Legislature(2007 - 2008)SENATE FINANCE 532

02/06/2007 09:00 AM Senate FINANCE


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09:01:28 AM Start
09:01:37 AM Alaska Medicaid Program Review Presentation
10:42:56 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Joint w/ (S) Health, Education & Social TELECONFERENCED
Services
Medicaid Program Review Presentation:
Pacific Health Policy Group
-- Testimony <Invitation Only> --
Full Report will be available online by
8:00 am, February 6th
http://www.legis.state.ak.us/teldocs.asp
                            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                                                                   

Document Name Date/Time Subjects