
serve as  a "convener" of interested  entities in healthcare                                                                    
issues. He conveyed that in  prior years when the commission                                                                    
established  specific   findings  and   recommendations  the                                                                    
commission  was  careful   not  to  assign  responsibilities                                                                    
because  of  the  belief  that  was  not  the  role  of  the                                                                    
commission.  He stated  that the  commission worked  closely                                                                    
with  the   DHSS  commissioner.   He  emphasized   that  the                                                                    
commission "responded  and embraced" the audit  findings. He                                                                    
saw more  work for  the commission moving  forward resolving                                                                    
the audits recommendations.                                                                                                     
9:40:25 AM                                                                                                                    
Co-Chair  Stoltze  asked  how the  commission  was  actively                                                                    
dealing  with the  evolving federal  healthcare policies  or                                                                    
mandates.  He  wondered  what  challenges  federal  policies                                                                    
created  for the  commission and  whether  its response  was                                                                    
reactive or proactive.                                                                                                          
Dr. Hurlburt  replied that the  commission engaged  with the                                                                    
military healthcare  and tribal healthcare systems  and with                                                                    
its  commissioners  from  those sectors  of  healthcare.  He                                                                    
informed the  committee that each  of the  commissioners was                                                                    
constantly updated on  the Affordable Care Act  but that the                                                                    
commission  had not  taken a  proactive  role regarding  the                                                                    
issues surrounding the  law. The commission did  not feel it                                                                    
was the  best forum to formulate  recommendations partly due                                                                    
to "political sensitivities."                                                                                                   
Co-Chair  Stoltze  characterized  the  commission's  actions                                                                    
towards  the Affordable  Care Act  as a  "cautious defensive                                                                    
Dr. Hurlburt replied in the affirmative.                                                                                        
Representative Guttenberg  discussed the  difference between                                                                    
recommendations   and   policy.   He  believed   that   both                                                                    
recommendations and  policy were  "shelved." He  judged that                                                                    
proactively  examining health  care policy  concentrating on                                                                    
increasing  efficient   health  care  delivery   and  higher                                                                    
quality  care   could  not  be  accomplished   without  some                                                                    
confrontation   and   criticism.   He  expected   that   the                                                                    
commission would take proactive  stances and make definitive                                                                    
statements regarding road blocks  to competition or creating                                                                    
efficiencies. He wanted the commission  to identify what was                                                                    
impeding the  delivery of  quality affordable  healthcare so                                                                    
lawmakers could act.                                                                                                            
Dr.  Hurlburt   observed  that  he   saw  movement   on  the                                                                    
commission's recommendations. Changes  would create tensions                                                                    
due to  deeply held beliefs  and the large amounts  of money                                                                    
at stake.  He mentioned the commission's  recommendation for                                                                    
greater transparency which could  be accomplished through an                                                                    
all payer  claims database. The database  required payers to                                                                    
report  what they  were paying  for healthcare  services. He                                                                    
delineated   that  a   bill  was   recently  introduced   in                                                                    
Washington  State to  establish the  data base.  Premera and                                                                    
Regents  insurance companies  were  the  main opponents  and                                                                    
killed the bill. The bill  that was signed only required the                                                                    
state to report its  healthcare costs. Conflicts of interest                                                                    
were problematic.  He noted  possible conflicts  of interest                                                                    
between commission  members and the industry  they work for.                                                                    
He  mentioned that  Commissioner  Jeff Davis  was the  Chief                                                                    
Executive Officer (CEO) of Premera  in Alaska and a valuable                                                                    
commissioner working for the best  interest of all Alaskans.                                                                    
He  thought that  a similar  bill  would place  Commissioner                                                                    
Davis in  a conflict of interest.  The commission identified                                                                    
high  profit   margins  for   urban  hospitals.   The  urban                                                                    
hospitals  were run  by  outstanding  individuals but  would                                                                    
choose  to  continue  to   maintain  the  profitability.  He                                                                    
indicated  that  some   regulatory  and  legal  restrictions                                                                    
existed i.e., workman's  compensation required that payments                                                                    
were  made at  the 90th  percentile of  market pricing.  The                                                                    
requirement enabled a medical  specialty with relatively few                                                                    
providers to control the  pricing. He referenced legislation                                                                    
by Rep. Olsen's that required  that the state employ a cost-                                                                    
based methodology rather than  provider pricing. He remarked                                                                    
that  the issues  created controversy.  He  stated that  the                                                                    
issues noted were examples  of concrete recommendations that                                                                    
came from the commission.                                                                                                       
Representative Guttenberg  related hearing  complaints about                                                                    
inadequate  Medicaid reimbursement  rates.  He wondered  how                                                                    
accurate the claim was.                                                                                                         
Dr. Hurlburt  responded that Medicaid and  Medicare utilized                                                                    
a cost  based methodology  for payments. Outside  of Alaska,                                                                    
the Medicaid payments were much  lower. Washington State was                                                                    
40 percent lower than Alaska.  He mentioned discussions with                                                                    
a  hospital administrator  who expressed  that Medicare  was                                                                    
the  larger  problem.  In  Alaska,  Medicaid  payments  were                                                                    
higher than  Medicare payments. He stated  that Medicaid and                                                                    
Medicare  payments were  significantly lower  than insurance                                                                    
reimbursement in any state.                                                                                                     
9:51:05 AM                                                                                                                    
Representative  Guttenberg asked  whether a  study regarding                                                                    
the actual  costs of  delivering a  service was  compared to                                                                    
the actual Medicaid and Medicare reimbursement rates.                                                                           
Dr. Hurlburt  answered that the  cost based  methodology was                                                                    
exactly what  Medicaid and Medicare  took into  account. The                                                                    
data  employed   was  derived  from  the   American  Medical                                                                    
Association and  came directly from  the provider's  side of                                                                    
the equation.                                                                                                                   
Representative  Gara stated  that  annually  Alaska had  the                                                                    
highest healthcare  cost increases in the  country. He asked                                                                    
whether the statement was accurate and why it occurred.                                                                         
Dr. Hurlburt  stated that the  costs were driven by  a human                                                                    
tendency to charge what can  be charged in any business. The                                                                    
competition in  the state was  limited and had a  history of                                                                    
high cost. Premera reported more  pressure from employers to                                                                    
send people  to other states  because of the high  costs. He                                                                    
restated that  Alaska should maintain  a quality  and robust                                                                    
health care sector and provide services within the state.                                                                       
Co-Chair Stoltze  noted that  SB 13  was the  companion bill                                                                    
and would be heard by the committee soon.                                                                                       
HB  376  was  HEARD  and   HELD  in  committee  for  further                                                                    

Document Name Date/Time Subjects
HB 314 - Correspondence between BP and DOR.pdf HFIN 4/7/2014 8:30:00 AM
HB 314
HB 314 - HB 271 Sponsor Statement 23rd legislature.pdf HFIN 4/7/2014 8:30:00 AM
HB 314
HB 314 - Letter of Support AOGA 3.11.14.pdf HFIN 4/7/2014 8:30:00 AM
HB 314
HB 314 - NSLP Map.pdf HFIN 4/7/2014 8:30:00 AM
HB 314
HB 314 - Relevant Excerpts from the Legislative History.pdf HFIN 4/7/2014 8:30:00 AM
HB 314
HB 314 - Sectional Analysis 4.4.14.pdf HFIN 4/7/2014 8:30:00 AM
HB 314
HB 314 - Sponsor Statement ver. O 4.4.14.pdf HFIN 4/7/2014 8:30:00 AM
HB 314
2013AnnualReportFINAL.pdf HFIN 4/7/2014 8:30:00 AM
HB 376
AHCC audit rpt-2013.pdf HFIN 4/7/2014 8:30:00 AM
HB 376
HB 376 Sponsors Statement.pdf HFIN 4/7/2014 8:30:00 AM
HB 376
Resolution.pdf HFIN 4/7/2014 8:30:00 AM
HB 376