Legislature(2007 - 2008)SENATE FINANCE 532
02/06/2007 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| Alaska Medicaid Program Review Presentation | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
SENATE HEALTH, EDUCATION & SOCIAL SERVICES COMMITTEE
February 6, 2007
9:01 a.m.
CALL TO ORDER
Co-Chair Lyman Hoffman convened the meeting at approximately
9:01:28 AM.
PRESENT
Senate Finance Committee:
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Charlie Huggins, Vice Chair
Senator Kim Elton
Senator Donny Olson
Senator Joe Thomas
Senator Fred Dyson
Senate Health, Education & Social Services Committee:
Senator Bettye Davis, Chair
Senator John Cowdery
Senator Joe Thomas
Senator Kim Elton
Senator Fred Dyson
Also Attending: SENATOR LYDA GREEN; SENATOR JOHN COWDERY;
SENATOR GARY STEVENS; ANDY COHEN, Director, Pacific Health
Policy Group; SCOTT WITTMAN, Director, Pacific Health Policy
Group
Attending via Teleconference: There were no teleconference
participants
SUMMARY INFORMATION
Medicaid Program Review Presentation
Pacific Health Policy Group
The Committee heard a report regarding the State's Medicaid
program from Pacific Health Policy Group, a consulting firm
secured by the Legislature. No Committee action was taken.
9:01:37 AM
^Alaska Medicaid Program Review Presentation
Alaska Medicaid Program
Review Presentation
by Pacific Health Policy Group
9:02:11 AM
Co-Chair Hoffman advised that the Pacific Health Policy Group's
(PHPG) presentation would align with the information included in
the handout titled "Alaska Medicaid Program Review" [copy on
file] dated February 2007. The Review is a synopsis of PHPG's
comprehensive "Medicaid Program Review" report [copy on file]
dated January 2007. A document titled "Long Term Forecast of
Medicaid Enrollment and Spending in Alaska: 2005-2025", dated
February 15, 2006 [copy on file], which had been prepared at the
request of the Alaska Department of Health and Social Services
(DHSS) by the Lewis Group and ECONorthwest, was also
distributed.
Co-Chair Hoffman recognized Senator Lyda Green for
"spearheading" the effort to address the challenges presented to
the State by the Medicaid program. Senator Green was also
instrumental in selecting PHPG as the consulting firm charged
with compiling the January 2007 Medicaid report.
9:03:36 AM
SENATOR LYDA GREEN acknowledged Legislative Staffer, Ginger
Blaisdell, for developing the strategy utilized in this effort.
9:04:04 AM
Senator Green informed the Committee that she and other
legislators often receive calls from Medicaid beneficiaries and
providers "who are frustrated with the growing paperwork"
accompanying Medicaid programs. Even though State personnel are
"working diligently to make the Medicaid program work as
efficiently as possible" they, like members of the Legislature
and program beneficiaries, are frustrated by the complexity of
the program. Legislative "fixes" to Medicaid program's problems
have been evasive.
9:04:47 AM
Senator Green communicated that the Lewin Group and ECONorthwest
report was the initial step toward understanding the Medicaid
issue. She cited the key findings of that report as follows.
1. The Medicaid program will change fundamentally over the
next 20 years from one focused on children to a program
geared to caring for Alaska's growing senior and Alaska
Native populations.
2. State matching funds will increase from approximately
$500 Million per year to more than $2 Billion for a total
program cost of more than $5 Billion.
9:05:25 AM
Senator Green characterized Medicaid program funding increases
as "sobering".
Senator Green advised that ECONorthwest developed a computer
program which allows DHSS to continually update data and
forecast future funding needs. The baseline data provided by
ECONorthwest's report and their forecasting model were
instrumental in the effort to implement program change.
Senator Green stated that following the release of the Lewin
Group and ECONorthwest report, the Senate Finance Committee
released a Request for Proposals (RFP) for the development of "a
programmatic baseline so that the Legislature and the
Administration could make program changes to improve Alaska's
Medicaid program". That contract was awarded to PHPG.
Senator Green explained that any changes to the State's Medicaid
program, which was developed in 1974, are made via the amendment
process. This has resulted in "a difficult sequence of rules to
follow".
9:06:31 AM
Senator Green also warned of the potential for institutional
knowledge to be lost as State Medicaid management team
transitions occur.
Senator Green communicated that the purpose of securing a firm
to review the State's Medicaid plan, Statutes, and regulations
was to provide information upon which the Legislature and the
Medicaid program management "could identify where, if any,
pieces did not relate well with its counterparts". This
information is provided in Appendix B of PHPG's comprehensive
report.
Senator Green declared that many opinions exist about program
services and eligibility requirements. The issue is complex, as
are "the implications of change" on stakeholders. While the
Legislature is responsible for recommending program Statute
changes, they are challenged "to make sound recommendations when
we may not fully understand the implications to the client,
providers, agency staff or the budget".
Senator Green proclaimed that program changes "to better serve
Alaska's needy population … should be based on sound research
rather than on assumptions".
Senator Green informed the Committee that the report also ranked
Alaska's Medicaid "services and eligibility criteria" against
other states and the District of Columbia. This information is
reflected in Appendix A of PHPG's comprehensive report.
9:08:37 AM
Senator Green cited another concern as follows.
When there were optional services mandated to constrain the
Medicaid program to spend within a limited budget, the
restriction could not hold up to unanticipated growth in
program needs and client needs. It was frustrating to see
very large supplemental requests come before the
Legislature each year with relatively no option for
legislators, except to pay for the cost of this important
program.
How do we create a program that is more predictable?
Program reform options are outlined in Chapters 2 through
Chapter 6. Many of these options are tried and true changes
that have been successful in other states. Although Alaska
has unique obstacles when compared to other states, the
Pacific Health Policy Group has identified options that may
create positive changes for Alaska.
Senator Green reported that PHPG has a history of Medicaid
program reform success in other states including Arizona,
Oklahoma, Vermont, and West Virginia. PHPG has also worked
extensively with the federal Indian Health Service (IHS) and
tribal providers to address problems unique to those services.
Some of the reforms resulting from those efforts could benefit
Alaska.
Senator Green informed the Committee that Andy Cohen, a policy
analyst with PHPG, would be leading today's presentation. His
expertise included evaluating "managed care strategic planning;
fee for service; home and community service; base services; and
service providers".
9:10:08 AM
Alaska Medicaid Program Review
Presentation of Findings
The Pacific Health Policy Group
February 2007
ANDY COHEN, Director, Pacific Health Policy Group, appreciated
the opportunity to discuss the findings of the work PHPG
conducted over the past six months. A power point presentation
accompanied the "Presentation of Findings" handout.
[NOTE: For reference purposes, the Senate Finance Committee
Secretary made a notation on each page of the corresponding
timestamp in which that page in the presentation was addressed.
A copy of the handout can be obtained by contacting the
Legislative Research Library at (907)465-3808.]
Page 2
Medicaid Review
Introduction
Pacific Health Policy Group
· PHPG is a health care consulting firm, founded in 1994
· Offices in California and Illinois]
· Our focus is Medicaid/SCHIP and other government-
funded health care programs
· Have provided assistance to 20+ states
· We also have worked with counties, providers,
foundations and private health insurers
Mr. Cohen reviewed the information. PHPG has worked with
numerous state legislatures and state Medicaid agencies to
"assess their programs and identify areas for reform".
Mr. Cohen expressed that today's discussion will address "unique
features" and challenges being experienced in administering the
Alaska Medicaid program. Every state's Medicaid program has
"faced growing challenges with regard to meeting the service
needs of their beneficiaries while at the same time keeping the
program fiscally sustainable", and PHPG drew on the experience
of "the best practices" of other states in its recommendations
for Alaska.
9:12:37 AM
Page 3
Medicaid Review
Introduction
Project objectives
· Evaluate the Alaska Medicaid program relative to other
states ("50-state analysis")
· Ensure that program operations reflect current
statutes, rules and policies ("regulatory review")
· Assess current program operations and identify best
practices from other states ("operational review")
· Assist the legislature with the evaluation of short
and long term program reform initiatives - identify
strategies that enable the program to operate with the
flexibility necessary to best serve Alaskans,
recognizing budgetary realties
· Identify oversight priorities for the legislature
Mr. Cohen reviewed the study's objectives. PHPG compared
Alaska's Medicaid program to those of other states in order to
view it in "a broader context for how the program looks". PHPG's
review also drew on the findings of the aforementioned
Lewin/ECONorthwest report.
Mr. Cohen stressed that PHPG conducted "an assessment" of the
current program rather than "an audit". The intent was to
determine "how the program worked today, the issues and
challenges for funding it, and take those findings" and compare
them to operations that have been successful in other states.
The ultimate goal was to develop "both short and long term
program reform initiatives" for the Legislature and DHSS to
consider.
Mr. Cohen assured the Committee that Alaska is not alone in
having to cope with Medicaid program fiscal challenges. While
having to address "short term priorities" within annual fiscal
constraints is an on-going dilemma, the effort must consider the
"major systemic changes" the Medicaid program is undergoing at
both the federal and state level to make it sustainable over the
long term.
Mr. Cohen communicated that during today's discussion, PHPG
would be offering strategies the State might consider in order
to provide "the needed flexibility to act quickly, but also with
a long term perspective in mind, as challenges present
themselves". PHPG also considered the cumbersome affect of the
amendment process in its program review.
9:16:11 AM
Page 4
Medicaid Review
Introduction
Potential reforms defined in RFP
· Developing public/private partnerships between
Medicaid and employers - adopting market-based reforms
· Introducing managed care, to the extent feasible
· Enacting cost sharing - premiums/co-pays, perhaps tied
to benefits
· Containing costs through program caps
· Increasing federal financial participation by
obtaining matching dollars for services funded with
state dollars only
· Strengthening the tribal health system
Mr. Cohen praised the reform criteria specified in the
Legislative RFP and noted that each criterion was addressed in
the report. PHPG was not restricted to the Legislative list and
was able to draw on other states' reform experiences such as the
public/private partnership approach. These partnerships have
allowed employers and state and federal Medicaid programs to
link up and provide private health care coverage to uninsured,
working, low-income individuals and their families.
Mr. Cohen noted that managed health care is limited in Alaska.
This is also true in many rural areas of the country. A number
of other states with high rural areas have implemented
alternative types of managed health care systems.
Mr. Cohen communicated that recent federal Medicaid revisions
have improved states' cost sharing opportunities. To that point,
care should be given to insure that shifting costs such as
premiums and co-payments to individuals not discourage people
"from availing themselves of preventive services", primary care,
and other services.
Mr. Cohen reviewed reform measures being pursued in other
states. For example, Vermont transitioned "its entire Medicaid
program out of the traditional Medicaid system" through a
federal waiver process. While the waiver process would provide a
state more flexibility, the waiver process requires a state to
operate within a specified federal funding level for a period of
time. Florida has implemented a defined contribution program
rather than the traditional defined benefit package.
Mr. Cohen divulged that "the federal government has looked to
the states as the laboratories for creativity" in addressing
Medicaid program costs.
Mr. Cohen had been surprised to learn that the federal Tribal
Health System (THS) Medicaid component for Alaska is the largest
in the nation "in terms of the number of Native Alaskans and
American Indians who are served and the dollars that are spent
on the program". South Dakota is a distant second. Thus,
strengthening the THS in Alaska is paramount.
9:21:49 AM
Page 5
Medicaid Review
Introduction
Work Steps:
· Interviewed provider representatives and beneficiary
stakeholders
· Consulted with DHSS and other state agency staff
· Reviewed recently-issued reports examining
Medicaid's long term growth; long term care system;
and behavioral health system
· Compared Alaska enrollment and expenditure data to
comparable data for the other fifty states
· Evaluated best practices and innovative approaches
in other states for applicability to Alaska
· Note: DHSS has not had the opportunity to review
figures/assumptions
Mr. Cohen reviewed the work steps taken to date by PHPG, and
acknowledged the assistance provided by DHSS employees, the
Alaska Mental Health Trust Authority (AMHTA), and Senator Green
and her staff in this endeavor.
Mr. Cohen complimented the State's efforts to date toward
addressing the issues identified in the work steps. For
instance, the Lewin report provided important information about
long term enrollment and spending forecasts and AMHTA has
commissioned behavioral health system studies. Rather than
duplicating those efforts, PHPG "built on" the information
provided by those efforts. National and other states' studies
were also utilized.
Mr. Cohen noted that DHSS has not had an opportunity to review
PHPG's comprehensive report since it was just recently delivered
to them.
9:23:38 AM
Page 6
Medicaid Review
Introduction
Topics to be Covered Today
1. Summary findings from 50-state review
· Demographics and Medicaid eligibility
· Covered services & aggregate expenditures
2. Current operations & trends, by service type
· Acute care
· Long term care - elderly/physically disabled & MR/DD
· Behavioral health
· Tribal health (all services)
· Administration
3. Recommendations for reform and oversight
Mr. Cohen overviewed the topics and noted that an effort would
be made to avoid acronyms. To that point, he defined MR/DD as
Mental Retardation/Developmental Disabilities.
9:24:30 AM
Page 7
Medicaid Review
Introduction
Executive Summary:
· Alaska is expensive, on a per beneficiary basis
· However, the state falls into the middle range in most
areas, in terms of the populations and services
covered
· The aging of the state's population is going to place
significant pressures on the delivery system and
Medicaid's budget
· There are a number of reforms within the existing
Medicaid structure that can be taken to improve
services and better control costs
· There also are structural reforms that the state
should consider to ensure the program's long term
sustainability
Mr. Cohen reviewed the information. The aging and disabled
population of the State would place the most monetary pressure
on the Medicaid system over the long term. "That's the future
that we confront."
9:26:25 AM
Page 8
50-State Summary
Demographics & Medicaid Eligibility
Overview
· Medicaid eligibility is segmented into mandatory and
optional populations
· Mandatory groups have a "categorical" linkage to
eligibility - e.g., children, pregnant women, disabled
· Optional groups typically are persons who meet
mandatory/categorical criteria but whose income is too
high
· Every state covers some optional groups, although the
extent of the coverage varies widely
· Some states also cover "medically needy" persons
through Medicaid - similar to Alaska's Chronic & Acute
Medical Assistance (CAMA) eligibles
Mr. Cohen noted that the Medicaid eligibility issue is addressed
in Chapter 2 of the PHPG report. The structure of the Medicaid
program is quite complicated and consists of five eligibility
groupings: kids; pregnant women; parents of eligible children;
low-income; and aged and disabled persons. Some Medicaid
coverage for individuals is mandatory and some is optional.
Certain programs are mandatory as a condition of a state's
entering into the federal Medicaid program. Federal regulations
specify and describe in detail the income level requirements
pertinent to each grouping within a mandatory program covered by
the State.
Mr. Cohen specified that optional programs are those to which a
state agrees to provide coverage beyond federal Medicaid
eligible standards for the five beneficiary categories. There is
no limit on the amount above the mandatory eligibility income
standards a state could provide.
Mr. Cohen noted that while each state in the nation has opted to
provide beyond the federal minimums, there is "a great deal of
variation between states as to which groups are covered beyond
that minimum and to what extent".
Mr. Cohen also noted that several states have incorporated a
sixth group of beneficiaries, "the medical needy", into their
Medicaid program. Alaska does not. While the medical needy
program resembles an optional program, it is not considered as
such because the incomes of the group exceed federal
qualifications. However, the states' medical needy programs
allow people "to count" the medical expenses incurred by their
medical condition toward their income maximums, thereby
"spending down" their income to a level that would qualify them
for coverage.
Mr. Cohen noted that while Alaska does not have the medical
needy program, it does have a program called the Chronic & Acute
Medical Assistance (CAMA) program "that serves the same kinds of
people in the similar way…". The CAMA program is solely funded
with State dollars.
9:29:36 AM
Page 9
50-State Summary
Federally Defined Coverage Groups
Mandatory Group
1) Children under age 6 in households with income below 133
percent of FPL ($21,945 for a family of two in Alaska)
2) Children ages 6 and older in households with income
below 100 percent of FPL ($16,500 for a family of two)
3) Parents at or below a state's AFDC cutoffs from July
1996, when welfare reform was enacted (75 percent of FPL
for non-working parents; 81 percent for working parents)
4. Pregnant women at or below 133 percent of FPL
5) Aged, blind or disabled SSI beneficiaries with income
below 75 percent of FPL ($9,188 for a household of one)
6) Working disabled persons at or below SSI limits
7) Medicare eligibles above SSI limits qualifying for
limited benefits (QMB, SLMD and AI groups)
Optional Group
1) Children under age 6 in households at or above 133
percent of FPL
2) Children ages 6 and older in households at or above 100
percent of FPL
3) Low-income parents above the state's AFDC cutoff
4) Pregnant women above 133 percent of FPL
5) Aged, blind and disabled beneficiaries between 75 and
100 percent of FPL
6) Working disabled above SSI limits
7) Nursing home residents above SSI limits but below 300
percent of SSI
8) Individuals at risk of needing nursing facility or
ICF/MR placement but served through an HCBS waiver
9) Women with breast or cervical cancer
10) Medically needy individuals
Mr. Cohen cited this information as being a summary of the
federal Mandatory Groups and the Optional Groups through which
states can expand their Medicaid program beyond the income
levels mandated by the federal Medicaid poverty level (FPL).
Mr. Cohen noted that individuals in categories 7 and 8 of the
Optional program are nursing home residents who are served
through a Home and Community Based Waiver Program (HCBS). He
noted that every state in the nation offers assistance to such
nursing home residents. Assistance to women with breast and
cervical cancer is a fairly new Optional program.
9:30:44 AM
Page 10
50-State Summary
Alaska Optional Coverage Groups (sfy '05)
[A table developed by the DHSS depicting the different
categories comprising the Optional Programs in Alaska. The
information is presented by category based on the five
federal groupings. Such things as enrollment and
expenditures per enrollee are depicted.]
Mr. Cohen pointed out that while children comprise the largest
component of the State's optional Medicaid program, only $2,114
is spent per child on an annual basis. The most expensive group,
at $53,518 per beneficiary, is the Aged, Blind & Disabled group,
which includes those served in nursing homes or by waivers. This
group receives approximately 20 percent of the total annual
State spending on Medicaid. This is also the group whose numbers
are anticipated to increase in the future.
Page 11
50-State Summary
Coverage of Optional Populations
Alaska is middle-range in coverage of major optional
categories, such as children and pregnant women
[Chart comparing Alaska's coverage relative to federal
mandatory income levels to the highest and lowest state
coverage's in the nation.]
This page was not addressed in the presentation.
9:33:00 AM
Page 12
50-State Summary
Coverage of Optional Populations
Overall, Alaska's optional groups account for a smaller
than average portion of enrollment and spending
[Four pie charts were depicted: one pair indicating that
the enrollment in Alaska's Optional programs (27 percent)
in the year 2005 was lower than the national average (29
percent) and the other pair indicating that Alaska's
Optional program expenditures that year accounted for 30
percent of the budget compared to a national optional
program expenditure of 43 percent.]
Mr. Cohen noted that the higher national expenditure was due to
the fact that the numbers of elderly and disabled populations in
the nation exceed that of Alaska.
9:33:32 AM
Page 13
50-State Summary
Enrollment Growth
Total Medicaid enrollment until 2005 exceeded state
population growth, but trailed the national rate
[Graph comparing Alaska's population and Medicaid
enrollment growth to the national Medicaid enrollment
growth during the years 2000 and 2005.]
Mr. Cohen noted that Alaska's population and Medicaid growth
percentages "converged" in the year 2005 due to actions taken by
DHSS to control Medicaid program costs.
9:34:13 AM
Page 14
50-State Summary
Medicaid & Uninsured Populations
Medicaid covers a large percentage of Alaskans, but the
percentage without insurance is also relatively high
[Two sets of state rankings were depicted: one ranking the
top ten states according to citizens utilizing Medicaid,
and one ranking the top ten states according to the percent
of its citizens who are uninsured. Alaska is ranked fourth
in terms of its populace utilizing Medicaid and tenth in
the number of uninsured.]
Mr. Cohen communicated that approximately one of five people in
Alaska are covered by Medicaid. Alaska differs from the other
states ranked in the top ten, as they are "generally comprised
of low income states or states like Vermont" which have reformed
their programs and are covering people "who would otherwise" be
uninsured.
Page 15
50-State Summary
Distribution by Payor Mix
Relatively fewer Alaskans have employer-sponsored coverage,
not surprising given the prevalence of small employers in
the state.
[Graph comparing the number of Alaskans to other United
States' citizens receiving medical coverage from Medicaid,
Medicare, Employer-based, Direct Purchase, Military, or
Uninsured coverage.]
Mr. Cohen reviewed the information and noted that Native
Alaskans in the State, who only have access to health care
through the federal Tribal Health System," are classified by the
federal government as uninsured".
9:35:12 AM
Page 16
50-State Summary
Medically Needy & CAMA
Overview
· Medically Needy programs serve persons whose incomes
exceed categorical limits, but who incur medical
expenses sufficient to qualify on that basis
· Alaska is one of the 16 states without a Medically
Needy program
· The state's CAMA program is similar to a Medically
Needy program, but is funded with state dollars only
($2.2 million in 2004)
· Some states have added CAMA-like populations to
Medicaid through waivers, thereby capping the state's
financial liability, while drawing down additional
federal matching dollars.
Page 17
50-State Summary
Medically Needy & CAMA
Overview
· Example: Mississippi added a program in 2005 through a
Section 1115a waiver covering most of the same groups
as CAMA (cancer, diabetes, etc.)
· Mississippi projected the program would be "budget
neutral" by forestalling onset of disabling conditions
requiring long term care
· Converting the CAMA program would likely not require
legislation, unless the eligibility standards for the
program were altered
Mr. Cohen reviewed the information and stated that while CAMA is
solely funded by State dollars, it differs from similar
Medically Needy programs adopted by other states, in that it is
not an entitlement program. Optional programs such as the
Medically Needy program which operate under traditional federal
Medicaid rules are "obligated to spend to whatever [level] is
required by law in terms of the folks who present for the
program".
Mr. Cohen noted that some states have addressed this issue by
conducting a federal waiver process. This has allowed them to
provide coverage to individuals, receive federal dollars, "but
cap their obligation at whatever level is established and
negotiated out with the feds".
9:36:06 AM
Page 18
50-State Summary
Covered Services
Overview
· Medicaid-covered services are also segmented into
mandatory and optional groups (children are entitled
to a wider range of mandatory services than adults)
· Alaska is comparable to most other states in terms of
the optional services offered
· Alaska spends more per beneficiary than other states
and costs grew rapidly in the first part of the decade
· DHSS has taken a number of steps to contain costs,
consistent with actions in other states
· Demographic trends are going to impose serious cost
pressures in the next decade
Mr. Cohen addressed the information. While the DHSS has
endeavored to contain program expenses, the projected increase
in the State's aging and disabled population will continue to
present challenges. The State must also address the tribal
health challenge which is "more structural and infrastructural
in nature".
9:37:06 AM
Page 19
50-State Summary
Expenditures per Beneficiary
Alaska spent more than the national average per beneficiary
in 2003, even after adjusting for cost-of-living.
[Bar graph comparing Alaska's unadjusted and an estimated
adjusted average cost per beneficiary, approximately $6,400
and $5,200 respectfully, to the national average of
$4,000.]
Mr. Cohen noted that these figures are dated and do not reflect
changes undertaken by DHSS to contain costs. The figures were
also adjusted by federal standards to account for the high cost
of living experienced in the State. The cost of living
adjustment accounted for approximately half of the difference
between Alaska's average cost and the national cost.
Transportation costs for Medicaid delivery in Alaska also exceed
those of other states.
9:38:04 AM
Page 20
50-State Summary
Expenditure Growth
Alaska's Medicaid expenditures grew faster than the average
annual rate early in the decade, but have since fallen back
to the middle-range.
[Line graph comparing Alaska's expenditures to those of the
United States for three time periods: 1991-2001, 2001-2004,
and 2004-2005.]
Mr. Cohen noted that both the State and the nation's Medicaid
programs rapidly expanded between 1991 and 2001. Alaska outpaced
the federal Medicaid program growth rate from 2001 to 2004. As
reflected on the chart, DHSS cost containment efforts such as
provider payment freezes, up-front service authorization
controls, and pharmacy controls began to curb Alaska's cost
growth in 2004 and 2005 and Alaska's growth rate began to track
with the national rate during this period.
9:39:01 AM
Page 21
50-State Summary
Expenditures by Beneficiary Type
Alaska ranked in the top 5 in every category (unadjusted
dollars)
[Chart depicting Alaska's ranking against the highest and
lowest amounts paid by other states in terms of unadjusted
2003 dollars spent on Children, Adults, Elderly, Blind &
Disabled, and in Total.]
Mr. Cohen noted that Alaska ranked near the top in each of the
listed categories. Alaska's ranking would fare better today as a
result of DHSS cost containment measures.
9:39:31 AM
Page 22
Alaska Medicaid
Where Are the Dollars Spent?
Most spending falls into five major service categories
[Pie chart depicting Alaska's major Medicaid service areas
and the percent of funding attributed to each: Long Term
Care, 27 percent; Hospital care, 24 percent; Behavioral
Health, 14 percent; Pharmacy, 14 percent; Physician/Clinic
care, 11 percent; and Other expenditures, 10 percent.]
SCOTT WITTMAN, Director, Pacific Health Policy Group, clarified
that in Alaska, services for individuals who have developmental
disabilities are a component of long-term care.
9:40:25 AM
Page 23
Alaska Medicaid
Acute Care
Hospital Services
· In 2003, Alaska spent $1,200 per beneficiary for
inpatient services, fourth highest in the country
· Alaska spent $168 per beneficiary for outpatient
services, second highest in the country
· The higher costs occurred despite lower than average
utilization
Mr. Wittman reviewed the data and noted that, while Alaska ranks
high in amounts spend per beneficiary for inpatient and
outpatient service, it is not ranked high in "utilization" which
is the actual number of days of service or visits per
beneficiary. The lower utilization numbers however are countered
by the higher provider costs per visit resulting from such
things as higher salaries and costs of supplies and utilities.
Mr. Wittman advised that disease management programs and
increased primary care physician opportunities could further
reduce utilization, particularly in terms of emergency room
visits and other preventable admissions.
9:42:26 AM
Page 24
Alaska Medicaid
Acute Care
Physician/Clinic
· Alaska's physician payment rates are the highest in
the country, partly because of the prevalence of
tribal and cost-based providers
· Physicians perceive the fee schedule to be essential
for supporting their practices - the reverse of what
normally occurs
· The state faces a worsening physician supply shortage
- one that could be exacerbated by cutting fees
· Telemedicine is a promising concept for stretching
provider capacity. The state implemented payment
regulations in 2002, but utilization remains low
Mr. Wittman discussed the findings. Alaska's physician care
costs are double the national average. Furthermore, people
served by both Medicaid and Medicare programs have difficulty
accessing physicians and services. This is exacerbated by the
current deployment of military physicians.
Mr. Wittman noted that efforts to attract physicians and provide
adequate access to medical care have added to already high
physician rates.
9:43:51 AM
Page 25
Alaska Medicaid
Acute Care
Pharmacy
· In 2003, prescription drug expenditures per
beneficiary (before rebates) were $788, 13th highest
in the country
· The state has taken a number of cost containment
actions, including joining a purchasing pool and
introducing a preferred drug list
· Alaska pays among the highest rates for drugs and
dispensing fees - which to some extent supports
critical access pharmacies
· The state should consider differential pricing
strategies, targeting urban chains for discounts. This
likely could be enacted through regulation, without
the need for a statutory change.
Mr. Wittman discussed the information and disclosed that
Alaska's dispensing fee is the highest amongst states. DHSS is
furthering several cost containment efforts to lower costs.
9:44:54 AM
Page 26
Alaska Medicaid
Long Term Care
Nursing Facilities/HCBS
· LTC accounted for one-quarter of Medicaid expenditures
in 2005, but is projected to grow significantly as the
state's elderly population grows in size (from 55,000
seniors in 2005 to 80,000 in 2015)
· Under current trend lines, Medicaid LTC spending is
projected to increase from $273 million in 2005 to
$877 million in 2015
· Nursing home rates are highest in the country, but
utilization is the lowest, partly due to a lack of
beds
· Pioneer Homes, which are licensed as Assisted Living
Facilities, are becoming de facto Alzheimer's
providers, though in a relatively costly setting
Mr. Wittman read the information and noted that the elderly
population in the State is projected to triple over the next ten
years. This would change the utilization of nursing homes, which
is currently low.
9:45:49 AM
Page 27
Alaska Medicaid
Long Term Care\
Nursing Facilities/HCBS
· The state has two HCBS waiver programs for elderly and
physically disabled persons (OA and OPD), but neither
are designed to serve persons with
Alzheimer's/dementia.
· The waivers also offer limited in-home support
services, encouraging many to seek Personal Care
Attendant (PCA) services outside the waiver.
· In 2005, PCA costs reached $80 million, while the two
waivers amounted to only $42 million
· The state has introduced prior authorization rules for
PCA, but a comprehensive pre-admission screen
encompassing all community services (with PCA
converted to a waiver service) would allow the state
to operate a more holistic system
Mr. Wittman shared that while the State has federal waivers for
in-home support services, those services are limited. Thus,
costs are increasing as people seek in-home Personal Care
Attendants (PCA) services outside of the waiver. A tightening of
the rules pertaining to accessing PCA services, specifically a
new pre-admissions screening, has been implemented to address
"the growth curve" being experienced.
9:46:47 AM
Mr. Cohen warned that while the cost of Alaska's Optional Group
services is currently lower than the national average, it is
anticipated to approach national levels.
Page 28
Alaska Medicaid
Long Term Care
Nursing Facilities/HCBS Recommendations
· Institute up-front, comprehensive pre-admission
screening and care planning
· Convert PCA to a waiver service
· Add waiver services targeted to Alzheimer's/Dementia
as less costly alternatives to Pioneer Homes (e.g.,
AFC) and/or establish case-mix adjusted payments for
Pioneer Homes
· Also consider a provider tax on Nursing Facilities as
a revenue source (also recommended by PCG in its
report). Federal law permits up to a six percent tax
· The tax would require legislative action. The other
recommendations would require federal approval
Mr. Cohen stated that efforts to contain the costs of large
programs such as PCA services outside of the waiver should be
addressed. A waiver process has built-in controls on spending
and a comprehensive pre-admission screening which considers each
individuals needs. Having a large PCA component outside of the
waiver defeats the effort to provide comprehensive service.
Mr. Cohen reviewed PHPG's recommendation to move PCA services
entirely into a waiver program. Additional waiver services
should be developed to address other challenges such as
Alzheimer's. A comprehensive effort should be made to keep the
elderly and physically disabled in the community where they live
rather than in more costly environments such as Pioneer Homes.
The waiver process could assist in meeting individual needs as
well as containing costs.
Mr. Cohen communicated that federal regulations allow states to
impose up to a six percent tax on institutional providers like
nursing facilities. The money generated by the tax is subject to
a federal match. DHSS is considering whether the federal
regulations accompanying this tax would offset its benefits.
9:49:45 AM
Page 29
Alaska Medicaid
Long Term Care
Developmentally Disabled
· Alaska serves all DD beneficiaries through waivers,
outside of institutional settings - one of only a
handful of states to do so (making it a leader)
· In 2004, expenditures per waiver beneficiary were
sixth highest in the country ($63,000 verses $37,000
average)
· DHSS should develop and introduce a mandatory, uniform
cost reporting tool for providers (and audit
requirements)
· Rates should be updated through application of a
reasonable annual inflator and rebased periodically
(e.g., every four or five years)
· This likely could be implemented at the regulatory
level through changes to the principles of
reimbursement
Mr. Wittman discussed the Developmentally Disabled (DD) waiver
services provided in the State and disclosed the need for DHSS
to develop a uniform rate setting system for these services.
9:50:56 AM
Page 30
Alaska Medicaid
Long Term Care
Developmentally Disabled
· About 12 percent of the state's DD spending is through
state-funded grants ($18 million in 2005) - average
for the fifty states, but below states that have
achieved close to 100 percent federally-matched
programs
· Unmatched DD dollars are being spent, in part, on
persons on the DD waiver waiting list and persons
deemed not eligible under current screening criteria -
the reverse of the elderly/physically disabled program
· The state could create a second waiver, with distinct
eligibility criteria. Enrollment could be capped at
the numbers served today with state dollars - and the
dollars matched
· The new waiver would require federal approval and
possibly legislative action, if the waivers are
authorized in statute
Mr. Wittman reviewed PHPG's findings and recommendations. The
effort should be to garner additional federal match dollars.
9:51:43 AM
Page 31
Alaska Medicaid
Behavioral Health
Overview
· Over 80 percent of behavioral health dollars in 2005
went toward treating children, with 90 percent of all
spending split between Residential Psychiatric
Treatment Centers (RPTCs) and general mental health
· The state spends very little on early intervention
activities, to prevent or treat behavioral health
conditions at an initial stage
· CMHC rates have been flat for over a decade - with
most additional funding going to serve persons in
crisis
· The "Bring the Kids Home" initiative is an important
effort, though it will bring Alaska only to the stage
many states reached years ago and will leave Alaska
dependent on inpatient care
· Savings achieved through Bring the Kids Home should at
least partly invested in early intervention/community-
based services, in line with trends in other states
Mr. Wittman declared that the State is challenged by an
insufficient level of community behavioral health services. The
State is spending significant money for children in out-of-state
services. Increasing these services would lower costs and
recognize the social implications of keeping families together.
9:52:50 AM
Page 32
Alaska Medicaid
Tribal Health
Overview
· American Indian/Alaska Natives (AI/AN) represent 40
percent of the state's Medicaid population; tribal
health is a $740 million delivery system
· The tribal system faces significant fiscal challenges,
as HIS funding has been increasing at 1 -2 percent per
year
· The health status of Alaska Natives is significantly
worse than that of the general population on many key
measures, such as tuberculosis and diabetes
· The AI/AN population is younger than average, but its
elderly segment is growing significantly and will
require a tribal LTC provider infrastructure that does
not exist today
· The state may have an opportunity to dramatically
alter the fiscal landscape - and provider system - for
AI/AN beneficiaries
Mr. Wittman stated that the discussion regarding AI/AN tribal
health programs included the consideration of program reforms
that would strengthen the program and garner additional
financial investment. The effort should also contemplate
transitioning the tribal health system into a complete delivery
system offering acute care service, long-term service, and
behavioral health service. A managed care system approach would
allow the tribal health program to further develop
infrastructure and garner additional federal funds as opposed to
a combination of federal and State dollars.
Mr. Wittman advised that while the State Medicaid funding levels
have increased, the Indian Health Service (IHS) program funding
has been "relatively flat".
9:54:24 AM
Page 33
Alaska Medicaid
Tribal Health
AI/AN Current Medicaid Funding
[Two pie charts comparing the State/Federal Fiscal Year
2005 (FFY 05) AI/AN Medicaid expenditures to non-tribal
provider expenditures.]
Mr. Wittman re-emphasized the fact that the State is required to
share in the cost of services provided to Alaska Natives by non-
tribal providers. Currently the State spends approximately $93
million in this regard. Strengthening the IHS service
infrastructure could increase federal funding to 100 percent.
The State could then utilize its money to further "develop the
health system".
9:55:18 AM
Page 34
Alaska Medicaid
Tribal Health
Tribal Health Recommendation
· Alaska spends about $19 million per year on nursing
facility costs for AI/AN beneficiaries residing in
non-tribal facilities ($8 million state dollars)
· The state should consider investing in development of
tribal long term care capacity, to allow beneficiaries
to be served closer to family/friends, while garnering
100 percent federal matching dollars. For example:
State Federal Total
Nursing Facility
Expenditures:
Non-Tribal Provider
*Cost per nursing
facility day $170 $230 $400
*Total annual
Medicaid expend-
itures to serve
50 clients $3,096,660 $4,203,340 $7,300,000
*Ten-year Medicaid
Expenditures (8%
annual growth) $44,859,959 $60,891,947 $105,751,906
Investment in Tribal
Provider Infrastructure
*State investment $8,000,000
(equal to estimated
construction cost of
60-day bed facility) $7,300,000 $7,300,000
*Ten-year Medicaid
expenditures (census
= 50) $105,751,906 $105,751,906
*Total
Expenditures $ 8,000,000 $105,751,906 $105,751,906
Potential State Savings
Over Ten Years:
Single Facility $36,859,959
Mr. Wittman spoke to the potential savings that could be
achieved by moving nursing facilities into the tribal health
provider system. A State investment of $8 million into a 60-bed
long term care facility operating under a tribal health provider
system could be 100 percent federally funded. The State would
spend in excess of $44 million on non-provider nursing facility
services over a ten year period under current conditions.
9:56:18 AM
Page 35
Alaska Medicaid
Tribal Health
Tribal Health Recommendation
· Medicaid expenditures within the tribal health system
receive 100 percent federal funding; services provided
to AI/AN beneficiaries by non-tribal providers are
matched at the regular rate
· Under a Section 1115a waiver, the state, in
collaboration with tribal providers, could designate
the tribal system as a managed care entity
· The entity would be funded for all care - including
services furnished by non-tribal providers. However,
the "capitation payment" would be submitted for 100
percent federal match
· The new entity would have flexibility to invest
savings into areas of greatest need for AI/AN
beneficiaries
· This initiative would require federal approval, which
is not assured
Mr. Wittman explained PHPG's tribal health program
recommendations. After obtaining a Section 1115a waiver, a
tribal health system with tribal or contracted providers would
be capitalized with 100 percent federal funds.
9:57:48 AM
Page 36
Alaska Medicaid
Administration
Overview
· DHSS was reorganized into four major divisions in 2003
- the department overall falls into the "super agency"
structure adopted by many states to consolidate
"public health/behavioral health/Medicaid
· In 2003 (pre-organization), Medicaid's administrative
costs were $504 per beneficiary (or $403, adjusting
for cost-of-living), versus a national average of $224
· Administrative costs represented a 6.8 percent of
total expenditures, closer to the national average of
five percent
· Administrative spending also grew more slowly in
Alaska from 1997 to 2004 than it did nationally
Mr. Cohen noted that all states find the Medicaid program
expensive to administer. This is particularly true in Alaska as
its high fixed costs "are spread over a small beneficiary
population" in a large geographic area. He reiterated that
actions taken by the DHSS assisted in containing costs.
9:58:13 AM
Page 37
Alaska Medicaid
Administration
Program Integrity/Provider Payments
· The federal government is phasing-in a new audit
structure for states, known as the Payment Error Rate
Measurement (PERM) process; Alaska's first audit is
scheduled for 2008
· States that have error rates significantly above the
national rate face disallowances and may be ordered to
refund federal monies
· DHSS has established a Program Integrity and Analysis
function and has re-codified service regulations, as a
means of bringing better clarity and oversight to the
payment process; the Department also has conducted
test audits to prepare for PERM
· However, the PERM audit will overlap with
implementation of a new MMIS - on a schedule which
appears to be very ambitious
· The legislature should monitor both processes closely
because of their fiscal implications for the program
Mr. Cohen read the information and noted that the federal
Payment Error Rate Measurement (PERM) audit would be phased into
Alaska in the year 2008. The Legislature should keep abreast of
the readiness actions DHSS is taking in this regard.
9:59:16 AM
Page 38
Alaska Medicaid
Administration
Regulations
· The updating of Medicaid regulations, beginning with
HCBS waiver rules, was essential and is already
yielding results
· The Department's recently-issued draft regulations for
covered services comply with federal law and
regulations, with only a few areas for potential
follow-up by DHSS identified
· Of the 481 regulations reviewed, only 8 potential
inconsistencies were detected, representing 1.66% of
the total
· It appears that Alaska performed a very thorough
review of applicable federal authorities when it
sought to repeal existing state regulations and
propose revised rules
Mr. Cohen complimented the regulation compliance efforts made by
the State.
9:59:58 AM
Page 39
Alaska Medicaid
Broad-Based Reform
Planning for Reform
· The federal government in recent years has shown a
willingness to grant states greater flexibility in
running their Medicaid programs, if presented as parts
of a comprehensive reform model
· Vermont, Massachusetts and, to a lesser extent,
Florida have undertaken major reforms under the aegis
of 1115a waivers
· Under such waivers, states agree to operate their
programs at no greater cost than would have occurred
without reform. In return, the federal government
agrees to "waive" traditional rules governing how the
program operates and who can be served
· Denali KidCare operates under an 1115a waiver
Mr. Wittman reiterated that "the federal government has been
grappling" with the issue of increasing Medicaid program costs
and has "looked to the states" for ideas of how to improve
quality of care while containing costs. The 1115a waiver would
allow states to implement reforms in a flexible environment.
10:02:05 AM
Page 40
Alaska Medicaid
Broad-Based Reform
Reform Objectives
· Ensure the best use of public resources to meet
Alaskans' health care needs
· Ensure the program is culturally appropriate and
recognizes Alaska's unique demography
· Ensure the program is fiscally sustainable for the
long term
· Encourage preventive care and early intervention
· Promote access to quality care
· Ensure the state has the necessary tools to quickly
respond to client needs, changes in the delivery
system and fiscal constraints
Mr. Wittman addressed reform objectives. Providing the State the
flexibility to implement such things as employer sponsored
insurance initiatives in which Medicaid funds could subsidize
private coverage for low income individuals would be an example
of how to best use public resources. This action could lessen
the cost of insurance on employers, reduce the number of
uninsured individuals, and lessen the amount of uncompensated
care in the system.
Mr. Wittman reported that the successes of health reform
initiatives in other states such as Health Management
Organizations (HMOs) in controlling program costs have been
mixed. The HMO approach was not deemed appropriate for Alaska as
its success has been limited in other rural states. However,
successful HMO quality care initiatives such as its disease
management programs, 24-hour nurse line, and linking each
participant to a physician, are being considered by DHSS in its
effort to contain costs.
10:04:27 AM
Page 41
Alaska Medicaid
Broad-Based Reform
Reform Steps
· Define Medicaid's top programmatic needs over the next
decade
· Project likely spending authority over same period
· Draft waiver proposal seeking flexibility to
restructure program
· Identify specific reforms to be undertaken
o CAMA program
o Tribal health
o DD waiver
o Long Term Care
Mr. Wittman stated that one of the key elements to program
reform is identifying programmatic needs and projected spending
authority.
10:05:25 AM
Page 42
Medicaid Review
Summary
Program Area Recommendation Action Required
CAMA Program *Convert to fed- *Federal approval
ally matched *Possible statutory
model under a action (if covered
Section 1115a population/services
Waiver change)
Pharmaceutical *Differential *Regulatory
Pricing pricing stra- amendments
tegies, by
location
Personal Care *Comprehensive *Regulatory changes
Attendant (PCA) pre-admissions *Possible statutory
Screening action (if covered
populations /
services change)
10:05:42 AM
Page 43
Medicaid Review
Summary
Program Area Recommendation Action Required
Personal Care *Convert to waiver Federal Approval
Attendant (PCA) service
*Target alternatives
for individuals with
Alzheimer's/dementia
Nursing *Provider Tax
Facilities *6% tax allowed Statutory approval
by Federal Law
Developmentally *Mandatory, uniform
Disabled cost reporting
tool Regulatory changes
*Fixed rate
increases
Page 44
Medicaid Review
Summary
Program Area Recommendation Action Required
"Bring the Kids *Reinvest savings *Evaluate options
Home" in early for enhanced
intervention/ community based
community based services
services
Tribal Health *Designate tribal *Develop applica-
system as tion for Section
managed care 1115a waiver
entity *Develop detailed
*Construct cost-benefit
tribally-operated analysis
nursing facility
Mr. Wittman communicated that these pages depict actions that
might be required to accommodate reform measures.
Mr. Cohen advised that there were both short and long term
opportunities associated with reforming the State's Medicaid
program. Expansion of the federal waiver process would provide
the flexibility necessary to consider additional program
reforms.
10:07:10 AM
Co-Chair Hoffman invited Senator Green to join Committee members
at the table.
Senator Green was impressed with the PHPG report, particularly
in that it provided workable regulatory process solutions to
issues as opposed to solutions requiring Legislative
involvement.
10:08:03 AM
Senator Stedman asked the savings the State might anticipate by
implementing PHPG's recommendations.
10:08:30 AM
Mr. Cohen responded that reforming the IHS component would
provide the most monetary benefit; however, collaborative
efforts between the DHSS and IHS must first occur. He reiterated
that the State is currently spending $90 million annually as the
State match for non-provider services.
Mr. Cohen shared that determining a definitive dollar savings
amount for reforms to CAMA and other programs is difficult as
some of the proposed solutions might be ultimately deemed
"impractical" or infeasible. While 1115a IHS waivers take time
to negotiate, the savings could potentially range between $80 to
$100 million dollars over time.
Mr. Cohen stressed that in order to achieve long-term results,
any reform-generated money should be reinvested into the IHS
service infrastructure for such things as a long-term nursing
facility.
10:10:33 AM
Co-Chair Stedman expressed that such savings would impact the
DHSS budget.
10:10:48 AM
Co-Chair Hoffman concurred.
Co-Chair Hoffman asked what incentives might be required to
generate reform support from IHS entities.
10:11:07 AM
Mr. Cohen acknowledged this as being one of many challenges in
the reform process. Care must be taken to ensure that the
federal government or other entities do not perceive actions as
an effort to solely "supplement or offset" State expenditures.
Mr. Cohen communicated that conveying the benefits of reform to
Native Alaskans as well as the IHS is paramount in creating a
comprehensive health care system. No such system exists today.
10:12:37 AM
Co-Chair Hoffman asked the identity of the tribal entities PHPG
communicated with in Alaska.
Mr. Cohen replied that a complete listing would be provided.
PHPG worked with the Eastern Aleutian tribes and the Alaska
Native Health Consortium amongst others.
10:13:31 AM
Co-Chair Hoffman referred to the Alaska Medicaid Tribal Health
information depicted on page 32; specifically that IHS funding
had only increased one or two percent per year. This was not due
to a lack of effort to obtain additional funding. To that point,
he asked for assurance that obtaining the 1115a waiver would
obtain additional federal dollars.
Mr. Cohen believed that additional federal funding could be
obtained were 1115a waivers pertaining to the IHS programs
discussed in this presentation negotiated with the federal
Centers for Medicare and Medicaid Services (CMS). Such funding
would offset State spending and provide opportunities for
reinvestment. Nonetheless, he could not commit for the federal
government.
Mr. Cohen continued that before proposing the IHS waivers to the
federal government, it would be "critical to do more work within
the State with the tribes, collaborate with them and private
providers" to initially develop "a concept paper" that describes
program objectives. "With the blessing of IHS" in the belief
that the program would "strengthen the tribal delivery system",
State and tribal representatives could present the concept paper
and begin negotiations with CMS. While this practice has been
successful in other cases and the federal government has looked
to the states to be innovative in respect to the Medicaid
program, "there is no guarantee" of the outcome of those
negotiations.
10:15:48 AM
Co-Chair Hoffman asked how long it took other States working
with PHPG to obtain the federal waiver and implement the
program. He also asked the level of savings such programs
generated.
10:16:11 AM
Mr. Wittman communicated that PHPG worked with Vermont,
Oklahoma, New York, and Rhode Island in developing their 1115a
waivers. The process in New York took approximately six months
and the 1115a waiver for Vermont's managed care program took
approximately 15 to 18 months. While it is typically a one to
two year process, it could occur faster depending on
circumstances.
10:17:10 AM
Co-Chair Hoffman stressed the importance Alaska places on the
effort to "Bring the Kids Home". Addressing the needs of
children in-state rather than elsewhere would result in
increased services as well as cost savings. The State's current
lack of infrastructure is delaying this effort.
Mr. Wittman agreed that having in-state infrastructure and an
adequate provider base are necessary to serving individuals in
their community. The State of Vermont identified these elements
as a priority.
10:18:18 AM
Mr. Cohen specified that structural reform is the key to
providing community service to all demographic groups. Investing
in community based services "early on" for people in need and
providing preventive behavioral care infrastructure would also
produce savings. The battle is half lost when an individual is
placed in inpatient or residential treatment as they have
already reached "crisis level".
Mr. Cohen clarified however that a lack of services should not
diminish the effort to "Bring the Kids Home". In addition to the
benefit of providing services to them close to their
communities, it is less expensive than sending them out of
state.
Mr. Cohen reminded the Committee that a tremendous amount of
money is currently spent on long-term non-tribal care for tribal
beneficiaries. Another area of large expense is behavioral
health treatment for Native Alaskan adolescents. This was also a
component of the tribal health initiative being proposed.
10:19:46 AM
Mr. Wittman informed the Committee that the 1115a waiver granted
to the State of New York has generated hundreds of millions of
dollars in savings over its ten years of operation. Vermont has
saved approximately $160 million over a five year period. He
noted that Vermont's Medicaid budget is similar to Alaska's.
10:20:38 AM
Co-Chair Hoffman asked whether PHPG has estimated the cost of
implementing its recommendations in Alaska.
Mr. Cohen understood the question to be to the cost of
implementing the actions depicted on pages 42 through 44 of the
presentation. PHPG had identified eight minor inconsistencies
between what was specified in State regulations as compared to
the federal code of regulations. While some might argue else-
wise, PHPG recommends erring on the side of caution. The costs
associated with the regulatory action recommendations would be
insignificant.
Mr. Wittman stated that the expense of addressing the PERM and
MMIS processes has not been determined.
Mr. Wittman affirmed that the cost of addressing the
recommendations would primarily be in terms of staff time. For
instance, staff time would be the initial step in evaluating
whether the return on constructing a nursing home, for example,
would warrant the investment.
10:22:26 AM
Senator Elton asked regarding the recommendation to implement a
tax on nursing homes; specifically whether the consequence of
doing so might extend beyond simply increasing the cost of
service.
10:22:57 AM
Mr. Wittman noted that many states have incorporated a tax on
nursing homes and hospitals to provide revenue. He clarified
that the Medicaid program prohibits there being "a link between
the tax and the payments" of a Medicaid rate established for
providers.
10:23:31 AM
Senator Elton asked whether imposing this tax might impede the
business decision to expand a nursing home.
Mr. Wittman responded that "it would if the rates themselves
didn't recognize the additional cost of that tax".
Mr. Cohen furthered explained that one consideration in levying
the tax is whether the current rate is close to the maximum
payment level mandated by the federal government.
10:24:26 AM
SENATOR JOHN COWDERY, observing that the cost of pharmaceuticals
has increased dramatically in recent years, asked how this has
affected the Medicaid program.
Mr. Wittman was unsure whether the PHPG comprehensive report
specified the rate of the increase in pharmaceutical costs, but
advised that pharmaceutical expenses, which comprise 15 to 20
percent of national Medicaid costs, are one of the leading
causes of growth in state Medicaid programs. States have tried
to "curb" this growth through such things as preferred drug
lists, purchasing pools, and "disease management programs
specific to pharmaceuticals".
Mr. Cohen noted that "Medicaid programs "have been especially
hard hit" due to federal regulations pertaining to the federal
Food and Drug Administration (FDA) approved drug list, because
states without a managed care program are prohibited from
restricting access to certain drugs.
Mr. Cohen further explained that, even though Alaska has
promoted the use of less expensive generic drugs, some
behavioral health drugs are new and do not yet have generic
equivalents. This is an important consideration since behavioral
health issues are a large component of the Medicaid program.
Mr. Cohen affirmed that DHSS like its counterparts in other
states has been working to address this growing expense. To that
point, the State is 85 percent compliant with its voluntary
preferred drug list usage; DHSS has recently begun a program to
pre-authorize certain types of drugs, specifically behavioral
health drugs, that are not on the preferred drug list; and DHSS
is addressing the high dispensing fees being experienced at the
pharmacy level in the State.
10:27:53 AM
Senator Cowdery asked how the "average wholesale price for
drugs" is determined.
Mr. Cohen was not privy to that information; drug manufacturers
strive to keep their pricing mechanisms private.
10:28:58 AM
Senator Thomas opined that treatment efforts typically focus on
treating symptoms rather than the cause of the behavioral
problem. He asked whether there has been a national trend to
redirect money in this regard.
Mr. Cohen communicated that many states with a waiver,
particularly those with a managed care model, are operating
under the premise that "keeping people healthy" saves money over
the long term. Thus their emphasis is on preventive primary care
and early intervention.
Mr. Cohen reiterated that implementing a statewide managed
health care program such as an HMO in Alaska, was "not
feasible". However, the nurse advice line and "some of the
principles espoused by HMOs … could be replicated" within the
State's Medicaid program. Larger efforts would include
increasing community based service infrastructure and preventive
care. The waiver program would allow the State to be creative
and more flexible to "do things that are not allowed under
traditional Medicaid rules".
Mr. Cohen applauded the State's efforts in addressing its
provider shortage, especially in remote areas. The health aide
program, which is unique to this State, is a successful example
of that effort.
Mr. Cohen cautioned against reducing Medicaid program expense by
enacting short-term solutions such as cutting benefits or
eligibility. "This will create a hole somewhere else because the
need is still going to be there." The State's situation would
worsen without long-term planning and all "the quick fixes" are
exhausted. Alaska should be credited for having started its
planning efforts.
Mr. Wittman stated that the flexibilities provided by the waiver
process would encourage such things as psychologists consulting
with pediatricians. This is currently not commonplace as "there
is not a reimbursement mechanism under Medicaid". As a result of
its waivers, Vermont's Medicaid agency is investing money saved
by not having to provide matching dollars to recruit doctors for
underserved rural areas.
10:33:16 AM
Senator Olson referred to the effort to "Bring the Kids Home",
as addressed on page 31 of the presentation. In addition to
being required to invest in infrastructure, the State would be
required to invest in more trained personnel as there are, for
example, few child psychiatrists in Alaska.
10:34:03 AM
Senator Olson also questioned the current practice of placing
children in out-of-state care based on a provider bid process.
10:34:26 AM
Mr. Cohen stated that service cost comparisons are included in
the comprehensive report. Senator Olson's reference to a bidding
process is a fair observation. In addition to the effort to save
money, there is a "quality of care advantage" for caring for
young people in their community.
Mr. Cohen agreed the State was lacking care providers such as
child psychiatrists. "The residential care model is not the
ideal model ultimately." The ideal approach would be to serve
children in need "sooner through" early intervention services.
To get service to communities faster, the initial effort could
begin with providing mid-level professional expertise in
communities similar to that provided by the health aide program.
10:36:24 AM
Senator Dyson appreciated the initiative taken by Senator Green
and the expertise of PHPG in advising on the Medicaid program,
specifically the effort to strengthen the village tribal health
initiative. He asked whether costs associated with Medicaid
services to non-Natives in remote areas could be curtailed by
enhancing their ability to be treated at IHS facilities.
10:37:35 AM
Mr. Wittman agreed that the unique demographics of the State
should be recognized and addressed in the waiver proposal; it
would be impractical and inefficient to provide "a duplicated
system in a small community".
In response to a follow-up question from Senator Dyson, Mr.
Wittman stated that the federal waiver proposal should specify
that the federal tribal health care system should be available
to all people residing in that area.
Senator Dyson asked for further direction in appealing to the
federal government to allow such an "accommodation".
Mr. Wittman stated that the proposal should include physical
location facts "and the arguments for designing a system" that
would be most appropriate for the State.
Mr. Cohen identified the waiver process as "the vehicle" for
presenting such a proposal.
Senator Dyson asked whether there might be an opportunity for
civilians to access the "very extensive" military health care
system that exists in remote areas of the State.
10:39:24 AM
Mr. Cohen recalled this issue being addressed during Medicaid
discussions about rural areas in northern Maine. He would
revisit those notes.
10:39:50 AM
Senator Dyson pointed out that the states of Vermont and Maine
were physically very different from Alaska. Guam would be a
better comparison as it was remote and had a large military
component. Guam's approach to allowing civilian contractors and
others to access military health care could be considered for
Alaska.
10:40:22 AM
Senator Dyson appreciated Health Savings Accounts (HSAs) being
recognized in the presentation as being "a possible solution" to
the Medicaid issue.
10:40:36 AM
Mr. Cohen affirmed that the HSA model has become popular,
particularly in the private sector. The goal of the HSA program
is to empower people "to take more ownership of their care; to
be better stewards of their health care dollars by putting them
more under their control rather than a third party payer like a
Blue Cross handling all that for them". In the private sector, a
HSA typically has a high deductible policy for catastrophic
conditions. After their account is funded, the individual would
utilize that money to pay for regular doctor visits. Individuals
tend to carefully manage their account so it lasts the entire
year.
Mr. Cohen stated that Medicaid has been considering modeling a
program after the HSA. Florida has implemented a program similar
to the HSA concept. In addition to providing people money for
health care, additional money could be awarded for taking
certain healthy actions. A waiver application for a similar plan
is being considered in Vermont.
Co-Chair Hoffman noted PHPG's report was available online at
http://www.legis.state.ak.us/teldocs/AKMedicaidProgramReviewFina
lReportJan07.pdf.
The presentation concluded.
^
ADJOURNMENT
Co-Chair Lyman Hoffman adjourned the meeting at 10:42:56 AM
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