Legislature(2005 - 2006)SENATE FINANCE 532
02/16/2006 09:00 AM Senate FINANCE
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* first hearing in first committee of referral
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MINUTES
SENATE FINANCE COMMITTEE
February 16, 2006
9:13 a.m.
CALL TO ORDER
Co-Chair Lyda Green convened the meeting at approximately 9:13:27
AM.
PRESENT
Senator Lyda Green, Co-Chair
Senator Gary Wilken, Co-Chair
Senator Con Bunde, Vice-Chair
Senator Bert Stedman
Senator Donny Olson
Also Attending: JANET CLARKE, Assistant Commissioner, Finance and
Management Services, Department of Health and Social Services; JOHN
SHEILS, Vice President, The Lewin Group; TED HELVOIGT, Economist,
ECONorthwest
Attending via Teleconference: There were no teleconference
participants.
SUMMARY INFORMATION
Presentation
By the Lewin Group
ECONorthwest
Long Term Forecast of Medicaid Enrollment and Spending in Alaska
2005-2025
JANET CLARKE, Assistant Commissioner, Finance and Management
Services, Department of Health and Social Services, testified that
the forthcoming presentation is based on a study commissioned by
the Department to examine the future of the Medicaid program in
Alaska. The full report contains detailed information on the items
covered in the overview [copy on file].
9:14:31 AM
Ms. Clarke introduced Ted Helvoigt and John Sheils to present the
findings of the study.
9:15:07 AM
JOHN SHEILS, Vice President, The Lewin Group, testified that the
Group is committed to performing nonpartisan studies and analyses.
9:15:53 AM
Mr. Sheils informed that Alaska is the only state projecting 20
years to the future. Other states have projected five years;
however, the most dramatic impacts to the Medicaid system occur
after ten years.
Mr. Sheils assured that this effort is timely. In his recent State
of the Union address, President George W. Bush indicated the
federal government would undertake a long-term study of the
national system. Alaska would benefit from obtaining this
information in advance.
9:17:05 AM
TED HELVOIGT, Economist, ECONorthwest, gave a presentation titled,
"Long Term Forecast of Medicaid Enrollment and Spending in Alaska
2005-2025" [copy on file].
Slide 1
The Lewin Group
ECONorthwest
Long Term Forecast of Medicaid Enrollment and Spending in
Alaska: 2005 - 2025
Prepared for: Alaska Department of Health and Social Services
February 15, 2006
9:17:57 AM
Slide 2
Who, What, and Why…
In March 2005, DHSS contracted with the Lewin Group and
ECONorthwest to build a model that would allow DHSS staff to
project long-term trends in Medicaid spending.
Mr. Helvoigt explained the intent to "provide a tool" to allow the
State to determine the future of the Medicaid program.
9:18:36 AM
Slide 3
Who, What, and Why (cont.)…
This model will allow DHSS staff to update long-term spending
projections as additional data become available.
Mr. Helvoigt noted that updated population estimates and other
information could be factored into the model.
9:18:54 AM
Slide 4
Who, What, and Why (cont.)…
In addition, we were asked to prepare a report that describes
the forecasting model and presents the finding of the
"baseline" analysis.
Mr. Helvoigt indicated he would explain the baseline later in the
presentation.
9:19:23 AM
Slide 5
Who, What, and Why (cont.)…
This presentation presents key findings from that analysis.
Mr. Helvoigt read this to the Committee.
9:19:36 AM
Slide 6
Presentation Outline
· "Steps" of the analysis
· Findings
o Population
o Enrollment
o Utilization
o Total Spending
o State matching fund spending
· Going Forward
Mr. Helvoigt clarified that the findings are forecasts.
9:20:13 AM
Slide 7
Each Model Component Builds on the Others
[Illustration showing a staircase of Components of the Long
Term Medicaid Forecasting Model leading to a door labeled Long
Term Medicaid Forecast 2005-2025. The stair steps are labeled
from bottom to top as follows:
Alaska Population
Medicaid Enrollment
Utilization of Services
Total Spending on Claims
State Funds Spending
Other Payments & Offsets]
Mr. Helvoigt stated this illustration is a representation of the
methodology followed. Each step becomes the basis for the next part
of the analysis.
Mr. Helvoigt noted the category of Utilization was divided between
males and females because the two genders have different uses of
the services. Men do not bear children, and women tend to live
longer. Separate calculations were made for Native and non-Native
Alaskans because the amount of federal matching funds is different
for the two subsets. Native utilization of services is reimbursed
100 percent.
Mr. Helvoigt remarked that 220 subpopulations were established in
the model and forecasted to the future.
Mr. Helvoigt described the subsequent stair steps.
9:24:24 AM
Slide 8
Some factors are within your control…
· Eligibility requirements
· Reimbursement rates
· Services provided
Mr. Helvoigt overviewed this slide
9:24:41 AM
Slide 9
And some factors are outside of your control…
· Population growth
· Demographic changes
· Changes in medical technology
Mr. Helvoigt commented that advances in medical technology could
increase costs.
9:25:27 AM
Slide 10
Assumptions Regarding Baseline Analysis
· Assumes status quo as of FY 2004
· Does not anticipate policy changes, such as these 2005 &
2006 measures
o Cost containment
o Bring the Kids Home initiative
o Personal Care Attendant regulation changes
o Medicare Part D drug benefit
Mr. Helvoigt explained that the policies in effect for FY 04 were
utilized as assumptions for the full forecast.
Mr. Helvoigt understood that policy changes would be made year to
year; however, this forecast provides a model in which changes
could be factored into the calculations.
9:27:10 AM
Slide 11
Alaska Population
Mr. Helvoigt noted this is the first stair step indicated in Slide
7.
9:27:18 AM
Slide 12
Alaska Population
The 65 and older population is projected to grow rapidly,
almost tripling from 43,000 to 124,000 between 2005 and 2025.
Mr. Helvoigt identified the aging of the population as the most
important factor influencing the future of the Medicaid program.
9:27:51 AM
Slide 13
Alaska Population
· The rate of growth in the state's population will slow
over the next 20 years from just over 1.0% currently to
less than 0.6% by 2025
· Population growth will be concentrated in the
Anchorage/Mat-Su Region
· We project the Southeast will lose population through
2025
· The Native population will grow faster than the non-
Native population (1.7% vs. 0.7%)
Mr. Helvoigt gave the reason for the population increases in the
Anchorage and Matanuska-Susitna areas, as this region is the
economic center and location where most services are located.
Mr. Helvoigt clarified that the population decline experienced in
Southeast Alaska would be slight.
9:28:56 AM
Slide 14
Alaska Population
Alaska's population growth will be driven by the elderly
[Bar graph showing the population of Alaskans aged 0-19, 20-
34, 35-64, and 65+ for the years 2005, 2010, 2015, 2020 and
2025.]
Mr. Helvoigt pointed out the slight population growth anticipated
for the 0 to 19 and 20 to 34 age groups. The age 65 and older age
group would experience the greatest increase.
9:29:35 AM
Senator Stedman noted the total population shown for 2005 is
approximately 650,000. The number of Permanent Fund Dividend
payments issued for the same year was approximately 620,000. Most
Alaskan residents are "aggressive" in applying for the dividend
program and he therefore questioned the accuracy of the total
population estimate.
9:30:35 AM
Co-Chair Green pointed out that some residents chose to not apply
for the annual payments and others are counted as Alaskan residents
but do not qualify for the dividends for various reasons.
9:30:51 AM
Mr. Sheils remarked that some of the census data must be "taken
with a grain of salt" in a place such as Alaska because much of the
state "is a frontier population".
9:31:19 AM
Mr. Helvoigt informed that the 2005 population figures were
provided by the State demographer.
9:31:43 AM
Slide 15
Medicaid Enrollment
Mr. Helvoigt directed attention to the next stair step illustrated
on Slide 7.
9:32:09 AM
Slide 16
Medicaid Enrollment
· We project Medicaid Enrollment will grow faster than the
state's population (1.4% vs. 0.85%).
· Enrollment will grow from 132,000 in 2005 to 175,000 by
2025
Mr. Helvoigt attributed the increased enrollment to the aging
population.
9:33:00 AM
Slide 17
Medicaid Enrollment
· Medicaid enrollment will grow much faster for the elderly
than for the entire population (6.0% vs. 1.4%)
· Elderly enrollment will grow from approximately 10,000 in
2005 to 33,000 by 2025
Mr. Helvoigt cited these figures.
9:33:36 AM
Slide 18
Medicaid Enrollment
Most of the projected growth in Medicaid enrollment will be in
the elderly age cohort
[Bar graph showing the number of Medicaid FTE Enrollees
divided into Children, Working Age Adults, and Elderly (65+)
for the years 2005, 2010, 2015, 2020 and 2025.]
Mr. Helvoigt pointed to the slight enrollment decline projected for
children, the little change in the number of working age adults and
the substantial growth of elderly-aged enrollment.
9:34:35 AM
Slide 19
Utilization of Services
Mr. Helvoigt explained that the forecasts for all 220
subpopulations had been established and the next step, as
illustrated on Slide 7, is to determine the utilization of services
of each group.
9:35:09 AM
Slide 20
Utilization of Services
A quick note…
· We define Service Utilization as the annual unduplicated
count of persons who used a particular Medicaid Service
during the fiscal year.
Mr. Helvoigt clarified the distinction between utilization of
services versus intensity of services. With few exceptions, a
person eliglible for Medicaid could utilize any of the services
offered.
9:36:34 AM
Slide 21
Utilization of Services
Growth in utilization will differ greatly among Service
categories
· Some will grow very rapidly
o Personal Care: 9.7%
o HCB Waiver: 9.0%
o Residential Psychiatric: 7.3%
· Some will grow slowly or even decline
o Inpatient Hospital: 0.6%
o Lab/X-ray: -0.1%
o Inpatient Psychiatric: -0.3%
Mr. Helvoigt hoped the increase in the utilization of the personal
care assistance service would be less than projected as a result of
recent changes to the program. If so, the Home Community Based
(HCB) Waiver services would likely experience the highest growth.
Mr. Helvoigt pointed out that compared to other services, the
growth of inpatient hospital care would be negligible.
9:38:09 AM
Slide 22
Utilization of Services
Across all Medicaid Service categories, we rely upon the CMS'
national forecast of growth in utilization of 2.2% to guide
growth in Alaska's Medicaid utilization.
Mr. Helvoigt defined the Centers for Medicare/Medicaid Services
(CMS) as the only source for estimates of utilization growth. This
is difficult to forecast. The model attempts to subsequently
account for Alaska's unique situation.
9:39:27 AM
Slide 23
Utilization of Services
Partially offsetting the projected growth in HCB Waiver is
relatively slow projected growth in the Nursing Home Service
category (4.2% through 2025).
Mr. Helvoigt overviewed this information.
9:39:52 AM
Co-Chair Wilken, returning to Slide 22, asked if the CMS data is a
federal entity.
9:40:12 AM
Mr. Helvoigt affirmed.
9:40:19 AM
Co-Chair Wilken asked if the CMS forecast is to the nationwide
trend or specifically to regional areas. He asked if the growth
rate of 2.2 percent was expected to occur in Alaska as well as all
other states.
9:40:35 AM
Mr. Helvoigt replied that the data is calculated nationwide, and
that the growth rates may vary between states. The CMS forecast
estimates the overall growth of the entire system.
9:41:02 AM
Mr. Sheils furthered that such an assumption allows for "the unique
patterns of growth in utilization by service type for the state of
Alaska. All of that is state specific." CMS has factored in medical
technology, has been undertaking these forecasts for many years and
has obtained refined estimates. This study incorporates the CMS
data but also makes allowances for the unique utilization patterns
of Alaska.
9:42:00 AM
Co-Chair Wilken asked if utilization in all states would increase
2.2 percent annually.
9:42:07 AM
Mr. Helvoigt responded that based on this projection they would.
9:42:16 AM
Co-Chair Wilken stressed that this assumption is a significant
portion of the model created in this study.
9:42:24 AM
Mr. Helvoigt replied that it is. Within the 20 service categories
of the Alaska Medicaid program, the study maintains the historic
variability as well as the rate of utilization throughout the
forecast. The study assumes that Alaska's utilization growth rate
would be no higher than the CMS rate of 2.2 percent. Although
Alaska could be unique, medical technology defuses across the
nation rather quickly. Utilization of services is not significantly
varied throughout the country.
9:43:36 AM
Mr. Sheils stressed the difficulty to project utilization 20 years
into the future, based on data collected over the past ten years,
the length of time the Lewin Group and ECONorthwest have been in
operation. CMS has a dedicated staff and is able to discern more
information.
Mr. Sheils assured that the 2.2 percent utilization growth estimate
is the only nationwide assumption factored into this study. He
understood the concern, but stated that a judgment call was
required and the decision was made to incorporate CMS projection.
9:45:01 AM
Mr. Helvoigt informed that the model could easily be adjusted by a
percentage point to accommodate actual growth rates.
9:45:28 AM
Co-Chair Wilken asked if this study makes such adjustments.
9:45:35 AM
Mr. Helvoigt replied that adjustments are not made to the original
model, but could be incorporated as additional information is
garnered.
9:45:39 AM
Slide 24
Total Spending
Mr. Helvoigt explained this stair step illustrated on Slide 7
includes combined federal and state spending on Medicaid claims.
This incorporates the 220 subpopulations, population forecasts,
enrollment forecasts and utilization forecasts of those
populations. This also incorporates the utilization of the
population groups of the 20 service categories. This has all been
calculated, although the impact of the whole is more informative
than that of each subpopulation.
9:47:07 AM
Slide 25
Total Spending
Of primary importance are our findings related to the
direction and approximate magnitude of changes in spending on
the Medicaid Program
Mr. Helvoigt reiterated this.
9:47:36 AM
Slide 26
Total Spending
· Total spending on Medicaid Services is forecasted to be
$1.0 billion in CY2005.
· By CY2025
o In actual terms, we project total spending to grow
by 7.6% per year to $4.8 billion.
o In inflation adjusted terms, we project total
spending to grow by 3.8% per year to $2.2 billion.
Mr. Helvoigt defined CY2005 as calendar year 2005.
9:48:52 AM
Slide 27
Total Spending
Currently (i.e., in 2005)…
· Inpatient Hospital Services is the largest Medicaid
Service category, responsible for 15% of total spending.
· Comparatively,
o HCB Waivers constitutes approximately 11% of
spending
o Personal Care constitutes approximately 10 % of
spending
Mr. Helvoigt overviewed this information.
9:49:21 AM
Slide 28
Total Spending
We project that in 2025…
· Inpatient Hospital Services will be only about 5% of
total Medicaid Services spending.
· HCB Waivers will be about 22% of total Medicaid Service
spending.
· Personal Care will be about 27% of total Medicaid Service
spending.
Mr. Helvoigt noted the significant changes. Utilization of
inpatient hospital services would grow, although the percentage of
total spending for this service would be reduced.
9:50:14 AM
Slide 29
Total Spending
Spending on Elderly will Surpass Spending on Working-Age
Adults by 2015 and Spending on Children by 2018
[Line graph depicting the Percent of Total Spending for the
three age groups for the years 2005 through 2025. Total
spending for Elderly increases from approximately 22 percent
in 2005 to over 45 percent in 2025, total spending for
Working-Age Adults decreases from 35 percent in 2005 to 25
percent in 2025, and total spending for Children decreases
from approximately 42 percent in 2005 to approximately 29
percent in 2025.]
Mr. Helvoigt overviewed this graph, pointing out that in 2005, most
of the spending is for children. In future years, the percentages
would shift and spending for the elderly would surpass the other
categories. This would result in a significantly different focus of
"Medicaid dollars."
9:51:27 AM
Slide 30
Total Spending
Forecasted Spending by Age Cohort, Calendar Years 2005-2025
[Line graph demonstrating Millions of Dollars spent for the
three age categories for the years 2005 though 2025. Spending
for Elderly would increase from approximately $200 million in
2005 to approximately $2.1 billion in 2025, spending for
Working-Age Adults would increase from approximately $300
million to approximately $1.1 billion, and spending for
Children would increase from approximately $400 million to
approximately $1.4 billion.
Mr. Helvoigt noted that the substantial increase in spending for
the Elderly age category would be realized in later years. A
forecast of five to ten years would not show this dramatic change.
9:52:13 AM
Senator Stedman asked when the trend of the growing aging
population would begin to decrease.
9:52:23 AM
Mr. Helvoigt suggested a 50-year projection would demonstrate such
decline.
Mr. Helvoigt emphasized the two factors: the increasing percentage
of the elderly population as well as the increased costs of
treating elderly participants.
9:53:05 AM
Mr. Sheils informed that the federal Office of Social Security
Administration conducts projections of the number of people who
would qualify for Medicaid out to the year 2075. The growth of the
elderly population would likely level off after 30 to 40 years.
However, enrollment is increasing faster than population and
therefore this study combined both economic and population trends.
Mr. Sheils stated he would provide the Social Security
Administration data.
9:54:47 AM
Mr. Helvoigt stressed that the percentage of working age adults,
those likely to contribute taxes, would not increase.
9:55:46 AM
Senator Stedman asked if the data on the Elderly population
percentage contains a formula error. He estimated that the growth
would stop after the year 2025.
9:56:07 AM
Mr. Helvoigt was unsure when the increases would stop.
9:56:12 AM
Mr. Sheils responded that 10 to 25 years after the year 2025, the
elderly population increases would level off.
9:56:41 AM
Mr. Helvoigt pointed out that much of the growth in spending for
the Medicaid program is related to the number of enrollees. The
personal care attendant and nursing home services are expensive
categories.
9:57:37 AM
Mr. Sheils added that long-term care costs are high for the oldest
age group of 75 and above. This service category is growing
substantially and per capita is "several times that" of people aged
65 to 74. One reason is the increased number of elderly enrollees
who have exhausted their resources and require the economic
assistance. This group has special needs from both financial and
health perspectives. This is consistent with problems of health
care across the country.
9:59:04 AM
Slide 31
Total Spending
DHSS staff can conduct long-term policy scenarios using the
long-term Medicaid forecasting model.
Mr. Helvoigt stated that the scenarios could be calculated as more
dates become available.
9:59:35 AM
Slide 32
Total Spending
For example…
What is the effect on total Medicaid spending if the elderly
population grows slower than is forecasted by the Alaska
Department of Labor and Workforce Development?
Mr. Helvoigt read this example.
9:59:51 AM
Slide 33
Total Spending
Forecasted Spending by Age Cohort, Calendar Years 2005-2025
[Line graph identical to that on Slide 30, with a line
inserted to demonstrate Total spending on the elderly assuming
their population grows by 25% less than forecast.
{Illustrative Purposes Only}]
Mr. Helvoigt explained this graph shows that the cost for the
Elderly age category would still increase in the long-term.
10:00:41 AM
Mr. Sheils interjected that this slide shows that in absolute terms
the model is sensitive to variations. It also demonstrates that
regardless of different assumptions, the outcome would be similar.
10:01:26 AM
Slide 34
Total Spending
Or…
What is the effect on total Medicaid spending if utilization
of Medicaid Services grows slower than is forecasted in the
baseline projections?
Mr. Helvoigt posed this question.
10:01:48 AM
Slide 35
Total Spending
Forecasted total spending assuming slow utilization growth
[Bar graph showing the Millions of Dollars for each year 2005
though 2025 with a line superimposed indicating a Revised
Average Annual Growth = 7.2% {Illustrative Purposes Only}.]
Mr. Helvoigt explained that this graph demonstrates the actual
costs if certain reductions to the program were made. The most
significant example is the personal care attendant service.
10:02:32 AM
Slide 36
Total Spending
Comparison to national trends…
· Nationally, CMS projects Medicaid spending will grow by
7.5% per year through 2014
· Over this same period, we project Total Medicaid spending
in Alaska will increase by 7.7%
Mr. Helvoigt noted that CMS only performs ten-year projections. The
estimates for Alaska are similar to the national average over the
same period.
10:03:13 AM
Slide 37
State Funds Spending
Mr. Helvoigt described that the preceding stair steps have been
accounted to determine this next stair step.
10:03:44 AM
Slide 38
State Funds Spending
· State matching fund spending on Medicaid Services was
approximately $380 million in CY2005.
· By CY2025…
o Actual spending will grow to approximately $2.1
billion.
o Inflation adjusted spending will grow to
approximately $1.0 billion.
Mr. Helvoigt noted that the inflation adjusted growth rate is
greater than the income growth rate projected for Alaska.
10:04:49 AM
Slide 39
State Funds Spending
State Matching Fund Spending on Medicaid Claims to Grow 8.9%
Annually
[Bar graph showing the Billions of Dollars for each year 2005
through 2025.]
Mr. Helvoigt informed that spending by the State would "outgrow"
spending by the federal government. The projected federal increase
is 6.3 percent annually. This discrepancy is due to the changes in
the federal matching assistance program. The match rate for Alaska
has increased since 2001 and would continue to increase at least
through 2008, when it should reach the highest level. Preferably,
the federal match rate would be increased.
10:07:06 AM
Slide 40
State Funds Spending
Projected per capita state matching fund spending on Medicaid
Services will grow substantially.
[Bar graph showing Dollars Per Alaskan of Per Capita Actual
(Nominal) State Matching Fund Spending and Per Capita Real
State Matching Fund Spending (in 2004 Dollars) for each year
2005 through 2025.]
Mr. Helvoigt explained that currently, approximately $500 per
Alaskan is spent for the Medicaid program. This amount would
increase to over $2,500 in actual dollars and almost $1,500 in
inflation-adjusted dollars. This increase is greater than the
projected increase in personal income growth.
10:08:08 AM
Mr. Sheils pointed out that much of the increase in the State's
share of the costs would occur in the first several years of the
projection and then would level off.
10:08:58 AM
Mr. Helvoigt furthered that this information emphasizes the
importance of working towards maintaining as high a federal match
as possible.
10:09:03 AM
Slide 41
Going Forward
Mr. Helvoigt commented that this portion of the presentation does
not provide significant answers.
10:09:09 AM
Slide 42
Going Forward
"The Alaska Medicaid program will fundamentally change over
the next 20 years from a program that centers on children to
one that is dominated by seniors." Janet Clarke, Assistant
Commissioner, DHSS
Mr. Helvoigt noted this would result in a change of what services
are provided as well as the structure of the program.
10:09:48 AM
Slide 43
Going Forward
Some factors are within your control…
· Eligibility requirements
· Reimbursement rates
· Services provided
Mr. Helvoigt clarified that the State has some control over some
factors.
10:10:21 AM
Slide 44
The complete report is available on the Internet at:
www.hss.state.ak.us/das
Mr. Helvoigt indicated that the members were provided with the
complete report [copy on file].
10:10:40 AM
Co-Chair Green had received this presentation during the Senate
Finance Department of Health and Social Services budget
subcommittee. She requested solutions.
10:10:58 AM
Co-Chair Wilken affirmed that assistance in finding solutions is
necessary.
10:11:07 AM
Co-Chair Wilken remarked that although the issue of the future of
the Medicaid program has been discussed, the magnitude was unknown.
The model would be reviewed in five years to determine its
accuracy.
10:11:46 AM
Senator Stedman appreciated the presentation. The Medicaid program
would receive additional attention in the appropriation process and
assistance would be required to review the program.
10:12:15 AM
Co-Chair Green surmised this would be a "daunting task".
ADJOURNMENT
Co-Chair Lyda Green adjourned the meeting at 10:12:22 AM
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