Legislature(1993 - 1994)
01/27/1993 03:00 PM House HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES
STANDING COMMITTEE
January 27, 1993
3:00 p.m.
MEMBERS PRESENT
Rep. Cynthia Toohey, Co-Chair
Rep. Con Bunde, Co-Chair
Rep. Gary Davis, Vice Chair
Rep. Tom Brice
Rep. Bettye Davis
Rep. Pete Kott
Rep. Irene Nicholia
Rep. Harley Olberg
Rep. Al Vezey
MEMBERS ABSENT
None
COMMITTEE CALENDAR
Overviews of the Health Resources and Access Task Force and
the proposed Comprehensive Health Insurance and Payment
Reform Act of 1993.
WITNESS REGISTER
Karen Perdue
P.O. Box 73209
Fairbanks, Alaska 99707
(907) 456-5780
Position Statement: Public member of the Health Resources
and Access Task Force representing
health care consumers
Mano Frey
President
Alaska AFL-CIO
2501 Commercial Drive
Anchorage, Alaska 99501
(907) 258-6284
Position Statement: Public member of the Health Resources
and Access Task Force representing
organized labor
Dr. David T. Mather
1569 Northfield Road
Fairbanks, Alaska 99709
(907) 455-6942
Position Statement: Public member of the Health Resources
and Access Task Force representing
nonprofit organizations
Jerome Near
Field Underwriter
New York Life Insurance Co.
Drawer 448
Soldotna, Alaska 99669
(907) 262-4461
Position Statement: Public member of the Health Resources
and Access Task Force representing
health insurers
Janet P. Oates
Director, Marketing and Community Relations
Providence Hospital
3200 Providence Drive
P.O. Box 196604
Anchorage, Alaska 99519-6604
(907) 261-3145
Position Statement: Discussed CHIPRA
Dr. Rodman Wilson, M.D.
Fellow of American College of Physicians, Internal Medicine
6234 Tanaina Drive
Anchorage, Alaska 99502
(907) 243-5583
Position Statement: Public member of the Health Resources
and Access Task Force representing
providers
Raymond Schalow
Executive Director
Alaska State Medical Association
4107 Laurel St.
Anchorage, Alaska 99508-5334
(907) 562-2662
Position Statement: Presentation on CHIPRA
ACTION NARRATIVE
TAPE 93-6, SIDE A
Number 000
CHAIR CON BUNDE called the meeting to order at 3:02 p.m. and
noted members present. He noted that the meeting was being
teleconferenced on a listen-only basis to Anchorage,
Fairbanks, Homer, the Matanuska-Susitna Borough, Sitka and
Soldotna. He said the first order of business would be an
overview presentation on the Health Resources and Access
Task Force, followed by a report on the Comprehensive Health
Insurance and Payment Reform Act of 1993. Chair Bunde said
each presentation would be followed by questions from the
committee.
Number 098
KAREN PERDUE, a public member of the Health Resources and
Access Task Force representing consumers, said the members
would present the results of their two-year effort studying
health care resources and access, then discuss their
proposed solutions. She had earlier presented two
documents. The first was an 83-page document entitled, "The
State of Alaska Health Resources and Access Task Force Final
report to the Governor and Legislature, January 1993,"
herein incorporated as Attachment 1. A second document was
a 25-page, condensed version of the report, herein
incorporated as Attachment 2.
MS. PERDUE began by discussing the issues the task force
examined over the past two years. She referred to
Attachment 2, page two, showing projected rises in total
state health care costs to $5.6 billion and per capita costs
to $7,341 by the year 2003.
MS. PERDUE said health care spending has outstripped other
elements of the state and has cut business profits. The
nation's health care crisis is reflected in Alaska, she
said. The state paid about $318 million on health care in
1991, about 20 percent of the total amount spent on health
care. She predicted the 11 percent to 13 percent increase
in health care spending for the next several years would
take a bigger bite from the state budget.
MS. PERDUE presented several demographic statistics about
health care in Alaska. She said about 76,000 Alaskans lack
health insurance, not including the underinsured or those
receiving other forms of government health care. As costs
rise, this number will rise. Almost 90 percent of the
uninsured do have jobs, though they work in industries or
small businesses that do not offer health insurance. She
said the uninsured represent a wide range of economic
levels. Up to 30 percent of those uninsured are children,
as many insurance policies do not include children or
dependents without additional costs.
Number 224
MANO FREY, president of the Alaska AFL-CIO and a public
member of the Health Resources and Access Task Force
representing organized labor, said the health care crisis
affects all Alaskans. He described the task force's
extensive work. He warned the legislature not to wait for
President Bill Clinton's administration to take action first
on health care. He argued that Alaska's special
geographical and transportation conditions warrant swift and
independent action. If necessary, state legislation could
be later molded to fit national legislation, or challenged
by lawsuit. He encouraged the committee to give favorable
consideration to the task force's recommendations and to use
them as a basis for health care reform.
MS. PERDUE said public input to the task force indicated
some major needs: the need for fundamental reform of the
health care system; the need to address rising health care
costs; the need for universal access to health care; and the
need to address basic public health services such as public
water and sewer systems.
Number 360
DR. DAVID MATHER, a task force member representing Alaska
Native nonprofit health corporations, said the task force
met for 30 days and produced recommendations he offered as a
basis for public discussion on the issue.
DR. MATHER indicated his intention to speak on the
interconnected issues of health care access and cost
control. The task force believes that neither workers,
state government, nor business will be able to afford the
projected annual $29,000 cost of health care for a family of
four, he said. Either the state must control the cost, or
it will be forced to pay more of it as fewer middle class
people can afford health care.
DR. MATHER said cost control efforts have focussed on
specific cost areas like hospitals or doctors' costs, but
such piecemeal efforts force up prices elsewhere in the
system. To counter this problem, most health care reform
ideas include comprehensive cost containment mechanisms.
Number 417
DR. MATHER stated the task force supports a global budgeting
approach, which would cap total spending in each general
area of health care, with the amounts set through a
political process. Both the Comprehensive Health Insurance
and Payment Reform Act (CHIPRA) and the task force support
limiting price increases to the Consumer Price Index in
Alaska, which would save $1.5 billion each year until the
year 2003. This approach allows politicians to set the
overall funding levels, but would involve health care
providers in deciding how to set rates and how to allocate
funding. The task force proposed creating a well-funded
public health authority to set global budgets and to
negotiate contracts.
Number 458
DR. MATHER discussed the task force's second recommendation:
to allow universal access to health care. He described
different access plans. The "pay or play" plan, such as the
one in effect in Massachusetts, requires all employers to
provide insurance or pay an insurance tax. An approach used
in Hawaii requires employers to provide insurance, but such
a plan requires some waivers of federal law. The approach
that Alaska should pursue, he recommended, is a program
similar to Canada's in which the government is the single
payer for health care, but in which such care is provided by
independent doctors, hospitals, nurses and others.
Number 487
DR. MATHER said such a system is best suited to Alaska,
since many people move from job to job and work in seasonal
industries, and since government pays nearly two-thirds of
medical costs already. There are difficulties in
implementing a single-payer system, but it would bring
savings in administrative services that would permit
extension of care to uninsured Alaskans. He said those
proposing CHIPRA agree with that assessment.
Number 538
CHAIR BUNDE called an at-ease. He recalled the meeting to
order, and Mr. Mather proceeded.
MR. MATHER stated that Alaska faces a crossroads between
taking no action and seeing health care become more
expensive and unavailable, or attempting a comprehensive
solution to control costs and provide decent universal
health care at less total cost.
Number 551
JERRY NEAR, a field underwriter for New York Life Insurance
Co. and a Health Resources and Access Task Force member
representing the insurance industry, said the sate health
care system faces meltdown as people leave the system,
raising costs for those remaining in the system. He said
the task force tried to allow access to health insurance to
small businesses, which employ most people in the state. He
referred to page 19 of Attachment 2, the start of
recommendations to improve health care access. He warned
that delaying action on the issue would only exacerbate the
problems and he encouraged prompt action.
Number 580
CHAIR BUNDE reminded the task force members to submit any
written testimony they might have and opened the floor to
questions.
REP. CYNTHIA TOOHEY asked whether the task force's fourth
recommendation, to pass legislation to reform small group
health insurance markets, did not represent the kind of
piecemeal approach the task force members had warned
against.
DR. MATHER answered that the task force had wrestled with
such questions, but decided problems with small group health
insurance could be addressed expeditiously with relatively
quick and simple action, independent of a comprehensive
overhaul of the health care system, which might take several
years.
Number 619
DR. MATHER, in response to a question from Chair Bunde, said
that the 76,000 uninsured residents in the state excluded
15,000 people eligible for health care through the Alaska
Native Health Service (ANS).
CHAIR BUNDE asked how the task force recommendations related
to the ANS program and other existing systems.
DR. MATHER said the state should push the federal government
to continue operating the Alaska Native health care system,
and any new health care system should be coordinated with
the ANS system, as it would with any existing insurance
program.
Number 639
CHAIR BUNDE asked how the task force's recommendations would
mesh with or conflict with the reforms proposed in the
CHIPRA proposal.
DR. RODMAN WILSON, a physician and member of the Health
Resources and Access Task Force representing health care
providers, and who has also sat in on the CHIPRA meetings,
said the proposals had several similarities and differences.
Among the differences, he said, are that CHIPRA relies on
employers as the main source of health insurance, whereas,
the task force would stop private employers from offering
such insurance. Also, CHIPRA would create a privately
operated health authority and claims clearinghouse, while
the task force envisions operating such functions through
public processes. The CHIPRA recommendations also contain
more tort reform, he added.
Number 661
REP. GARY DAVIS asked whether the task force wished they had
a trial attorney on the team, and was answered with laughter
from the audience, which Chair Bunde interpreted as a
negative answer.
REP. TOOHEY encouraged consideration of small business'
limitations in providing health care insurance. She also
asked who would control the pool of money that would come in
from taxes, insurance premiums and other sources, and which
would go out in compensation to health care providers. She
also asked who would set rates.
DR. WILSON answered that the government might hire a
contractor to manage one large pool of health care money,
and the government would negotiate how much of that pool
they would spend for each general area of health care. He
said the task force doubted that federal health care
providers would pay into such a pool at first, but might
eventually.
REP. TOOHEY said the federal health care providers would
have to be included in such a pool for the system to work.
TAPE 93-6, SIDE B
Number 000
DR. WILSON encouraged committee members to study Table 4-3
on page 23 of Attachment 2 and on page 64 of Attachment 1,
which he described as the heart of the issue: that a future
single payer system would provide health care at less cost
than the current system would if it does not change.
CHAIR BUNDE observed that the 76,000 uninsured Alaskans had
their health care insurance costs paid by others. He asked
members of the task force what initial legislation they
would introduce to address the health care system if they
themselves were legislators.
MS. PERDUE said all members believe that the most important
element of their plan is the health care authority that is
separate from government, but which has the professional
staff to begin building a database and (unintelligible).
Number 047
DR. WILSON agreed with Ms. Perdue and added that some small
group market reform bills, and possibly some tort reform
bills, might be introduced soon. He mentioned possibly
lowering the prejudgment interest rate of 10.5 percent added
onto awards for successful malpractice suits, retroactive to
the date the lawsuit was filed.
MS. PERDUE also said bills already in the state legislature
could achieve many of the task force's recommendations for
short-term action, such as for small market reform. She
mentioned the Healthy Start Bill, which would allow parents
to buy inexpensive health insurance for their children.
Number 090
DR. WILSON encouraged the committee to keep up on national
efforts at health insurance and health care reform and to
remain ready to pass their own bills in case federal efforts
are unsuccessful.
CHAIR BUNDE called a short at-ease at 3:52 p.m. He called
the meeting back to order at 3:59 p.m.
Number 119
MS. JANET OATES, director of marketing and community
relations at Providence Hospital in Anchorage, introduced
herself and announced her intent to describe the hows and
whys of the Comprehensive Health Insurance and Payment
Reform Act.
MS. OATES said that two years ago physicians and doctors
were concerned with the direction of possible legislation
that focussed only on containing health care costs. She
decried such an approach, saying such an approach would lead
to increased costs elsewhere. Rather than simply criticize
the legislature, they decided to see what areas of the
health care system they would be willing to change.
MS. OATES stated that they followed the Health Reform Task
Force's efforts closely and tried to work out the nuts and
bolts of health care reform, focussing on how to control
costs and what they would need to get in return for doing
so. They also addressed the criticism they heard for
wanting the public to have increased access to health care
merely because it would increase their business. She said
Raymond Schalow, executive director of the Alaska State
Medical Association, would address that issue in a
meaningful way in his presentation.
MS. OATES said they kept focussed on finding an answer, not
bewailing the problem. She noted that both the health care
task force and those who prepared the CHIPRA proposal were
trapped by actuarial constrictions. She mentioned Hawaii,
which passed its own health care plan 18 years ago in
anticipation of a federal plan, and has since been the sole
state to successfully address problems in health care
access. She credited that state for trying to see what kind
of health care they could provide at a given cost. She then
introduced Mr. Schalow.
Number 190
RAYMOND SCHALOW, executive director of the Alaska State
Medical Association, began his presentation by saying that
nine physicians and seven administrators have been working
for 27 months on the project. He indicated their ideas are
not unrealistically optimistic, but are a detailed set of
draft legislation that he hoped would serve as a basis for
discussion. He began displaying a set of overhead
projections, copies of which are herein incorporated as
Attachment 3. (All attachments are on file in the House
HESS Committee room during session; thereafter, they may be
found in the Legislative Reference Library.)
MR. SCHALOW said the group developed a set of principles for
a successful health care system. As outlined on pages one
and two of Attachment 3, they are: affordable quality
universal health care; patient responsibility; preventative
care; adequate capitalization; choice of provider; market
environment; and scientific basis for care.
MR. SCHALOW stated their proposal attempts to fairly share
the sacrifices necessary in health insurance reform among
the insurance industry, the trial attorneys, physicians,
hospitals and the public. They even require that Medicaid
recipients pay some small amount, to encourage a sense of
responsibility.
Number 232
MR. SCHALOW referred to page three of Attachment 3, listing
the features of CHIPRA's health system reform, some of
which, he said, complement those of the task force's
efforts. The features are: everyone gives up something;
insurance reform; administrative simplification; cost
controls; medical liability reform; funding; and the Alaska
Health Insurance Corporation.
MR. SCHALOW referred to page four of Attachment 3, which
outlines the components of CHIPRA. He indicated that there
is a need for reliable data on health insurance, saying that
there is little data available on health insurance in
Alaska, and even the data presented by the task force is
suspect.
MR. SCHALOW stated, "The cost control agency obviously, with
the program that we are presenting, the government CPHI
(consumer price household index?) will hold back cost
control, but the cost control agency is created to control
volume. That in the pool would be state and municipal
employees, the uninsured, and employer plans, and self-
insures that data would also go into the corporation. So
this is just a quick glance -- glimpse -- of what we're
trying to do."
Number 261
MR. SCHALOW referred to page seven of Attachment 3, which
outlines the elements of CHIPRA insurance reform.
1) Universal Coverage. He said those proposing CHIPRA
decided early in their development process to include a
requirement that those receiving a permanent fund dividend
must show proof of health insurance. He believes many
uninsured people can afford to buy it but choose not to.
2) Eligibility. He said anyone would be eligible for
CHIPRA benefits if they qualified for a permanent fund
dividend.
3) Insurance Pool. He said CHIPRA would create an
insurance pool of about 200,000 people, including all
employees of local and state governments, universities,
school districts, and retirees from such employers and their
dependents. He said the insurance industry, seeking more
profit, has eliminated coverage for many high-cost policy
holders, thus subverting his conception of insurance as a
pool in which people share the risk of financial risk.
4) Employee Contribution to Health Insurance.
According to Mr. Schalow, employers must provide insurance
or switch to CHIPRA, and must pay taxes to make up any
difference in coverage levels between their plan and CHIPRA.
Number 296
MR. SCHALOW described the CHIPRA policy as a $1,000
catastrophic policy. He said the big problem with health
care insurance is with uninsured people who suffer costly
catastrophic illnesses or accidents.
5) Community Rating. They backed off of immediately
rating communities because it would increase individual
premiums to $2,000 per month. Instead, they proposeD
phasing it in over five years.
6) Guaranteed Renewability and Portability.
7) Stabilize Health Insurance Premiums. Health
insurance companies would have to prove the need for raising
premiums higher than the Consumer Price Index. He said
companies should not balance out financial losses in other
states by rasing premiums in Alaska.
MR. SCHALOW discussed CHIPRA's efforts at simplifying
administration of health insurance. Such elements include
establishing a single claim form for all users, a single
clearinghouse that would pay claims, and a 15-day limit on
claims processing and payment, which would save money and
reduce complications.
MR. SCHALOW referred to page 10 of Attachment 3, which
outlines CHIPRA's cost controls. They include:
1) linking price increases to the General Consumer
Price Index to limit spiraling costs;
2) requiring physicians and hospitals to give up 5
percent of their fees to the CHIPRA pool;
3) publishing provider fee schedules to allow market
forces to operate;
4) establishing a separate corporation to limit the
volume of medical services offered, so as to encourage
health care providers to self-police those who collect
unusually high fees;
5) eliminating the practice of shifting the costs of
providing care for the uninsured to the insured, which can
add up to 15 percent to the insurance bills;
6) reducing defensive medicine, the practice of
performing costly and superfluous tests in order to
forestall later patient accusations of neglect; and
7) requiring patients to share some of the costs of
medical service, even when insured.
Number 460
MR. SCHALOW referred to page 14 of Attachment 3, which shows
proposed medical liability reform. He said many physicians
have told him they would be willing to give up a lot if the
insurance industry would change to relieve them of the
complications and hassles involved in dealing with it.
The reform measures, as outlined on page 17, include:
1) a $250,000 cap on non-economic damages;
2) periodic payments of court awarded judgments;
3) collateral income sources;
4) statute of limitations on claims for injury;
5) protection of hospitals from liability for actions
by non-employees;
6) court-ordered non-binding arbitration; and
7) prejudgment interest rates set lower than the
current 10.5 percent.
Number 506
MR. SCHALOW referred to page 18 of Attachment 3, which
describes the function of an Alaska Health Insurance
Corporation that would establish a health benefits package,
establish uniform utilization review standards, and perform
analyses of the health system. It would also negotiate with
providers for discounts, monitor the solvency of the CHIPRA
pool, control costs, publish provider fees for usual and
customary procedures, and propose target budgets.
MR. SCHALOW briefly described the sources for funding for
the CHIPRA pool, as outlined on page 20 of Attachment 3.
(Rep. Nicholia left at 4:25 p.m., and Rep. Bettye Davis
followed at 4:26 p.m.)
CHAIR BUNDE opened the floor to questions.
Number 542
REP. TOOHEY commented that the CHIPRA and health care access
task force reports seemed to indicate the imminent demise of
the insurance companies as middlemen in the provision of
health care, and asked whether that was not a good idea.
MS. OATES responded that members of the insurance industry
have expressed fear that they are being rendered obsolete.
She said the CHIPRA plan would set up a clearinghouse that
would allow the insurance companies to sell insurance. She
also suggested the CHIPRA proposals could be an opportunity
for all those involved to streamline their operations.
MR. SCHALOW said the insurance industry expressed a dislike
of the idea of giving up the claims processing to an outside
clearinghouse.
Number 568
CHAIR BUNDE asked what the basic monthly premium would be
for CHIPRA health insurance.
MS. OATES said she did not know, she would need more
actuarial information. She said they would like to start
with a low premium and see what kind of coverage they could
afford.
MR. SCHALOW repeated the need for better data, saying he has
been unable to ascertain the current cost of providing
health care to Alaskans now, and estimates have ranged from
$2,000 to $3,500 per person per month.
CHAIR BUNDE asked about the portability of CHIPRA benefits.
MR. SCHALOW answered that CHIPRA benefits would be good only
in Alaska, and employers would be required to provide their
workers insurance or pay a state insurance tax.
CHAIR BUNDE expressed concern at potential overuse of a
universal health care plan for minor complaints and asked
whether CHIPRA tries to control demand.
DR. WILSON said CHIPRA's cost-control mechanism controls
volume of services provided, not fees. Under the system,
any unusual or unexplained increase in costs would be
investigated and possibly corrected by having a health care
provider's peers question such overruns.
CHAIR BUNDE asked the witnesses to give him written opinions
of the Oregon health care plan.
MR. SCHALOW answered briefly that he believed that Oregon
should attempt such a system.
Number 634
CHAIR BUNDE thanked those attending the meeting at the
remote teleconference sites, and ADJOURNED the meeting at
4:30 p.m.
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