Legislature(2003 - 2004)

04/02/2003 09:00 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
     SENATE BILL NO. 109                                                                                                        
     "An  Act repealing  the statute  that sets  priorities for  the                                                            
     Department   of  Health  and   Social  Services  to   apply  to                                                            
     administration  of the  medical assistance  program when  there                                                            
     are insufficient  funds allocated in the state  budget for that                                                            
     program;  authorizing the department  to make cost containment                                                             
     decisions  that  may include  decisions  about  eligibility  of                                                            
     persons   and  availability  of  services  under   the  medical                                                            
     assistance program; and providing for an effective date."                                                                  
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Commissioner  Gilbertson explained  that this  bill would allow  the                                                            
Department of  Health and Social Services to eliminate  the optional                                                            
Medicaid services priority  list regulation that the Department must                                                            
abide by when  budgeted Medicaid funds are insufficient  to meet the                                                            
fiscal year's demands.  He continued that the optional services list                                                            
would  be replaced  with  language  authorizing  the  Department  to                                                            
undertake  cost  containment  strategies  for the  Medicaid  program                                                            
based  on  three principles:   1) that  the  Department  pursue  all                                                            
reasonable   cost  containment  measures   before  eliminating   any                                                            
eligibility  groups  or  services;  2) that  the  Department  pursue                                                            
strategies  to  maximize  federal  financial  participation  in  the                                                            
Medicaid program;  and 3) that the Department make  cost containment                                                            
decisions  that best  reflect the  needs and  interests of  eligible                                                            
Medicaid recipients.                                                                                                            
                                                                                                                                
Commissioner  Gilbertson shared  that the  Medicaid Options  list is                                                            
viewed by Governor  Murkowski and  the Department as an inefficient                                                             
method to contain  costs as, he explained,  no annual review  of the                                                            
options  list  is   conducted,  and  the  items  on   the  list  are                                                            
inappropriately ordered  in that the most expensive procedures would                                                            
be  disallowed  last. He  explained  that  the listing,  in  effect,                                                            
forces  the  Department  "to eliminate  broad  categories"  such  as                                                            
prosthetics,  wheelchairs,  prescription drugs,  and other  valuable                                                            
services  "before any  real savings  are incurred."  He stated  that                                                            
this legislation  proposes that the  same level of savings  could be                                                            
obtained without  impacting services to beneficiaries  in a negative                                                            
manner. He continued that  this change would allow the program to be                                                            
operated  within its appropriated  budget  without eliminating  such                                                            
things as  pharmaceutical  products that might  incur more  costs in                                                            
the long run.                                                                                                                   
                                                                                                                                
Commissioner  Gilbertson   assured  "that  individual  decisions  on                                                            
individual  procedures or  individual cases"  would not be  allowed,                                                            
but rather  that decisions would be  determined on a broad  category                                                            
of  eligibility   groups  or  services.  He  summarized   that  this                                                            
legislation  would  allow the  Department  to make  decisions on  an                                                            
annual basis as technology and medical industry changes occur.                                                                  
                                                                                                                                
In response  to  a question  from  Senator Taylor,  Co-Chair  Wilken                                                            
clarified that  the Members' packets  contain information  detailing                                                            
the optional Medicaid  services list in regulations  "Sec. 47.07.035                                                            
Priority  of  medical  assistance"  [copy  on file]  that  would  be                                                            
repealed.                                                                                                                       
                                                                                                                                
Commissioner Gilbertson  affirmed that the statute would be repealed                                                            
and replaced  with language  that provides  the Department  with the                                                            
discretion  "to engage  in the same  level of  cost containment  but                                                            
with greater  flexibility" through  the implementation of  the three                                                            
aforementioned guidelines.                                                                                                      
                                                                                                                                
Senator  Taylor  voiced  appreciation  that  the  Administration  is                                                            
addressing the Medicaid situation in this manner.                                                                               
                                                                                                                                
Co-Chair Wilken  expressed that were the Committee's  action on this                                                            
bill to incur  criticism, the three aforementioned  objectives would                                                            
assist in defending  Committee action. He continued  that the intent                                                            
of the action is clearly  identified by the Governor and in the bill                                                            
on pages  two, 24, and  31. He joined Senator  Taylor in  applauding                                                            
the Administration's  efforts to control the increasing  expenses of                                                            
the Medicaid program.                                                                                                           
                                                                                                                                
Co-Chair Green expressed  that the zero fiscal note further supports                                                            
the Department's  effort  to contain program  costs without  further                                                            
"cuts or general fund money being withdrawn from the program."                                                                  
                                                                                                                                
Commissioner  Gilbertson stated  that the  accompanying zero  fiscal                                                            
note is based  on Governor Murkowski's  efforts to offset  projected                                                            
Medicaid program growth  by implementing other "sizable general fund                                                            
reductions"  in FY  04. He  informed  that continuing  the  Medicaid                                                            
program  in FY  04, as it  is currently  designed,  would result  in                                                            
"well  over $60  million  in general  fund growth"  over  the FY  03                                                            
budget. He  stated that the Administration  has exerted substantial                                                             
effort to contain  general fund growth  in the Medicaid program  and                                                            
to limit impacts to beneficiaries  and providers. He stated that the                                                            
zero fiscal note is based  on the assumption that the FY 04 Medicaid                                                            
funding would  be approved at the Governor's proposed  budget level,                                                            
which contains  numerous  cost containment  strategies. He  declared                                                            
that, were  the Governor's funding  level approved, additional  cost                                                            
containment measures would not be required.                                                                                     
                                                                                                                                
Senator Olson  agreed that the more expensive procedures  are at the                                                            
bottom  of the  thirty-one  items  on the  optional  priority  list;                                                            
however, he voiced concern  that the proposed change would eliminate                                                            
the long established  list that was  developed "by a fair  amount of                                                            
thought  and  effort."   He  questioned  whether  the  Department's                                                             
decision-making  process  would allow  the same level  of input  and                                                            
consideration from such people as medical personnel.                                                                            
                                                                                                                                
Commissioner Gilbertson  stated that this legislation  would provide                                                            
the Department  "the discretion and the authority  to make and weigh                                                            
decisions"  and  the  subsequent   impact  of  those  decisions.  He                                                            
reiterated  that the current  optional priority  list is  inadequate                                                            
and is not a good cost  containment method in that it does not allow                                                            
for annual  review  or current  circumstances to  be considered.  He                                                            
avowed that  the issue is complex  and that the Department  would be                                                            
presenting  cost  containment strategies  and  their  impact, on  an                                                            
annual basis,  to the Legislature. He expressed that  the Department                                                            
anticipates  a "very interactive process"  with clear directives  as                                                            
to how the Department  would "engage in cost containment"  measures.                                                            
                                                                                                                                
Senator Olson voiced that  the mission of the Medicaid program is to                                                            
provide  a  health care  delivery  system  "to  people in  need"  as                                                            
determined  by the eligibility standards  defined in State  statute,                                                            
rather than "driving  the program" from a cost containment  position                                                            
as proposed in this legislation.                                                                                                
                                                                                                                                
Co-Chair Wilken reiterated  that the sponsor statement and the three                                                            
aforementioned  guidelines  indicate  that this  bill would  provide                                                            
benefits in addition to cost containment.                                                                                       
                                                                                                                                
Commissioner Gilbertson  agreed that "the Medicaid  program is about                                                            
providing care,"  and he specified  that approximately $900  million                                                            
of  health care  services  is projected  to  be spent  in  FY 04  to                                                            
support  those  services  and  to protect  service  for  low  income                                                            
individuals at  a time when State revenue resources  are limited. He                                                            
specified  that cost  containment efforts  should  be enacted  in an                                                            
effort  "to protect  the program  and allow  for good reimbursement                                                             
rate." He continued that,  were the program allowed to be "stretched                                                            
so thin," such  things as good reimbursement  rates and the  ability                                                            
to "take  care of  our neediest  seniors and  disabled individuals"                                                             
would be jeopardized.  Therefore, he continued, cost  containment is                                                            
required  in order to continue  adequate level  of care. He  alerted                                                            
that the  Department has  experienced tremendous  growth that  could                                                            
jeopardize the Medicaid program.                                                                                                
                                                                                                                                
Senator Bunde  asked whether the Department would  increase delivery                                                            
of Medicaid  services were  the Legislature  to increase funding  to                                                            
the program.                                                                                                                    
                                                                                                                                
Commissioner Gilbertson  responded that the Department  would manage                                                            
the program within the  parameters of the budget provided. He stated                                                            
that  program   expansions  or  increases   in  services   would  be                                                            
determined through the Legislative process.                                                                                     
                                                                                                                                
                                                                                                                                
SFC 03 # 40, Side B 09:48 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Senator Bunde summarized  the Department's position to be that there                                                            
is "the very great  likelihood that the Medicaid program  would have                                                            
less money  or would  grow beyond"  available  funding; however,  he                                                            
questioned  whether the Department  would further "these  options of                                                            
limitation"  efforts,  were  an increased  amount  of  funding  made                                                            
available to the Medicaid program.                                                                                              
                                                                                                                                
Commissioner  Gilbertson responded  that regardless of the  funding,                                                            
cost containment measures  would be implemented, as he asserted, the                                                            
program  must  be administered  efficiently.   He stated  that  were                                                            
additional  funding  provided,   the  Department  could  not  expand                                                            
programs or  services without Legislative  approval. He stated  that                                                            
the program  would be managed  as efficiently  as possible  and that                                                            
any remaining  funds would  be returned to  the general fund  at the                                                            
end of the fiscal year.                                                                                                         
                                                                                                                                
Senator Bunde  commented that, were the program to  continue to grow                                                            
beyond the State's  funding ability, cost containment  measures must                                                            
be implemented.  He asked whether  it could be anticipated  that the                                                            
Department  might  produce "its  own  list of  thirty-one"  services                                                            
guideline.                                                                                                                      
                                                                                                                                
Commissioner Gilbertson  anticipated this would occur. He voiced the                                                            
hope that "a dialogue with  the Legislature" would take place during                                                            
the development of the forthcoming fiscal year's budget.                                                                        
                                                                                                                                
Co-Chair Green informed  the Committee that the options list, to her                                                            
knowledge,  has not been  reviewed since  its original development;                                                             
however, she  opined, it has been  expanded in response to  requests                                                            
from "special  interest groups," without "proof" regarding  the need                                                            
or ranking  of the item on the list.  She summarized the  process as                                                            
"inconsistent"  and "troublesome." In contrast, she  stated that the                                                            
Department's  approach  to the  program  is "consistent  with  their                                                            
message that they  are engaging in cost containment  measures in the                                                            
right way."                                                                                                                     
                                                                                                                                
Co-chair Wilken ordered the bill HELD in Committee.                                                                             
                                                                                                                                
                                                                                                                                
[Note:  the following  Committee  discussion  regards  the  Medicaid                                                            
program discussed in SB 108 and SB 109.]                                                                                        
                                                                                                                                
Senator B.  Stevens, referring  to the Medicaid  charts provided  by                                                            
the Department  of Health and Social Services during  the hearing on                                                            
SB 108,  generalized that  the Medicaid program  is experiencing  "a                                                            
two-pronged"  containment  problem:  the  first  being the  cost  of                                                            
providing services;  and the second  being "the eligibility  of your                                                            
monthly recipients."  He noted that, according to  the chart on page                                                            
one, titled  "Medicaid Total Average  Monthly Eligibles and  Costs,"                                                            
there  has   been  a  47  percent   increase  in  eligible   monthly                                                            
participants  between FY 99 and projected  FY 04. He continued  that                                                            
the chart on page two titled  "Medicaid Eligible Children and Costs"                                                            
indicates  that,  during the  same  time frame,  there  has been  an                                                            
increase  of 73  percent in  monthly  eligible children,  while,  he                                                            
noted, the  page three  chart titled "Medicaid  Eligible Adults  and                                                            
Costs"  reflects  a  decrease  of  approximately  one  half  of  one                                                            
percent. He  continued that other  charts in the packet indicate  an                                                            
approximate  18-percent  increase  in senior  recipients  and a  33-                                                            
percent  increase  in disabled  recipients.  He asserted  that,  "no                                                            
sector of our  population is growing at that rate."  He asked for an                                                            
explanation to justify the increases in eligible participants.                                                                  
                                                                                                                                
Senator  B. Stevens  stated that  SB 108  and SB 109  focus on  cost                                                            
containment, and he specified  that, "the average cost per month per                                                            
member"  is identified  on the  charts. However,  he identified  the                                                            
containment  of  program  eligibility   as  the  primary  focus.  He                                                            
expressed that between  FY 99 and FY 04, the total number of program                                                            
recipients  has  increased  by 30,691,  with  27,734 of  that  total                                                            
number being children.                                                                                                          
                                                                                                                                
Commissioner Gilbertson  acknowledged Senator B. Stevens's  concern,                                                            
and stated  that the growth in the  Medicaid program "is  a national                                                            
trend."  However,  he  clarified  that  on the  national  level,  71                                                            
percent of Medicaid cost  increases result from seniors and disabled                                                            
individuals;   whereas,  he  attested,  these  groups   account  for                                                            
approximately  50-percent   of  the  cost  increase  in  Alaska.  He                                                            
furthered  that the costs  for these groups  are projected  to align                                                            
with the  national average  as "the  graying of  Alaska" results  in                                                            
more  demand for  long-term  care and  as people  with disabilities                                                             
"live longer."  He specified that  the most rapid population  growth                                                            
in the  Medicaid program  has been  in children  services, which  is                                                            
reflected  by the growth  of the  Denali KidCare  program while  the                                                            
only program  that reflects  a reduction  is the  adult program.  He                                                            
attributed  this reduction  to the  success of such  efforts  as the                                                            
State's welfare  reform and welfare  to work programs. However,  the                                                            
program has  experienced an  increase in  costs associated  with the                                                            
number  of pregnant  women in the  program. He  noted that  separate                                                            
legislation  is being considered  to address  eligibility  standards                                                            
for the various programs.                                                                                                       
                                                                                                                                
Co-Chair Green interjected  that the increase in costs is associated                                                            
with pregnant  women  who qualify  for services  through the  Denali                                                            
KidCare program.                                                                                                                
                                                                                                                                
Commissioner Gilbertson  concurred, and he commented  that "the vast                                                            
majority"  of growth  in terms of  children is  associated with  the                                                            
Denali  KidCare   program.  He  professed   that  the  State   would                                                            
eventually  incur  the  majority  of its  cost  increases  from  the                                                            
overall growth in services to seniors and the disabled.                                                                         
                                                                                                                                
BOB LABBE,  Deputy  Commissioner,  Department of  Health and  Social                                                            
Services  informed  that prior  to  the "expansion"  of  the  Denali                                                            
KidCare  program  in  1999,  the  child  population  growth  in  the                                                            
Medicaid  program "was  flat,"  and the  family being  on  temporary                                                            
assistance   determined  the  edibility   for  a  child.   With  the                                                            
implementation of welfare  reform measures, he continued, the number                                                            
of child  participants  in the  Medicaid program  decreased "as  the                                                            
parents went  to work." He  noted that when  the eligibility  policy                                                            
expanded to 200-percent  of the poverty level, the caseloads started                                                            
to increase.                                                                                                                    
                                                                                                                                
Mr. Labbe stated  that while the elderly Medicaid  population growth                                                            
has been "very  predictable and very  constant," the level  does not                                                            
correspond  to  the overall  number  of  seniors  in the  State.  He                                                            
informed  that to  qualify  for Medicaid  funding,  seniors must  be                                                            
receiving public  assistance. However,  he stated, the high  incomes                                                            
of many seniors excludes them from the program.                                                                                 
                                                                                                                                
Mr.  Labbe opined  that  these seniors  might  not qualify  for  the                                                            
program until  the age of 85 or older  when long-term care  services                                                            
might be required.                                                                                                              
                                                                                                                                
Mr.  Labbe  noted  that  the  State  is  experiencing  a  growth  of                                                            
individuals  with disabilities  as "baby boomers"  are aging  and as                                                            
adults  and  children  with  disabilities   live  longer  lives.  He                                                            
expressed that  the population growth  in the number of children  in                                                            
the Medicaid  program is  the result of a  State "policy choice"  to                                                            
expand the State services through the Denali KidCare program.                                                                   
                                                                                                                                
Senator B. Stevens asked  whether the eligibility specifications are                                                            
located in Section B(13) of the Denali KidCare program.                                                                         
                                                                                                                                
Mr. Labbe was unsure of the specific section.                                                                                   
                                                                                                                                
Commissioner Gilbertson  interjected that the 200 percent of poverty                                                            
level  eligibility  guideline  is  the  standard  for  children  and                                                            
pregnant women through the Denali KidCare program.                                                                              
                                                                                                                                
Senator B.  Stevens asked the level  of the current federal  poverty                                                            
guidelines.                                                                                                                     
                                                                                                                                
Commissioner  Gilbertson replied that  it is determined by  the size                                                            
of the family.                                                                                                                  
                                                                                                                                
Co-Chair Wilken interjected  that discussion relating to eligibility                                                            
for  the  Denali  KidCare   program  would  be  more  appropriately                                                             
addressed through forthcoming legislation.                                                                                      
                                                                                                                                
Senator Bunde commented  that, antidotally, people move to Alaska in                                                            
order to  qualify for the  Permanent Fund  Dividend and other  State                                                            
benefits.  He asked whether  the Department  "tracks" the length  of                                                            
residency of new individuals to the Medicaid program.                                                                           
                                                                                                                                
Mr. Labbe  responded that  the Department does  not track length  of                                                            
residency;  however, he noted, Medicaid  recipients are required  to                                                            
be a resident  of the State. He mentioned  that the Department  had,                                                            
several years  previously,  conducted studies  in which a length  of                                                            
residency question was  included and, he commented, that information                                                            
could be provided.                                                                                                              
                                                                                                                                
Senator Bunde  suggested that a length  of residency question  would                                                            
be beneficial.  He asserted that the minimum length  of residency to                                                            
qualify for Medicaid benefits should be at least 30 days.                                                                       
                                                                                                                                
Commissioner  Gilbertson responded  that the Medicaid program  is an                                                            
entitlement  program whereby  if an individual  meets the  program's                                                            
criteria, they  must be enrolled in the program. However,  he agreed                                                            
that the length of residency information could be beneficial.                                                                   
                                                                                                                                
Senator  Taylor asked  the penalty  that  might be  incurred were  a                                                            
state  to  deny  benefits   to  individuals,  contrary   to  federal                                                            
standards.                                                                                                                      
                                                                                                                                
Commissioner Gilbertson  responded that were the State  to disregard                                                            
federal  guideline standards  for  the Medicaid  program, the  State                                                            
would be denied access  to federal Medicaid funds. However, he noted                                                            
that a state's  participation in "the Medicaid program  is optional;                                                            
it is  voluntary  for States,"  and he  continued,  although "it  is                                                            
rare," states  have the option to submit and manage  their own plans                                                            
through a wavier process.                                                                                                       
                                                                                                                                
Co-Chair  Wilken asked  whether  a bill  that passed  in an  earlier                                                            
Legislative session  included a study being conducted  regarding the                                                            
Medicaid program and the Permanent Fund.                                                                                        
                                                                                                                                
Co-Chair Green reminded  the Committee that the bill in question had                                                            
been vetoed.                                                                                                                    
                                                                                                                                

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