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 FINANCE COMMITTEE                                                                                 
                          April 02, 2003                                                                                      
                              9:00 AM                                                                                         
SFC-03 # 40, Side A                                                                                                             
SFC 03 # 40, Side B                                                                                                             
CALL TO ORDER                                                                                                               
Co-Chair Gary Wilken convened  the meeting at approximately 9:00 AM.                                                            
Senator Lyda Green, Co-Chair                                                                                                    
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Con Bunde, Vice-Chair                                                                                                   
Senator Robin Taylor                                                                                                            
Senator Donny Olson                                                                                                             
Senator Ben Stevens                                                                                                             
Also Attending: JERRY BURNETT,  Director, Division of Administrative                                                          
Services, Department of  Corrections; JOEL GILBERTSON, Commissioner,                                                            
Department  of  Health  and  Social  Services;   BOB  LABBE,  Deputy                                                            
Commissioner,  Department  of  Health  and  Social  Services;  ELMER                                                            
LINDSTROM,  Special Assistance  to the Commissioner,  Department  of                                                            
Health  and  Social   Services;  KAREN  PEARSON,  Acting   Director,                                                            
Division  of Alcoholism  &  Drug  Abuse,  Department of  Health  and                                                            
Social Services                                                                                                                 
Attending   via  Teleconference:   From  Anchorage:  JACK   NIELSON,                                                          
Executive Director,  Medicaid Rate Advisory Commission,  Division of                                                            
Medical Assistance, Department of Health and Social Services                                                                    
SUMMARY INFORMATION                                                                                                         
SB 115-CORRECTIONAL INDUSTRIES PROGRAM EXPENSES                                                                                 
The Committee  heard testimony  from the  Department of Corrections                                                             
and reported the bill from Committee.                                                                                           
SB 108-HEALTH FACILITY MEDICAID RATES/ADV. COM'N                                                                                
Testimony  was presented  by  the Department  of  Health and  Social                                                            
Services, and the bill was held in Committee.                                                                                   
SB 109-MEDICAID COST CONTAINMENT & PRIORITY LIST                                                                                
The Committee  heard  testimony from  the Department  of Health  and                                                            
Social Services and held the bill in Committee.                                                                                 
SB 124-ALCOHOLISM AND DRUG ABUSE GRANTS                                                                                         
The Committee  heard  testimony from  the Department  of Health  and                                                            
Social Services and held the bill in Committee.                                                                                 
     SENATE BILL NO. 115                                                                                                        
     "An  Act  allowing  expenses  of  the correctional   industries                                                            
     program that  may be financed from the correctional  industries                                                            
     fund to include the  salaries and benefits of state employees."                                                            
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Co-chair  Wilken informed  the Committee that  this bill involves  a                                                            
$963,000  fund   source  change  from   the  general  fund   to  the                                                            
Correctional  Industry   Fund.  He  stated  that  the  Senate  Rules                                                            
Committee, at the request  of Governor Murkowski, sponsors the bill.                                                            
JERRY  BURNETT,  Director,  Division  of  Administrative   Services,                                                            
Department  of Corrections  stated that  this bill  would amend  the                                                            
Alaska Correctional  Industries' (ACI)  statutes to allow  ACI State                                                            
employees salaries  to be paid from ACI product-cost  revenues, from                                                            
which "all  other administrative costs"  are currently paid,  rather                                                            
than  from the  general  fund. He  expressed,  that  were this  bill                                                            
adopted,  the Division  of  Correctional  Industries  would be  100-                                                            
percent self-supporting.                                                                                                        
Mr. Burnett specified that  ACI operates eight programs in the State                                                            
including:  two  laundries,   a wood  furniture   plant,  an  office                                                            
furniture plant, a metals  plant, an auto body shop, and two garment                                                            
shops.  Additionally,   he  specified,   ACI  cooperates   with  the                                                            
Department  of Natural Resources  to operate  the Mt. McKinley  Meat                                                            
Plant in Palmer.                                                                                                                
Senator Taylor asked whether ACI programs generate a net profit.                                                                
Mr. Burnett  responded that a net  revenue of $150,000 is  projected                                                            
in  FY 03.  He continued  that  with  improved  marketing,  improved                                                            
products,  and program  oversight, ACI  is expected  to begin  FY 04                                                            
with a fund balance of approximately $300,000.                                                                                  
Senator Taylor asked how the fund balance would be utilized.                                                                    
Mr. Burnett stated  that the beginning FY 04 fund  balance, combined                                                            
with FY  04 projected revenues,  would allow  the Department  to pay                                                            
salary expenses and allow ACI to expand its programs.                                                                           
Senator  Taylor asked  whether  the  current $960,000  general  fund                                                            
expense  provides  for such  things  as materials  and  supplies  in                                                            
addition to salary expenses.                                                                                                    
Mr. Burnett  clarified that  the $960,000  exclusively provides  for                                                            
salaries and benefits.                                                                                                          
Senator Taylor  commented that ACI  currently grosses approximately                                                             
$3 million annually.                                                                                                            
Mr. Burnett  agreed  and voiced  optimism  that ACI  would gross  in                                                            
excess of $4 million in FY 04.                                                                                                  
Senator Taylor  summarized, therefore, that the ACI  fund balance of                                                            
approximately  $300,000 and projected  FY 04 revenues would  provide                                                            
for all Department expenses,  including $960,000 in salary expenses.                                                            
Mr. Burnett concurred.                                                                                                          
Senator Taylor  puzzled as  to "how exchanging  one fund source  for                                                            
another"  would   allow  for  ACI  program  expansion.   He  further                                                            
questioned  whether  there  should  be  an  additional  $300,000  in                                                            
savings to the general  fund because of the ACI FY 04 beginning fund                                                            
Mr. Burnett  expressed  that  the goal  of this  fund source  change                                                            
request is  to save $960,000 in general  fund expenditures  relating                                                            
to ACI salaries.                                                                                                                
Senator  Taylor voiced  concern that  this would  be identified  "as                                                            
another dedicated  fund within  the revenue  streams of Alaska."  He                                                            
asked whether program expansion  would require additional personnel.                                                            
Mr. Burnett responded  that no increases in personnel  are expected,                                                            
and that  consideration  is being  given to  form partnerships  with                                                            
public entities to market Correctional Industries products.                                                                     
Senator Taylor  voiced support for  ACI efforts to develop  industry                                                            
"to provide  meaningful  activities  and training  to individuals;"                                                             
however, he  declared, aggressive  marketing and program  expansions                                                            
should not compete with private industry.                                                                                       
Co-Chair Green  asked how ACI programs  are evaluated; specifically                                                             
the  criteria  used   to  determine  whether  a  program   is  self-                                                            
Mr. Burnett responded  that a Correctional Industries  Board reviews                                                            
each  program to  evaluate  its viability  and  to ensure  that  the                                                            
service does not compete with private industry.                                                                                 
Senator Bunde noted that  the Mt. McKinley Meat Processing Plant has                                                            
experienced  "difficulties  in functioning  successfully." He  asked                                                            
"at what  point," it might  be decided that  this program should  be                                                            
eliminated.  He additionally  asked  how the  plant's closure  would                                                            
affect ACI finances.                                                                                                            
Mr. Burnett clarified that  the Department of Natural Resources owns                                                            
the facility  and provides  for salaries  of the  ACI personnel.  He                                                            
noted  that the  salaries paid  to ACI  employees  generate a  small                                                            
profit for the Department of Corrections.                                                                                       
Mr. Burnett  informed the  Committee that  the eight ACI  industries                                                            
would be  reviewed this  year to determine  program continuance  and                                                            
expansion as well as to  consider the development of new industries.                                                            
Senator  Bunde   surmised,  therefore,   that  the  Department   has                                                            
mechanisms in place to expand or terminate programs.                                                                            
Mr. Burnett concurred.                                                                                                          
Co-Chair Wilken asked for  confirmation that the Department's fiscal                                                            
note is incorporated into the Governor's proposed FY 04 budget.                                                                 
Mr. Burnett confirmed.                                                                                                          
Senator  Taylor   moved  to  report  SB  115  from  Committee   with                                                            
individual recommendations and accompanying fiscal note.                                                                        
There  being no objection,  the  bill REPORTED  from Committee  with                                                            
previous fiscal note #1 from the Department of Corrections.                                                                     
     SENATE BILL NO. 108                                                                                                        
     "An Act  relating to payment  rates under the Medicaid  program                                                            
     for  health  facilities  and  to  budgeting,   accounting,  and                                                            
     reporting  requirements  for those facilities;  abolishing  the                                                            
     Medicaid Rate Advisory Commission; and providing for an                                                                    
     effective date."                                                                                                           
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Co-Chair Wilken  explained that this bill, which is  being presented                                                            
at the request  of Governor Murkowski, would eliminate  the Medicaid                                                            
Rate Advisory  Commission and, thereby, specify that  the Department                                                            
of Health and Social Services  would be responsible "for calculating                                                            
and setting Medicaid payment rates for health care facilities."                                                                 
JOEL  GILBERTSON,  Commissioner,  Department  of Health  and  Social                                                            
Services, distributed,  at the request of Co-chair  Wilken, Medicaid                                                            
program  charts [copies  on file]  titled: "Medicaid  Total  Average                                                            
Eligibles  and  Costs;"  "Medicaid  Eligible  Children  and  Costs;"                                                            
"Medicaid Eligible  Adults and Costs;"  "Medicaid Elderly  Eligibles                                                            
and Costs;"  "Medicaid Disabled  Eligibles  and Costs" to  Committee                                                            
Co-chair Wilken  explained that these  charts are being distributed                                                             
because,  "the width and  breadth and the  growth" of the  program's                                                            
history  would  be  beneficial  for  the  Senate  Finance  Committee                                                            
[NOTE: Further  discussion  regarding these  charts occurs  later in                                                            
the meeting.]                                                                                                                   
Commissioner   Gilbertson  informed   the  Committee  that   SB  108                                                            
eliminates   the  Medicaid   Rate  Advisory   Commission  that   was                                                            
established in  1984 to determine Medicaid payment  rates that must,                                                            
by federal law,  guarantee that a fair rate for reasonable  costs be                                                            
paid  to acute  care  facilities.  He continued  that  "in 1989,  by                                                            
Executive Order," the Commission's  role changed from a rate-setting                                                            
entity to that  of advisor to the Commissioner of  the Department of                                                            
Health  and  Social Services,  who  was,  thereby,  responsible  for                                                            
establishing the Medicaid payment rates.                                                                                        
Commissioner Gilbertson  continued that the federal law was repealed                                                            
in 1997 and  replaced with public  process requirements.  Therefore,                                                            
he continued,  this legislation would:  eliminate the Medicaid  Rate                                                            
Advisory Commission;  acknowledge that the rate setting  function is                                                            
a responsibility of the  Department; and provide for a single public                                                            
process  within the Department.  Additionally,  he furthered,  these                                                            
changes would  allow the  Department to align  with current  federal                                                            
law and  develop a variety  of payment methodologies  that  would be                                                            
more  efficient  and  responsive  to the  needs  of  differing  size                                                            
Commissioner  Gilbertson  elaborated  that  this  legislation  would                                                            
allow the Department  to establish  an Office of Rate Review  within                                                            
the Commissioner's  Office and to  centralize the Department's  rate                                                            
setting  operations  for  care  facilities  as  well  as  for  other                                                            
services  such  as  physician  services,  subsidized  adoptions  and                                                            
foster  care.  He  summarized  that  this  legislation  would  allow                                                            
"Alaska law  to mirror federal  law which  requires simply  a public                                                            
Commissioner  Gilbertson   informed  that  the  elimination  of  the                                                            
Medicaid  Rate Advisory Commission  would result  in a small  fiscal                                                            
note  savings  resulting   from  associated  travel   and  per  diem                                                            
Senator   Taylor  clarified   that   the  Medicaid   Rate   Advisory                                                            
Commission's current role is advisory.                                                                                          
Commissioner Gilbertson concurred.                                                                                              
Senator  Taylor   furthered  that  the  Commissioner   must  approve                                                            
payments to facilities.                                                                                                         
Commissioner Gilbertson concurred.                                                                                              
Senator Taylor  asked whether additional benefits  would be afforded                                                            
by the elimination of the advisory Commission.                                                                                  
Commissioner Gilbertson  reiterated that, in addition to the savings                                                            
resulting from the elimination  of the Commission's travel expenses,                                                            
this legislation  would  allow the  Department's  policies to  align                                                            
with current  federal regulations  that would permit the  Department                                                            
to develop,  through  the public  process, separate  payment  policy                                                            
methodologies  for facilities  rather than  being restricted  to the                                                            
current single methodology.                                                                                                     
Senator  Taylor asked  how this  new system  would  differ from  the                                                            
current system  in addressing a Certificate of Need  request, as, he                                                            
revealed,  Bartlett  Regional  Hospital  in  Juneau  underwent  five                                                            
hearings  over   a  six-year  period  in  order  to   be  granted  a                                                            
Certificate  of  Need  for the  purchase  of  a  Magnetic  Resonance                                                            
Imaging  (MRI) machine,  and he declared  that it  is unknown  as to                                                            
whether  Bartlett ever  received the  Certificate  of Need that  was                                                            
required for the  hospital to receive reimbursement.  He opined that                                                            
the Commissioner  was responsible  for the delay in this  situation;                                                            
and  he  questioned   whether  the   elimination  of  the   Advisory                                                            
Commission would improve the situation.                                                                                         
Commissioner  Gilbertson clarified  that the  legislation would  not                                                            
affect the Certificate of Need regulation.                                                                                      
JACK   NIELSON,   Executive   Director,   Medicaid   Rate   Advisory                                                            
Commission,  Division of  Medical Assistance,  Department of  Health                                                            
and Social Services  testified via teleconference  from Anchorage to                                                            
respond to Senator  Taylor's question. He reiterated  that this bill                                                            
would  provide the  Department with  "rate setting  flexibility  and                                                            
regulatory   relief."   He  noted   that  the   State  settled   the                                                            
aforementioned  situation with  Bartlett Regional  Hospital,  and he                                                            
stressed  that the flexibility  afforded by  this legislation  would                                                            
help the Department "avoid those situations in the future."                                                                     
Co-Chair Green  shared her surprise at having received  letters from                                                            
Commission  members   lobbying  legislators  to  increase   Medicaid                                                            
funding.  She  stated that  Commission  members  should  advise  the                                                            
Department  rather  than lobby,  and  she  voiced support  for  this                                                            
Senator Olson  voiced discomfort regarding language  in Section 2 of                                                            
the bill that reads as follows.                                                                                                 
     Sec. 2(a) The department  by regulation shall require a uniform                                                            
     system of accounting,  budgeting, and [FINANCIAL] reporting for                                                            
     health facilities  receiving [PROSPECTIVE] payments  under this                                                            
     chapter.  The regulations must provide for reporting  revenues,                                                            
     expenses,  assets,  liabilities,  [AND} units  of service,  and                                                          
     other   items  considered  necessary   by  the  department   to                                                          
     implement this chapter.  [THE DEPARTMENT SHALL SPECIFY THE DATE                                                          
      THE SYSTEM BECOMES EFFECTIVE FOR EACH HEALTH FACILITY.]                                                                   
     New Text Underlined [DELETED TEXT BRACKETED]                                                                             
Senator  Olson  stated  that  this  language  indicates  that,  "the                                                            
determination   regarding  what  the  rates  would   be  is  at  the                                                            
discretion of the Department."  He continued that, "there appears to                                                            
be no oversight."                                                                                                               
Mr.  Nielsen responded  that  were  the Department  to  implement  a                                                            
reporting  requirement  on  a  facility,  the  Department  would  be                                                            
required  to abide  by the public  process and  regulation  adoption                                                            
process procedures before the requirements could be imposed.                                                                    
Senator Olson  reiterated that the  Department would still  make the                                                            
Mr.  Nielson  specified   that,  while  the  Department   makes  the                                                            
decision, the regulatory process is required.                                                                                   
Senator Olson asked the composition of Commission members.                                                                      
Mr.  Nielson  reported  that  four of  the  five  Commission  member                                                            
positions have representation;  however, he noted that the physician                                                            
allocation on  the Commission has been vacant for  approximately one                                                            
Senator Olson asked whether Commission members support the bill.                                                                
Mr. Nielson  affirmed  that three  of the four  members "generally"                                                             
support the bill. He specified  that he has not had contact with the                                                            
fourth member.                                                                                                                  
Senator Olson asked whether hospitals support the legislation.                                                                  
Mr.  Nielson   replied   that  hospital   administrators  have   not                                                            
communicated  a position  regarding the bill;  however, he  believed                                                            
that  hospital  administrators  testified  on  the bill  in  earlier                                                            
committee hearings.                                                                                                             
Commissioner Gilbertson  interjected that the Alaska  State Hospital                                                            
Nursing Home Association does not oppose the bill.                                                                              
Commissioner  Gilbertson   responded  to  Senator  Olson's   concern                                                            
regarding Section  2 by specifying that the section  would allow the                                                            
Department  to  gather information  from  facilities  necessary  for                                                            
establishing  rates. He stated that  this information would  provide                                                            
for a uniform  accounting and budgeting system for  the rate setting                                                            
function, and  he verified that the public process  is a requirement                                                            
for gathering the information.                                                                                                  
Senator Taylor voiced that  he does not object to the bill as he has                                                            
questioned  the value of the Commission  for some time. However,  he                                                            
opined, "rate  setting has always been very contentious  between the                                                            
State and our  hospital and medical  facilities." He professed  that                                                            
the rates often  determine whether a facility would  survive, and he                                                            
voiced  concern that  language  in the  bill would  provide  broader                                                            
authority to the Department to audit and review facilities.                                                                     
Senator Taylor  voiced appreciation  for language  in the bill  that                                                            
would allow differing  rates for facilities; however,  he noted that                                                            
federal and State auditors  place "great, and duplicate," demands on                                                            
medical facilities. He  urged the Commissioner to determine measures                                                            
to reduce the burden that auditing places on a facility.                                                                        
Commissioner  Gilbertson replied  that, while  the costs  associated                                                            
with  the auditing  function are  high, the  need for  good data  is                                                            
important.  He stated that the Department  would endeavor  to reduce                                                            
the administrative burden of the reporting requirement.                                                                         
Co-Chair Wilken asked whether  the Department's negative fiscal note                                                            
is included in the Governor's budget proposal.                                                                                  
Commissioner Gilbertson replied that it should be.                                                                              
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
[Note: Further  discussion concerning SB 108 continues  later in the                                                            
     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                                                            
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                                                            
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                                                            
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                                                            
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                                                            
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.                                                                                                                    
     SENATE BILL NO. 124                                                                                                        
     "An Act relating to grants for alcoholism and drug abuse                                                                   
     programs; and providing for an effective date."                                                                            
AT EASE 10:06 AM / 10:07 AM                                                                                                     
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Co-Chair  Wilken   explained  that  this  bill,  sponsored   by  the                                                            
Governor, proposes  to increase the required local  match levels for                                                            
alcohol  and drug  abuse programs  from ten  percent to twenty-five                                                             
percent. He noted  that this change would result in  a $1.61 million                                                            
reduction in State spending.                                                                                                    
ELMER LINDSTROM,  Special Assistant to the Commissioner,  Department                                                            
of  Health   and  Social   Services,  affirmed   Co-chair   Wilken's                                                            
explanation of the bill,  and he added that this is "the appropriate                                                            
time" to change  the level of local  match specified in statute.  He                                                            
stated that while the statute  regarding the local match level would                                                            
be changed, language  would remain "that would allow  the Department                                                            
to waive the local  match in whole or in part, upon  a determination                                                            
that it would  not be feasible in  fact for the grantee to  generate                                                            
that  local match."  He  referenced  the  Department of  Health  and                                                            
Social  Services seven-page  listing  of grant  programs titled  "SB
124\HB  167 Increase  Local Match  Requirement  for Substance  Abuse                                                            
Grants (Revised  3/12)" [copy on file] that would  be subject to the                                                            
provisions of  this bill. He noted that some entities,  specifically                                                            
small rural  based programs such as  rural based suicide  prevention                                                            
programs,  would  be  exempt  from  the  local  match  requirement.                                                             
Additionally,  he qualified,  some  programs such  as the  substance                                                            
abuse  treatment  programs  for women  and  children would  be  held                                                            
harmless from the increase.                                                                                                     
Senator Taylor surmised  that tax-based communities would be subject                                                            
to  the  increased  match levels;  however,  he  noted,  most  other                                                            
entities are exempt.                                                                                                            
Mr. Lindstrom  expressed  that while  there is  no expectation  that                                                            
"local governments  would necessarily be stepping  in to provide the                                                            
local  match;  …there  is  an  underlying  assumption   that  larger                                                            
communities, where many  of these non-profits organizations operate,                                                            
have a greater ability to raise funds."                                                                                         
Senator Taylor  asked how local match funds are currently  provided.                                                            
Mr.  Lindstrom  responded  that  client  fees,  grants,   foundation                                                            
funding, and  local community fundraising  are among the  variety of                                                            
methods that  non-profits use to raise  funds. He acknowledged  that                                                            
while  the increased  match  level  would be  a challenge  for  some                                                            
programs,  he opined  that,  "the programs  would  be successful…in                                                             
generating this additional match."                                                                                              
Senator Bunde asked why  the Anchorage domestic violence program, as                                                            
specified  on page  four of  the aforementioned   list of  grantees,                                                            
would be exempt from the local match requirement.                                                                               
Mr. Lindstrom  verified that  the program is  exempt from the  local                                                            
match. He  explained that  certain programs  for women and  children                                                            
would be exempted;  although he was  uncertain whether this  program                                                            
is one of them.                                                                                                                 
Senator Bunde further questioned  why the suicide prevention program                                                            
on St.  George Island,  as specified  on page six  of the list,  was                                                            
exempt from  the match,  as he contended,  the community's  gambling                                                            
revenue equates  to $15,000 per person  per year. He suggested  that                                                            
the list of grantees be further reviewed.                                                                                       
Senator Olson  specified that the  gambling revenue referred  to was                                                            
in response to a fundraising endeavor.                                                                                          
Senator  Taylor asked  why  an Anchorage  program  for Services  for                                                            
Families-Women  with Children  was exempt  from the  local match  as                                                            
identified on page four  of the list, while a similar program in the                                                            
smaller community  of Sitka was specified for the  ten percent match                                                            
Co-Chair  Wilken  asked for  information  regarding  the 10%(A)  and                                                            
10%(B) notations designated on the grantee listing.                                                                             
Mr. Lindstrom  explained that these notations are  footnoted on page                                                            
seven  of  the  aforementioned  grantee  list  as  follows:  "10%(A)                                                            
Community Action  against Substance  Abuse programs receiving  grant                                                            
awards  of $30,000  or less;  and  10%(B) designates  treatment  for                                                            
youth, woman and children and special projects."                                                                                
KAREN  PEARSON, Acting  Director,  Division of  Alcoholism and  Drug                                                            
Abuse,  Department  of  Health  and  Social  Services  responded  to                                                            
Senator Taylor's  question regarding  the equitable methodology  for                                                            
determining which programs  are exempt or specified to remain at the                                                            
ten percent  level by  responding  that she was  newly appointed  to                                                            
this position  and  would supply  the requested  information to  the                                                            
Committee upon further research.                                                                                                
Co-Chair  Wilken   asked  that  the  Fairbanks  Native  Association                                                             
program, another similar  program specified at the ten percent level                                                            
listed  on  page three  of  the  report,  also be  included  in  the                                                            
Co-chair Wilken ordered the bill HELD in Committee.                                                                             
Co-Chair Gary Wilken adjourned the meeting at 10:16 AM.                                                                         

Document Name Date/Time Subjects