Legislature(1995 - 1996)
03/26/1996 03:04 PM House HES
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
HB 393 - MANAGED CARE PROGRAM FOR MEDICAID Number 123 REPRESENTATIVE NORM ROKEBERG, Sponsor, said House Bill 393 provides for the establishment of a pilot program for managed care for Medicaid recipients. He noted that managed care can mean many different things to many different people. This particular bill was brought forward for the precise reason of the legislature taking an active role in the development and implementation of a managed care plan and program for the state of Alaska. His involvement stems from his concern that national legislation is leading the way and in a certain sense, forcing the state to go this direction on the one hand; on the other hand, it's also potentially going to be giving the state an opportunity to embrace some newer and innovative concepts in health delivery in the state. REPRESENTATIVE ROKEBERG stated the Medigrant program that has been proposed in Washington, D.C. is one form and there is also a per capita type Medigrant program for Medicaid. Potentially, there is the National Governor's Association compromise plan. All three of these plans or basically a compromise, potentially could be coming out of Congress this year, but if they do not do so this year for partisan political purposes, he predicted it will happen within a year or eighteen months, no matter who is elected President. Therefore, he felt it was important for the state of Alaska to prepare for a new era of managed care health delivery to the Medicaid recipients of the state. He explained that the grants would allow flexibility, whereas presently waivers have to be applied for. Ninety-four percent of the rest of the states have some sort of managed care in their health delivery systems for Medicaid recipients. Managed care is a way to give high level of care and quality services, while keeping the cost down. For example, in the last four years the cost in the state of Alaska has increased 50 percent. The gross total spending for FY 97 is $336 million; that's number 2 to education as a line item in the state's budget. Much of that funding comes from the federal government, but in the last year $145 million in general fund receipts went into Medicaid services. Another way to look at that is there has been an average increase over the last five years of 13.9 percent growth. This is the fastest growing area of the state's budget, so he felt it was important that something be done to try to contain the cost increase. REPRESENTATIVE CAREN ROBINSON arrived at 3:07 p.m. Number 400 REPRESENTATIVE ROKEBERG pointed out that in 1994 the legislature put intent language in the budget instructing the Department of Health & Social Services to look into managed care. The department has been actively pursuing development of managed care programs and ideas. As a matter of fact, most recently they awarded a contract to Fox Systems Health Management Associates in Scottsdale, Arizona to review all the managed care options for the state. Also, the division is giving special consideration to implementation this next fiscal year of a managed care model called "Primary Care Case Management (PCCM). REPRESENTATIVE TOM BRICE arrived at 3:12 p.m. REPRESENTATIVE ROKEBERG said his interest in the health care system was primarily from the fact that as an independent businessman, he was unable to obtain insurance, except at a very high cost. He, like many others, thought that Alaska could not sustain and support an HMO or a managed care type system because we lacked the infrastructure, the size or the capabilities that many states have to be able to implement such a system. He mentioned that he attended a number of seminars last fall, including one on rural managed health care, which convinced him that it could be done in the state of Alaska. There was testimony from small areas of the country that have developed either statewide, regional or even small community plans and adapted managed health care into their communities. He received a lot of information about how this plan was implemented in the state of Arizona, which has 46 counties and two competing managed care plans in each of the counties. So essentially, even a Medicaid recipient has a choice of plans in the counties in Arizona. He said it was interesting to note that Arizona led the country in the development of their managed care systems, since as a very conservative state politically, they for years had not taken Medicaid money. Until about 15 years ago, they did not take any federal funds for public health, and at that point in time they realized their public health clinics were so overburdened they couldn't supply the needed services to their citizens. They got an 1115 Waiver and developed a managed care plan, which has taken a number of years to develop, but now it is the most successful in the country. Number 605 REPRESENTATIVE ROKEBERG advised the committee he had also gotten some information from the state of Oregon where they were serving 280,000 people before they implemented their managed care plan, but because of the cost savings they were able achieve by implementing a managed care plan, they've expanded that service to 400,000 people, which is a 43 percent increase. The biggest segment of the population in the United States are the uninsured. They make just enough money to get by, but they do not qualify for Medicaid or are not fortunate enough to be involved in an insurance plan. The biggest concern among most health care professionals right now is that the people who don't have insurance aren't able to get it. The state of Oregon is one example where the number of people served was expanded and chipped away at the middle level of the uninsured. Number 672 REPRESENTATIVE ROKEBERG in conclusion said this bill before the committee asks the department to come forward with a plan and new legislation for the legislature's review. He said that's all this bill does; it doesn't matter if you're for or against the concept of managed care. The intent is that the legislature needs to be a part of this process. It sets up a pilot project, gives certain guidelines, has findings and asks the department to come back next year with their plan. CO-CHAIR TOOHEY asked if there were any questions of the sponsor. Number 753 REPRESENTATIVE ROBINSON asked Representative Rokeberg why he believed legislation was needed if the department was already working on a plan. REPRESENTATIVE ROKEBERG acknowledged there was a process the department was going through, but it was being done on their own time frame and based on decisions made by the department. He reiterated the intent of this bill is to involve the legislature. Additionally, one of his other motivations was to move this process along because of the impact on the budget. CO-CHAIR TOOHEY remarked that two years ago the legislature spent a great deal of time on health care issues. She asked representatives of the department to come forward to testify on HB 393. Number 890 BOB LABBE, Director, Division of Medical Assistance, Department of Health & Social Services, said the department has had some informal discussions with Representative Rokeberg on HB 393 and provided information as to what the department was working on in the area of managed care. They have a contractor who is assisting the department and he thought it had been primarily an educational process for the staff. He said being somewhat removed from the Lower 48 development of managed care, it takes some time to learn and understand the new concepts. He noted that the department had made some decisions which they believed were based on the 1994 legislation directing them to look into case management systems. That was the basis for issuing the contract and they believe the primary care case management option is consistent with that initial direction and not inconsistent particularly with even the more full blown capitation type model. The department felt they would start with that and do some piloting around that concept. He noted in that particular model, there's usually a physician, possibly a nurse practitioner/physician assistant under contract with the state to provide primary care services and act as a referral agent for other specialty services. Clients are then enrolled with a primary care case manager and need to get approval for an outside referral. The payments are typically continuous fee for service for the primary care case manager, as well as the specialty services, hospital care, etc. There is not a lot of change in how people are reimbursed. It starts organizing the system so there are linkages between the providers. There's probably better access in some ways for primary care services; typically one of the goals is to have services provided without the use of an emergency room, if the physician case manager is available or has to make arrangements to be available. The department views this as a step in the process and believes they can move in that direction. They've been working with their current resources and trying to reprogram their own staff. He said this bill as it's drafted, from their purpose, seems to fit with their abilities to move ahead and they could support it because it is in the interest of moving the department along and getting another tool for improving management of their program. Number 1119 CO-CHAIR TOOHEY asked Mr. Labbe when the department's plan would start functioning. MR. LABBE said an actual target for enrollment hasn't been determined. The department is gathering data and decisions will need to be made about where to pilot the projects, which client groups and which types of services will be included. He commented that usually not every Medicaid service is put into this. The department wanted to wait until the contract agency was finished, which is expected to be around June 1, to make those decisions. It is his hope to get something going in the next fiscal year. He added that it would require involvement from the local community providers, recipients and family members. The department has announced the recruitment of a position in their Anchorage office to focus on this. Number 1170 REPRESENTATIVE BRICE asked if the department had taken any steps to rectify the concerns raised over the optical hardware contract; specifically the undermining of instate resident businesses by shipping out of state. Number 1227 JAY LIVEY, Deputy Commissioner, Department of Health & Social Services, said two or three years ago under the Medicaid program, the department decided it would be cost effective for Medicaid to bid a contract for a company to provide eye glasses to Medicaid recipients. The company that was awarded the competitive bid was an out-of-state provider. It saved the department a considerable amount of money in Medicaid service to do that. He thought that Representative Brice was asking if there was a guarantee that under future managed care programs the department would support the Alaska infrastructure. He believed under a case management proposal, as explained by Mr. Labbe, they would because they would be signing up local Alaskan physicians to provide that particular service. CO-CHAIR TOOHEY asked if it would be under a competitive bid. MR. LABBE responded that for the primary care case management program, he would not anticipate a competitive bid. The department would encourage providers to meet a set of standards that would be established and then sign up. He said the plus side of having sort of a performance expectation for the primary care case managers goes beyond where we currently are with the fee for services, but it's not to the point of having two or three plans that would compete for best price. Based on his experience of working with Oregon in the development of managed care, he wasn't sure he would encourage competition initially. He added that if there were already a number of commercial plans to select from, then he might look at competition. CO-CHAIR TOOHEY commented that it wasn't being narrowed down to one hospital versus the other. She asked Mr. Labbe how this legislation would help the department and if he felt it was necessary. REPRESENTATIVE ROBINSON inquired if anything would change if this legislation did not make it through the process. MR. LIVEY thought this bill provided some affirmation of the direction the department is headed anyway, which he felt was valuable in their discussions of managed care with providers and clients. In the absence of this legislation, he believed the department would proceed with their current project. He reemphasized the bill does provide some impetus and general direction for the department. REPRESENTATIVE ROKEBERG commented the biggest difference and the value of the bill is the speed at which things might get done, which is a friendly intention. Number 1453 HARLAN KNUDSON, Executive Director, Alaska State Hospital & Nursing Home Association, testified in support of HB 393. The association had three reasons for their desire to see this bill passed and signed by Governor Knowles. The first is that managed care will help control the Medicaid budget. It changes the total incentive of the current health care system. Under a managed care system, the incentive is on wellness. Second, it provides a boost for the department to reach out and work with providers, which they feel is very important. Third, it sets up pilot programs so instead of attempting to move the whole system into managed care, it allows it to be tried in both the rural and urban areas. Mr. Knudson said there is managed care in the Native Health Service, and asked why areas like Bethel, Nome, Dillingham couldn't put together a contract on Medicaid with the department. In areas such as Ketchikan or Kodiak where there isn't a prominence of a Native system, why couldn't a managed program be put together and brought back to the Indian Health Service or to the Medicaid system. He concluded that HB 393 opens those kinds of doors for health care. He believes it is a good bill and urged the committee's support. Number 1547 CO-CHAIR BUNDE said he had heard anecdotally of a system like this being put in for Medicaid in a larger urban center, doctors were assigned that were difficult to reach and use of the emergency room increased because people would wait until the problem was acute instead of having to take a bus or drive several miles to get to the doctor. He said he was describing the down side of managed care for Medicaid and asked Mr. Knudson what his reaction was to that. MR. KNUDSON replied that Co-Chair Bunde's comment was well taken and in the beginning of some of the Medicare managed care programs they were aware of situations where the incentive had been to keep the patient out of the system; in other words make it difficult for the patient. He said that's growing pains and it is something that Alaska will go through. He didn't feel that should be a concern, as he believed there would be good, competent managed care, but the risk is there of shutting some people out of the system. CO-CHAIR BUNDE said his point was that they won't be shut out of the system, they'll just go back to using the emergency room as preventive care. CO-CHAIR TOOHEY asked if under managed care there was a set price for a particular service such as a broken leg that Medicaid would pay and could be collected, would the patient be able to go to the physician of their choice or would it have to be a physician in the managed care program? Number 1638 MR. LABBE responded that under the primary care case management program, the client would have a choice of primary care providers, and once the client had selected a primary care provider they would stay with that primary care provider; in other words, that would be their medical home. If the client wished access to specialty care, a referral from their primary care provider would be needed. CO-CHAIR TOOHEY noted for the record the Alaska State Medical Association has taken no position on this bill. REPRESENTATIVE ROKEBERG said he envisions this, because of the rural nature of Alaska and the way many rural managed care organizations are established in the Lower 48, as there being a small core group of primary care providers, but there will be backstops that will be networked in or have a relationship with a tertiary care hospital in a large urban area. He asked Mr. Knudson if he could envision the networking and ability to use the tertiary hospitals throughout the state in coordination with the rural clinics that exist today. MR. KNUDSON said he could see Cordova for example, that is isolated but has a big influx of population, having a major relationship with one of the major hospitals in Anchorage and being able to offer a contract to either Medicaid or Aetna on a per capita basis. Number 1756 REPRESENTATIVE ROKEBERG said by networking there were certainly creatively ways that could be workable in the state of Alaska. MR. KNUDSON said with the regard to networking, the integration is already going on. There is a lot of collaboration in every community in the state. The Kenai Peninsula is way ahead on the relationship between the doctors, the hospitals, the nursing home, the community mental health center, local psychologist, etc., with shared services, equipment and all those areas. CO-CHAIR TOOHEY asked if anyone else wished to testify on HB 393. Hearing none, she closed public testimony. Number 1797 REPRESENTATIVE ROBINSON moved to adopt CSHB 393, Version F, dated 3/21/96. Hearing no objection, it was so ordered. REPRESENTATIVE BRICE asked if the state would consider, for example, a 5 percent for residents preference to providers who want to bid competitively for these services? REPRESENTATIVE ROKEBERG said that's why this legislation was before the committee. That's why this bill is needed so if there is a concern about procurement and the preference the legislature has a voice in it. He's had discussions with the department about the potentiality of exempting this particular provision from the procurement code. One of his concerns in setting up a pilot program is that he thought something very close to a Request for Proposal (RFP) should be put together to get demonstrated interest. However, the ability to just grant a contract to the lowest performing bidder may not be in the best interest of the state on the initial pilot level. He didn't think there should be too much concern about not having local providers, except in the secondary areas like optical, drugs, prosthesis and things of that nature where there may be some outside contractors that may be able to provide those services. REPRESENTATIVE BRICE wanted some assurance, because it wasn't spelled out in the bill, that the pilot program should have that. CO-CHAIR TOOHEY said HB 393 requests the department to look into this and urges the department to bring their plan before the legislature. REPRESENTATIVE BRICE wanted it to be clear on the record by both the sponsor and himself that any deleterious effects to the tertiary businesses associated with health care will be watched with a great deal of scrutiny. REPRESENTATIVE ROKEBERG said we want people to watch, that's the whole idea of the bill. REPRESENTATIVE ROBINSON made a motion to move CSHB 393(HES) out of committee with attached zero fiscal notes and individual recommendations. CO-CHAIR TOOHEY objected and asked for a roll call vote. Voting in favor of the motion were Representatives Rokeberg, Robinson, Davis and Bunde. Voting against the motion were Representatives Brice and Toohey.
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