Legislature(2021 - 2022)DAVIS 106
02/01/2022 11:30 AM House WAYS & MEANS
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): Budget Cost Drivers and Methods of Cost Containment | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
February 1, 2022
11:38 a.m.
MEMBERS PRESENT
Representative Ivy Spohnholz, Chair
Representative Adam Wool, Vice Chair
Representative Andy Josephson
Representative Calvin Schrage
Representative Andi Story
Representative Mike Prax
Representative David Eastman
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
PRESENTATION(S): BUDGET COST DRIVERS AND METHODS OF COST
CONTAINMENT
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
SANDRA HEFFERN, PhD, President
Effective Health Design;
Project Coordinator
Alaska Healthcare Transformation Project
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation, titled
"Healthcare Costs and Cost Drivers."
RALPH TOWNSEND, PhD, Professor of Economics
Institute of Social and Economic Research
University of Alaska Anchorage
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation, titled
"What do we know (and not know) about healthcare costs in
Alaska?"
ACTION NARRATIVE
11:38:03 AM
CHAIR IVY SPOHNHOLZ called the House Special Committee on Ways
and Means meeting to order at 11:38 a.m. Representatives
Eastman, Prax, Josephson, and Spohnholz were present at the call
to order. Representatives Schrage, Wool, and Story arrived as
the meeting was in progress.
^PRESENTATION(S): Budget Cost Drivers and Methods of Cost
Containment
PRESENTATION(S): Budget Cost Drivers and Methods of Cost
Containment
11:38:48 AM
CHAIR SPOHNHOLZ announced that the first order of business would
be a presentation on budget cost drivers and methods of cost
containment.
11:39:22 AM
SANDRA HEFFERN, PhD, President, Effective Health Design; Project
Coordinator, Alaska Healthcare Transformation Project, provided
a PowerPoint presentation, titled "Healthcare Costs and Cost
Drivers" [hard copy included in the committee packet]. She
described the Alaska Healthcare Transformation Project as a
cross sector collaboration of payers, providers, policy makers,
and patient advocates working together to transform Alaska's
healthcare system. She listed the following goals of the
project: reducing the overall per capita healthcare cost growth
rate to 2.25 percent or to the consumer price index, whichever
is greater; increasing the percentage of Alaskans with a
standard source of primary care; and aligning all public and
private payers towards value-based primitive payment models with
streamlined administrative requirements. She stated that
Alaska's healthcare cost in 2011 was at $7.5 billion and
climbing. She added that when this value is adjusted for today,
it would be closer to $9.3 billion, or $12,500 per Alaskan. In
response to Chair Spohnholz, she answered that inflation for
healthcare costs in Alaska is over 49 percent. She suggested
that Alaska has some of the highest healthcare costs in the
world.
11:44:28 AM
DR. HEFFERN pointed out the figures from the Center for Medicare
and Medicaid Services, Office of the Actuary, on slide 4, and
clarified that the graph represents these figures in the
millions. She stated that health spending increased by $6.4
billion from 1994 to 2014, which equates to a 371 percent
increase. She said that during this period, as Alaska's
population increased, healthcare services became more accessible
throughout the state, with more available primary care and
specialist services. She advised that health spending has
increased because of changes in medical technology,
administrative expenses resulting from the complexity of the
health-finance system, pharmaceuticals, low-value care, chronic
disease, health disparities, and social determinants of health.
In response to Representative Prax's inquiry about low-value
care, she referred to a study conducted by Milliman, from
MarketScan data. In response to Representative Josephson, she
referred him to Emily Richie with the Department of
Administration.
12:02:02 PM
RALPH TOWNSEND, PhD, Professor of Economics, Institute of Social
and Economic Research (ISER), University of Alaska Anchorage,
provided a PowerPoint presentation, titled "What do we know (and
not know) about healthcare costs in Alaska?" [hard copy included
in the committee packet]. He explained that the key driver of
Alaska's high cost of healthcare is the high compensation for
clinicians, physicians, and specialists. Alaska's higher costs
are not driven by higher utilization in the state, compared to
the rest of the country. He noted that the data in Alaska is
disjointed, incomplete, and untimely. He concluded that data
deficiencies currently make studying healthcare costs in Alaska
difficult. He suggested that an all-payer claims database would
improve the economic understanding of Alaska's healthcare costs.
To determine future policy decisions, he advised establishing an
ongoing process to analyze and understand the state's healthcare
data.
12:09:05 PM
DR. TOWNSEND, pointing out slide 2 and slide 3, stated this data
confirms that Alaska has the most expensive healthcare in the
country. He stated that professional services drive this cost,
as physician rates in Alaska stand out as being
disproportionately high. While all physicians' rates have a
high ratio relative to the rest of the country, orthopedists and
cardiologists have the highest rates. According to Milliman
MarketScan data from 2009, Medicare utilization rates in Alaska
are comparable to Idaho, Washington, Hawaii, North Dakota,
Oregon, and Wyoming. Commercial utilization in state's urban
areas is also comparable to these other states, while commercial
utilization in non-urban areas is higher in Alaska. Salaries
for healthcare professionals, except for those who are self-
employed, were 100 percent to 110 percent of the comparison
states. Hospital occupancy rates were lower in Alaska in
general. He stated that ISER does not have the capacity to
provide an ongoing examination of the data sets. He explained
that a study performed in 2018 found the 80th percentile rule
has impacted Alaska's healthcare expenditures. The results of
the study showed that the rule "jarred" the financial change.
Prior to 2004, before the rule was implemented, health expenses
in Alaska had been comparable to other places in the country;
however, after the enactment of the 80th percentile rule, a
divergence occurred, and healthcare costs in the state grew 1.5
percent to 2 percent more than the rest of the nation. He
explained that the 80th percentile rule was enacted with the
intent of preventing surprise legislation.
12:30:30 PM
DR. TOWNSEND stated that there are some problems with the data
used in the study. He emphasized the difficulty in acquiring
adequate data for research purposes. In response to
Representative Eastman, he mentioned that prescription drug
prices are comparable to those in the Lower 48. Also, Alaska
spends considerably less on nursing home care because of the
relatively young population. He suggested to Representative
Schrage that an all-payer claims database is the most obvious
way to create an ongoing, consistent, and comprehensive series.
With an all-payer claims database, Alaska would be able to
better understand and plan for healthcare costs and quality. He
stated that consistent data over time will help researchers
calculate the impacts of legislative changes.
12:43:26 PM
DR. TOWNSEND cautioned the committee that there are numerous
cost drivers creating more than one issue. Moving to slide 8,
he discussed options, including integration of data for
comprehensive analytics and policy recommendations, models of
care delivery, structured collaboration between clinicians and
hospitals, clinically integrated networks, and alternative
payment structures. The data suggests that better-coordinated
care can lead to efficiencies and improve the experience for
both the clinician and the patient.
DR. TOWNSEND stated that passed legislation provided for
coordinated-care demonstration projects to be implemented around
the state. One model created a network of providers with a per-
member fee. Another model is a clinically integrated network,
which is a structured collaboration between physicians and
hospitals. This creates clinical initiatives designed to
improve the quality and efficiency of healthcare services by
removing barriers to patient care coordination, allowing
providers to share infrastructure while maintaining their
independence, and rewarding quality. He stated that there are
two integrated networks developing in Anchorage.
DR. TOWNSEND stated that alternative payment structures use a
reference price developed either from a trend analysis or
Medicare reimbursement rates. He explained that, for reference-
based pricing, health plans determine providers' reimbursement,
while, for an all-payer rate setting, payers agree to common
prices and price increases set administratively through an all-
payer model. He stated that reimbursement rates would mitigate
price discrimination and reduce the administrative overhead
associated with rate negotiations, while maintaining consumer
choice. He stated that data analysis to understand policy
impacts is a key to sustainable reform, as healthcare reform is
a long road which involves continuity and focus.
12:52:40 PM
DR. TOWNSEND concluded that understanding costs and drivers is
complicated and healthcare reform is an ongoing process. In
response to Representative Wool, he deferred the question to the
Director of Insurance, Lori Wing-Heier, and mentioned that the
80th percentile rule helped to drive up costs of healthcare in
Alaska with out-of-network providers. Over the last few years
more providers have been brought in-network, which has helped to
moderate costs.
DR. TOWNSEND confirmed that the negotiations between providers
and health insurance networks are influenced by the 80th
percentile rule which applies to commercial insurance and does
not apply to employer self-insured programs. Self-insured
programs have increasingly negotiated network terms that are not
marked by the 80th percentile rule.
1:04:00 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
1:04 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Alaska Healthcare Transformation Project Presentation, 2.1.22.pdf |
HW&M 2/1/2022 11:30:00 AM |
|
| ISER Presentation, 2.1.22.pdf |
HW&M 2/1/2022 11:30:00 AM |
|
| Sandra Heffern Testimony, 2.1.22.pdf |
HW&M 2/1/2022 11:30:00 AM |