Legislature(2005 - 2006)SENATE FINANCE 532

02/23/2005 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
     SENATE BILL NO. 98                                                                                                         
     "An   Act   making    supplemental   appropriations,    capital                                                            
     appropriations,  other  appropriations,  and reappropriations;                                                             
     amending  appropriations; making  appropriations to  capitalize                                                            
     funds; and providing for an effective date."                                                                               
This  was the third  hearing  for this  bill in  the Senate  Finance                                                            
The Committee  concluded hearing presentations  from State  agencies                                                            
outlining the appropriation requests.                                                                                           
Department of Health and Social Services                                                                                      
     Item: 34                                                                                                                   
     Section: 9(a)                                                                                                              
     RDU: Alaskan Pioneer Homes: Pioneer Homes                                                                                  
     Supplemental  Need:  replacing  unrealizable  federal  Medicaid                                                            
     funds  with receipt supported  services. Lower receipts  is due                                                            
     to the voluntary  nature of residents signing  up for Medicaid.                                                            
     -$1,200,000 federal funds                                                                                                  
     $1,200,000 receipt supported services                                                                                      
     $0 Total Funds                                                                                                             
JANET  CLARKE,  Director,   Division  of  Administrative   Services,                                                            
Department  of  Health and  Social  Services,  noted this  item  was                                                            
addressed  at  the  previous  hearing.   This  request  would  allow                                                            
services to  be continued to residents  of the Pioneers'  Homes. The                                                            
residents   have  paid  these   monies  and   the  legislature   has                                                            
continually reappropriated the funds to the Homes.                                                                              
     Item: 35                                                                                                                   
     Section: 9(b)                                                                                                              
      RDU: Behavioral Health: Behavioral Health Medicaid Svc                                                                    
     Supplemental Need:  Medicaid caseload growth above FY 05 budget                                                            
     projections.   At  current  expenditure   rate,  the   existing                                                            
     appropriation will be gone in April or May.                                                                                
     $2,653,700 general funds                                                                                                   
     $3,517,700 federal funds                                                                                                   
     $6,171,400 Total Funds                                                                                                     
Ms.  Clarke  explained   this  increased  need  is   the  result  of                                                            
expenditure  growth of the behavioral  health program, particularly                                                             
the  out of  state  placements  of  children.  This program  is  the                                                            
fastest growing segment  of the Department's budget. This request is                                                            
for those costs over the amount projected would be required.                                                                    
Co-Chair  Green asked  if the increased  costs of  the out of  state                                                            
placement program  are the result  of additional patients  served or                                                            
longer stays by patients.                                                                                                       
Ms. Clarke  replied that the Department  is reviewing all  causes of                                                            
the increases,  which  includes  the number  of children  in out  of                                                            
state placement and the longer stays.                                                                                           
Co-Chair Green asked if the daily rate has stayed consistent.                                                                   
Ms.  Clarke answered  that  the rates  have  changed  some, but  the                                                            
amount  is  insignificant  and  not  the cause  of  the  large  cost                                                            
increases to operate the program.                                                                                               
     Item: 36                                                                                                                   
     Section: 9(c)                                                                                                              
     RDU: Health Care Services: Women's and Adolescents Services                                                                
     Supplemental  Need: Feds  reduced FFY05  funding in the  Breast                                                            
     and Cervical  Cancer screening program. The fund  source change                                                            
     will  allow  services to  1600  enrolled women  that  otherwise                                                            
     would  not be served due to federal  funding reductions.  Funds                                                            
     will be required  by late March or early April  to continue the                                                            
     $500,000 general funds                                                                                                     
     -500,000 federal funds                                                                                                     
     $0 Total Funds                                                                                                             
Ms.  Clarke  informed that  when  the  FY 05  operating  budget  was                                                            
adopted, the Department  was not aware that the federal  funding for                                                            
this  program would  be reduced.  Reducing  the program  would  have                                                            
resulted  in fewer women  being screened  for the  cancers. A  chart                                                            
included  in the back-up  material for this  request [copy  on file]                                                            
shows the  increased number  of women served  through this  program.                                                            
This  request would  restore  funds to  the program  to prevent  any                                                            
women from being eliminated from the program.                                                                                   
Co-Chair  Green asked  what services  besides  cancer screening  are                                                            
paid through this program.                                                                                                      
Ms. Clarke  indicated  she would  provide this  information,  noting                                                            
that mammograms and the  diagnostic analysis of those mammograms are                                                            
Co-Chair Green  was unaware that the screening program  was separate                                                            
from the free health care program.                                                                                              
Ms. Clarke  affirmed it  is a separate  program  and has been  fully                                                            
funded  by the  federal  government  for  many years.  This  program                                                            
serves as the  "gate" to receive Medicaid-paid  treatment  for those                                                            
eligible to receive it.                                                                                                         
Co-Chair  Green  asked  where   the  shortfall  is  listed  in  this                                                            
Ms. Clarke replied the  next item reflects the growth in health care                                                            
Ms. Clarke  reported  that the  program includes  a clinical  breast                                                            
examination,  a mammogram  and a pap  smear. If  abnormalities  in a                                                            
patient's  screening appear,  that patient  is provided care  within                                                            
that Medicaid enrollment year.                                                                                                  
Co-Chair Green asked why the federal funding was reduced.                                                                       
Ms. Clarke  replied that  the federal grant  award was reduced,  but                                                            
did not know the reason.                                                                                                        
Senator Olson  asked the plan for  the following fiscal year  if the                                                            
federal funding were not reinstated.                                                                                            
Ms. Clarke  replied that  the Governor's proposed  FY 06 budget  has                                                            
requested  reinstatement of  federal funds.  Otherwise, the  program                                                            
would restrict  the screening  procedures to  women over the  age of                                                            
55, the mandatory  age. Currently, any qualified woman  over the age                                                            
of 18 is eligible for the screening.                                                                                            
Senator Olson  asked about women under  the age of 55 with  signs of                                                            
potential cancer, such as a suspicious breast lump.                                                                             
Ms. Clarke  was unsure how  the program would  address these  women.                                                            
She would research the matter.                                                                                                  
     Item: 37                                                                                                                   
     Section: 9(d)                                                                                                              
     RDU: Health Care Services: Medicaid Services                                                                               
     Supplemental   Need:  Unable  to  implement  cost  containment                                                             
     measures   as  quickly   or  to  the   extent  planned:   e.g.,                                                            
     Prescription  Drug List  delay, Transportation,  Rate  Setting,                                                            
     Cost   Avoidance  of   Medicare  Covered   Drugs.  At   current                                                            
     expenditure  rate, the existing  appropriation will  be gone in                                                            
     April or May.                                                                                                              
     $13,821,400 general funds                                                                                                  
     $16,888,300 federal funds                                                                                                  
     $30,709,700 Total Funds                                                                                                    
Ms. Clarke  stated this funding request  is due to the Department's                                                             
inability to  accomplish its budget  goals of the previous  year. In                                                            
FY 05, the Department proposed  a total of approximately $45 million                                                            
of cost  containment  items,  but has been  able  to implement  only                                                            
approximately  $11 million. The backup  documentation details  those                                                            
areas where the reductions were unrealized [copy on file].                                                                      
Ms.  Clarke  highlighted  two  components,   which  demonstrate  the                                                            
majority of the  unrealized savings. The first involves  anticipated                                                            
reduced  transportation costs  of the Medicaid  program through  the                                                            
use of the newly  created State travel office. The  Medicaid program                                                            
did not get enrolled  in the travel office to enable  the Department                                                            
to purchase  bulk tickets  until later in  the fiscal year  and thus                                                            
the Department was unable  to realize the full amount of anticipated                                                            
cost reductions.  The Department had  also projected changes  to the                                                            
preferred  drug list would  save $20 million;  however the  adjusted                                                            
projection  is $8.4 million. This  is due to the decision  to exempt                                                            
behavior drugs from the  preferred drug list restrictions. Inclusion                                                            
of the behavior drugs proved to be controversial.                                                                               
Ms. Clarke  noted  savings for  several other  components were  less                                                            
than the amounts projected.                                                                                                     
Senator  Hoffman  recalled  that during  discussions  on  the FY  05                                                            
budget   during  the   previous  session   he   asserted  the   cost                                                            
containments were  aggressive and recommended revising  the amounts.                                                            
Of the projected $45 million,  $30 million was not achieved. This is                                                            
less than 25 percent and  reflects a "Far cry from good management."                                                            
Senator  Hoffman asked  the current  status of  the Medicaid  travel                                                            
component in securing cost containment.                                                                                         
Ms.  Clarke replied  that  the Department  joined  the State  travel                                                            
office  as  of  January  1,  2005,  although  the  savings  of  this                                                            
collaboration were less than anticipated.                                                                                       
Senator Hoffman  asked if  savings from the  travel office  over the                                                            
next four  months would reduce  the $30 million  of unrealized  cost                                                            
Ms.  Clarke answered  it  would.  She noted  that  at  the time  the                                                            
Governor's  supplemental  appropriation  request  was  drafted,  the                                                            
Department  had realized  no  savings  from participation  with  the                                                            
travel  office.  This  supplemental  request  would  be  updated  to                                                            
reflect  savings  realized  since  participation  began as  well  as                                                            
anticipated savings through the end of the fiscal year.                                                                         
Senator Hoffman  had expected the Department would  achieve at least                                                            
50 percent  of the projected  cost containment  efforts proposed  to                                                            
the legislature. He reminded  that he sponsored amendments to reduce                                                            
the funding  reductions, as he had  predicted they were unrealistic                                                             
Senator  Olson asked  the  percentage of  Medicaid  funds spent  for                                                            
behavioral drugs.                                                                                                               
Ms. Clarke  estimated  the cost  of behavioral  drugs comprise  one-                                                            
third of the  Medicaid funds expended  for prescription medication.                                                             
DWAYNE  PEEPLES,   Director,  Division  of  Health  Care   Services,                                                            
Department   of   Health  and   Social   Services,   testified   via                                                            
teleconference  from Anchorage that the expense of  behavioral drugs                                                            
is between  25 and 30 percent of the  total prescription  drug cost.                                                            
     Item: 38                                                                                                                   
     Section: 9(e)                                                                                                              
     RDU:  Senior/Disabilities  Svcs: Senior/Disabilities   Medicaid                                                            
     Supplemental   Need:  Unable  to  implement  cost  containment                                                             
     measures  as quickly or to the  extent planned: e.g.,  Contract                                                            
     Waiver   Assessments,   Medicaid  Waivers,   Reducing   Respite                                                            
     Utilization, Nursing  Homes Preadmission Care Plans, $7,084,400                                                            
     general  funds and  $7,606,300 federal  = $16,690,700.  Formula                                                            
     growth  over  budgeted  amount will  cost  $15,487,800  general                                                            
     funds and $20,930,200  federal = $36,418,100. Primary growth is                                                            
     in  Personal Care Attendant  Services.  At current expenditure                                                             
      rate, the existing appropriation will be gone in March.                                                                   
     $22,572,200 general funds                                                                                                  
     $30,536,600 federal funds                                                                                                  
     $53,108,800 Total Funds                                                                                                    
Ms. Clarke  stated this request includes  two items. She  noted cost                                                            
containment efforts  were more successful for these.  The Department                                                            
had projected  $48.5  million of  cost containment  and refinancing                                                             
savings for the Senior  and Disability Services Medicaid program and                                                            
expects would  realize approximately  two-thirds, or $32  million of                                                            
the initial projected savings.                                                                                                  
Ms. Clarke informed  that the second portion of this  request is for                                                            
funding  to  cover  continued  formula  growth  above  projections,                                                             
particularly for  the Personal Care Attendant program.  This program                                                            
continues  to expand above  the Department's  estimate, despite  the                                                            
audits  conducted. January  incurred  the highest  costs to date  of                                                            
$7.4 million.  She anticipated extensive  discussions would  be held                                                            
in the  budget subcommittee  to reevaluate  policy choices  for this                                                            
program.  Other states  have addressed  the issue  in various  ways,                                                            
which would be reviewed.                                                                                                        
Senator  Dyson  recalled  that  Commissioner  Gilbertson   expressed                                                            
concerns  a  year  ago about  the  growth  of  this  program.  Those                                                            
discussions  established   the  significant  advantage   for  senior                                                            
citizens to remain in their  homes rather than be institutionalized.                                                            
Senator Dyson  understood that criteria  was implemented  to require                                                            
that patients  must be qualified to  enter a care facility  in order                                                            
to qualify for this program.                                                                                                    
Ms. Clarke learned that  one section of the Department's regulations                                                            
stipulate that  clients must require an institutional  level of care                                                            
to qualify  for this program. However,  other regulations  stipulate                                                            
that patients demonstrate one deficiency.                                                                                       
STEVE  ASHMAN,  Director,   Division  of  Senior  and  Disabilities                                                             
Services, Department of  Health and Social Services, reiterated that                                                            
two regulations apply.  One requires that an eligible recipient have                                                            
one or more deficiencies  in an activity required  for daily living,                                                            
such as meal preparation.                                                                                                       
Senator Dyson pointed out  that regulations could be changed without                                                            
legislative  approval, and  asked why the  Department had not  taken                                                            
steps to control the costs of this program.                                                                                     
Mr.  Ashman  replied that  regulations  adopted  the  previous  year                                                            
resulted  in substantial  outcry from patients,  their families  and                                                            
service providers.  The Department has also conducted  audits of the                                                            
program to determine  what changes should be implemented  to contain                                                            
Senator  Dyson clarified  the Department  is  gathering information                                                             
necessary  to make  decisions regarding  the  program, but  requires                                                            
additional data before decisions could be made.                                                                                 
Mr. Ashman answered this was correct.                                                                                           
Senator  Dyson remarked  that  this program  should  not be  abused.                                                            
Families  have  a  duty to  provide  some  services;  however,  some                                                            
subsidy is  necessary in situations  where family members  must take                                                            
time away from  paying jobs to provide care. He asked  the timeframe                                                            
for  making  decisions  regarding   the  future  guidelines  of  the                                                            
Mr. Ashman replied that  the audits should be completed by mid-March                                                            
and that some preliminary data is already available.                                                                            
Ms. Clarke  stressed the  Department's intent  that changes  made to                                                            
the  program are  acceptable  to  the legislature.  This  should  be                                                            
determined before  any changes are implemented to  avoid complaints.                                                            
Therefore, the matter would  be discussed in the budget subcommittee                                                            
Senator Dyson  commented that the chair of that budget  subcommittee                                                            
is experienced on this  issue. He requested that a copy of the audit                                                            
be  forwarded to  the  chair of  the Senate  Health,  Education  and                                                            
Social Services Committee  upon completion to allow a hearing on the                                                            
topic to be scheduled in  that committee. The only manner to specify                                                            
legislative  intent is  through  statutory changes,  resolutions  or                                                            
direction given  through appropriations. He asked  the Department to                                                            
relay direction  to the  legislature on how  the legislature  should                                                            
Co-Chair Green  asked if a change  of statute would be appropriate.                                                             
Mr. Ashman  responded  that the  language in  statute only  provides                                                            
that the service is an option.                                                                                                  
Co-Chair Green  surmised that the  qualification requirements  could                                                            
be changed without legislation.                                                                                                 
Senator Bunde  sympathized that complaints  are made when  difficult                                                            
decisions are made.                                                                                                             
Senator  Hoffman reiterated  that the appropriations  requested  for                                                            
items #36 and  #37 total almost $95 million, which  demonstrate that                                                            
the  Department  "missed  its  target"  for  cost  containment.  The                                                            
documentation  for these requests indicates the reductions  were not                                                            
achieved because  changes were not  implemented in a timely  manner.                                                            
He asked if  the proposed enabling  changes would be implemented  by                                                            
the  start  of  FY 06  and  subsequently  reflected  in  the  FY  06                                                            
operating budget.                                                                                                               
Ms.  Clarke replied  that  some of  the  enabling changes  would  be                                                            
implemented  before the start  of FY 06 although  others would  not.                                                            
She  exampled  that  the projected  $4  million  savings  through  a                                                            
nursing homes  preadmission  care plan would  not be realized.  This                                                            
plan  was envisioned  to  prevent Medicaid  expenditure  related  to                                                            
patients entering  expensive nursing home facilities  unnecessarily.                                                            
However, the  plan failed to consider  that other Medicaid  eligible                                                            
patients would  be admitted to those  beds and that the only  way to                                                            
eliminate that expense would be to eliminate those bed spaces.                                                                  
Senator  Hoffman   asked  the  percentage   of  the  targeted   cost                                                            
containment would be realized for FY 06.                                                                                        
Ms. Clarke responded that  the Department has achieved approximately                                                            
$41 million in savings.                                                                                                         
Senator Hoffman  remarked that the total projected  cost containment                                                            
was $93 million.                                                                                                                
Ms.  Clarke clarified  that  a significant  portion  of the  funding                                                            
requested for  the Senior/Disabilities  Services BRU is not  related                                                            
to anticipated  cost containment,  but rather  reflects the  rate of                                                            
growth in the cost of the program.                                                                                              
Co-Chair Green ordered the bill HELD in Committee.                                                                              
AT EASE 9:34:01 AM / 9:35:45 AM                                                                                             
Co-Chair Wilken chaired the remainder of the meeting.                                                                           

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