Legislature(2017 - 2018)SENATE FINANCE 532
02/08/2018 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Prensentation: Health Care Authority Overview | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
February 8, 2018
9:02 a.m.
9:02:26 AM
CALL TO ORDER
Co-Chair MacKinnon called the Senate Finance Committee
meeting to order at 9:02 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Anna MacKinnon, Co-Chair
Senator Click Bishop, Vice-Chair
Senator Peter Micciche
Senator Donny Olson
Senator Gary Stevens
Senator Natasha von Imhof
MEMBERS ABSENT
None
ALSO PRESENT
Leslie Ridle, Commissioner, Department of Administration;
Emily Ricci, Chief Health Care Policy Administrator,
Department of Administration; Pat Pitney, Director, Office
of Management and Budget, Office of the Governor.
PRESENT VIA TELECONFERENCE
Adam Reese, PRM Consulting Group; Thomas Rand, PRM
Consulting Group; Scott Wittman, Pacific Health Policy
Group.
SUMMARY
^PRENSENTATION: HEALTH CARE AUTHORITY OVERVIEW
9:02:57 AM
LESLIE RIDLE, COMMISSIONER, DEPARTMENT OF ADMINISTRATION,
relayed that she and her staff would provide a presentation
and then the department's consultants would present
information.
EMILY RICCI, CHIEF HEALTH CARE POLICY ADMINISTRATOR,
DEPARTMENT OF ADMINISTRATION, discussed the presentation,
"Health Care Authority (HCA) Feasibility Study" (copy on
file).
Ms. Ricci turned to turned to slide 2, "Study Overview":
• In 2016, SB 74 directed Department of Administration
(DOA) to procure a study evaluating the feasibility
of a Health Care Authority.
• SB 74 requires the study to:
o Identify cost-saving strategies that a health care
authority could implement;
o Analyze local government participation in the
authority;
o Analyze a phased approach to adding groups to the
health care plans coordinated by the health care
authority;
o Consider previous studies procured by the
Department of Administration and the legislature;
o Assess the use of community-related health
insurance risk pools and the use of the private
marketplace;
o Identify organizational models for a health care
authority, including private for-profit, private
nonprofit, government, and state corporations; and
o Include a public review and comment opportunity
for employers, employees, medical assistance
recipients,
retirees, and health care providers.
9:05:23 AM
Ms. Ricci looked at slide 3," Study Outline":
square4 Study evaluates health benefits funded directly
or indirectly by the state for the following
groups:
• Medicaid
• State of Alaska retirees (PERS, JRS and TRS)
• Employees in the following groups:
o State of Alaska (all bargaining groups)
o School districts
o University of Alaska
o State corporations
o Political subdivisions
o Other groups that would benefit from
participation (e.g. individual market)
square4 Goal is to see if there are opportunities to
create savings through greater efficiencies.
square4 Evaluate opportunities for consolidated
purchasing strategies and coordinated plan
administration.
Ms. Ricci detailed that the Health Care Authority (HCA)
feasibility study had been challenging for two reasons.
Health care had gained attention at the national and
statewide level because the system was fragmented,
difficult to navigate, and very expensive. She considered
that the existing healthcare system was complex and had
been developed over decades; so there could not be a simple
solution. She thought one of the largest challenges was the
term "health care authority," for which that there was no
definition. Individuals had different and sometimes
divergent ideas about the definition. She spoke about the
challenging magnitude of expenditures and covered lives,
which would be addressed in a later slide.
Ms. Ricci spoke to slide 4, "Study Contractors":
Contractors:
o PRM Consulting Group (PRM) - survey collection, data
analysis, phase 1 & phase 2 findings focusing on
public employee benefits
o Mark A. Foster Associates (MAFA) peer-review,
Alaska specific market analysis & opportunities
o Pacific Health Policy Group Consulting (PHPG) -
Medicaid technical assistance and analysis
o Agnew::Beck public comment and review process
9:08:51 AM
Ms. Ricci discussed slide 5, "Important Dates":
Timeline:
August 30, 2017 PRM, PHPG, MAFA reports
released
September 1, 2017 Public comment process opens
September 7, 2017 PRM webinar (12:30pm1:30pm)
September 11, 2017 PHPG webinar (2:00pm3:00pm)
September 13, 2017 MAFA webinar (2:30pm3:30pm)
?October 30, 2017 Public comment process closes
**Extended to November 13, 2017**
December 4, 2017 Report addendum released
**Extended in conjunction with the public comment
extension to December 22, 2017**
Ms. Ricci detailed that the study was comprised of four
different studies. The contractors had provided an overview
of findings. She informed that all the report information,
including the webinars, were available on the department's
website.
Ms. Ricci read slide 6, "Big Picture Takeaways."
Ms. Ricci displayed slide 7, "2016 Expenditures & Covered
Lives," which showed a pie chart entitled '2016 State and
Federal Spend* $3.56 Billion,' and a bar graph entitled,
'State/Other* Spend ($Millions).' The bar graph showed
expenditures for Medicaid, state retirees, state employees,
school district employees, University of Alaska employees,
and political subdivisions. She noted that the top of the
slide read, "The State of Alaska & other publicly funded
health benefits cover over 340,000 lives." She qualified
that there was duplication in the number. The number also
encompassed the AlaskaCare retiree plans, which included 40
percent of members that lived out of state.
Senator von Imhof observed that the bar graph on the right
had dollar amounts for each category of spending. She
wondered if there was a breakdown of the number of covered
lives represented in each spending category on the bar
graph. She wanted a scale of efficiency or cost per capita.
Ms. Ricci offered to provide a breakdown of the individuals
represented on the graph. She thought the per capita cost
would also be addressed in a later slide.
Senator Stevens asked what Ms. Ricci's definition of
"health care authority."
Ms. Ricci considered that a health care authority (HCA)
would be an entity that was different from what existed
currently. She did not think that an HCA would be an
exaggerated version of the Division of Retirement and
Benefits. She thought an HCA was a different entity that
had sophisticated data analytics, was empowered to engage
in negotiations with providers, and managed a large pool of
Alaskans. She thought one important question was who would
participate in the pool.
9:12:47 AM
Senator Micciche asked if the difference of $2.05 billion
in state/other spending and $1.51 billion in federal
spending was out of pocket costs.
Ms. Ricci explained that the pie chart on slide 7 might
help answer the question. The pie chart was a breakout of
the $3.56 billion in expenditures associated with the
publicly funded health plans covering the 340,000 lives
listed on the slide. About $1.5 billion of the spending was
associated with federal programs. The other portion of the
pie chart depicted spending by the state and "other funds."
She explained that the department used the term "other
funds" loosely because it included local contributions. The
bar chart on the right-hand side of the slide broke down
the state/other spending into categories.
Ms. Ricci continued to address Senator Micciche's question.
She explained that the contractors had to pick a point in
time to examine in order to made equitable comparisons. The
point in time chosen was September 2016. She reviewed the
funding breakdown as shown on the slide.
9:15:07 AM
Senator Micciche asked about the difference between the
"State/Other" spending shown on the pie chart versus the
"State/Other" spending on the bar graph on slide 7.
Ms. Ricci stated that the difference had to do with
Medicaid and mentioned the dental plan and the retiree
plan.
Senator Micciche asked if the $605 million in state
Medicaid spending was not a state Unrestricted General Fund
(UGF) cost.
Ms. Ricci informed that the slide was not broken into UGF
or other funds, but rather a combination of state and local
funds for the purpose of the pie chart. She thought that
the Office of Management and Budget (OMB) had provided an
estimate of what UGF costs were for the categories on the
slide. She offered to share the information with the
committee.
Ms. Ricci referenced slide 8, "Health Plan Consolidation":
Health plan consolidation exists in the Medicaid and
AlaskaCare retiree population with administrative
entities covering a combined 233,000 covered lives.
The State of Alaska, along with school districts and
political subdivisions provide coverage to an
estimated 44,000 benefit eligible employees through
more than 100 different health insurance plans.
This includes a mix of fully insured and self-
insured plans as well as union health trusts.
Ms. Ricci stated that part of health insurance was the
aggregation of risk pools. She thought pooling in volume
was a fundamental concept in establishing health insurance
plans. The contractors had noted that health plan
consolidation did exist at higher levels that were more
optimal in two areas - Medicaid and the AlaskaCare retirees
and employees (which had about 80,000 lives). Reports had
estimated the optimal level for pooling insurance
efficiently was about 100,000 lives. She observed that
there were 100 different health plans being utilized to
cover different groups and included a mix of fully insured
and self-insured plans. Self-insured plans were similar to
AlaskaCare health plans, in which the entity providing the
plan took on the risk of paying claims. In a fully insured
plan, the insurer took on the risk.
Senator von Imhof hoped that further slides would refer
back to slide 8. She thought you could observe in later
slides that other plans were more efficient and were
different in how they provided value for members.
9:19:21 AM
Ms. Ricci addressed slide 9, "Current Actions":
Implement Employee Group Waiver Plan (EGWP)
o Increases federal subsidies for pharmacy
benefits in the AlaskaCare retiree health plans
through a Medicare Part D EGWP
o Estimated savings in GF range from $40 to $60
million/year
o Target implementation date is January 1, 2019
Pharmacy Benefit Management (PBM) Carve Out
o The Division of Retirement and Benefits (the
Division) issued a Request for Proposal In
January for PBM services
o Target implementation date is January 1, 2019
Travel Coordination Plan
o The Division issued a request for proposals for
travel coordination and assistance
o Goal is to assist members seeking care outside
their community through high-value, cost
effective service
o Target implementation date is July 1, 2018 for
employee plan, January 1, 2019 for retirees plan
Vice-Chair Bishop looked at the estimated savings in
general funds (GF) from implementing the Employee Group
Waiver Plan listed on the slide.
Senator Micciche asked about estimated savings associated
with travel coordination.
Ms. Ricci stated that the savings PRM identified were about
$85 per member per year across all entities. She was not
certain that the amount would translate into each health
plan. She would have further estimates available within 60
days' time when the department received estimates through
the proposal process.
Senator Micciche assumed that the amount would be
equivalent to $85 times 44,000, or close to $4 million per
year.
Ms. Ricci stated that the amount would likely be 16,000
individuals in the employee plan and more individuals in
the retiree plan. She cautioned against making estimates
before learning more about the vendors that would
participate. A portion of the savings would be attributable
to utilization in the program as well as the networks that
the vendors were able to bring to the table with prices and
quality metrics.
9:24:14 AM
Commissioner Ridle pointed to slide 10, "Next Steps":
The fiscal year 2019 budget includes funding to
evaluate and implement strategies to reduce the growth
of state health care spending including:
o Implementation of contractor recommendations
- e.g. coordinated/integrated services, data
analytics, clinical guidelines;
o Voluntary participation of pooled purchasing of
services (e.g. TPA); and
o Developing recommended options on the
governance structure of a health care authority
that includes representation for employees and
other stakeholders
Commissioner Ridle stated that an HCA was feasible. She
discussed a $200,000 request in the Department of
Administration's (DOA) budget for an effort happening in
the community called "the blueprint," or "AK Reform." There
was a public group including Department of Health and
Social Services (DHSS), Alaska Mental Health Trust
Authority (AMHTA), DOA, Division of Insurance, providers,
insurers, individual doctors, members of the legislature,
and others. The budget request would go toward the effort
to come up with a blueprint for healthcare for Alaskans. In
another part of the budget there was a $750,000 increment
to apply back to the health care authority effort. The next
step was to do actuarial analysis on claims data, legal
analysis, and re-engage stakeholders. She detailed that
there had been public comment, but more details needed to
be addressed such as implementation details, governance,
and legalities.
Senator Stevens asked if both budget requests begin in the
coming year.
Commissioner Ridle stated that the goal was to be done in
2018 with a plan to move forward. She believed the
blueprint group had a goal to be done in December 2018, and
the HCA wanted to be done by October.
9:27:00 AM
Ms. Ricci referenced slide 11, "Next Steps":
Future Exploration
o Analyze the ability for an established HCA to scale
up and offer services to other groups including:
individual market, private business, non-profits and
the Medicaid expansion group on a cost neutral basis.
Senator Micciche referenced the last line of the slide and
asked if there had been a study from Department of Revenue
(DOR) that estimated potential savings of $125 million per
year from the action of pooling the groups.
Ms. Ricci was not aware of a DOR study but recalled that
there were some additional savings that the contractor had
identified that might align with what Senator Micciche was
suggesting.
Senator Micciche welcomed a constituent in the room.
Senator Stevens asked what power would be given to the HCA.
Ms. Ricci stated that the department wanted to outline the
next steps of the HCA and to determine what kinds of things
would be necessary for an HCA to manage lives in a way that
was more aggressive. She thought there were benefits to the
way the private sector engaged in managing the same type of
circumstances. It was important for the HCA to have the
tools it needed to be as effective as possible.
Ms. Ricci read slide 12, PRM "Reports I & II".
ADAM REESE, PRM CONSULTING GROUP (via teleconference),
spoke to slide 14, "Purpose of the study":
To determine the feasibility of creating a Health Care
Authority (HCA) to coordinate health care plans and
consolidate purchasing effectiveness of health
benefits funded directly or indirectly by the state
including employees of the State of Alaska (all
bargaining groups), school districts, University of
Alaska, state corporations, political subdivisions,
retirees and other groups that would benefit from
participation.
Phase I report focused on consolidated purchasing
strategies
Phase II report focused on coordinated health plan
administration
?includes several governance models
?includes template for providing flexibility in plan
design to meet local needs
?includes 5-year savings estimates
9:32:09 AM
Mr. Reese discussed slide 15, "Phase I Report -
Consolidated Purchasing Strategies":
Collected and analyzed data from participating
employers
Interviewed wide range of interested parties
Analyzed the coverage, costs, funding, financing,
and administration for the primary health plan
Key observations high costs, existing
consolidation, wide variation in costs
Mr. Reese addressed the three charts on the slide. He
explained that annual average health care cost per
household was about 60 percent greater in Alaska than for
state and local governments in other parts of the country.
He thought there was a significant burden to be borne by
employers in the state. He referenced the chart on the
bottom left and had found that there was there was already
fairly significant organizational structure and
consolidation in place. He explained the significance of
the area size representing covered lives. The chart
excluded Medicaid, and the largest group was AlaskaCare
retirees. He thought there was a certain level of
efficiencies to look to as a model for best run health
plans. He listed other large pools listed on the chart.
Mr. Reese addressed the chart on the right of slide 15,
"Variation in Monthly Health Plan Cost Per Household by
Size of Plan." He explained that a key finding was that
there was wide variation in plan cost, particularly among
smaller entities (those with fewer than 500 employees).
9:35:55 AM
Mr. Reese moved to slide 16, "Phase I Report -
Opportunities for consolidated purchasing efficiencies,"
which showed two pie charts and a table. He shared that
other findings from the Phase I report identified
purchasing efficiencies that could be addressed including
pharmacy benefits, travel benefits, and implementing an
Employer Group Waiver Plan (EGWP). He discussed the
estimated savings from the efficiency opportunities
identified.
Senator von Imhof referenced slide 15, and the right-hand
graph. She asked if Mr. Reese had any information on the
underlying demographics for each of the data points on the
graph to better understand the difference in costs.
Mr. Reese answered in the affirmative. He stated that the
data was a key part of the analytics. As a health actuary
he was aware of the increased costs of healthcare that came
with advancing age. The consultants had sought the data,
received it from DOA and was able to map it to each of the
entities for which it had plan design and cost information.
He stated that future slides would show more detail as he
had tried to adjust for the demographics for each of the
health plans.
9:39:08 AM
THOMAS RAND, PRM CONSULTING GROUP (via teleconference),
displayed slide 17, "Phase II Report - Consolidated Health
Plan Administration":
Evaluated experience of other states
Collected and analyzed data from participating
employers
Interviewed wide range of interested parties
Made observations on plan designs, costs, employee
premium rates
Evaluated five models, projected costs & savings
over next five years:
Recommendations
Mr. Rand stated that PRM had found few other states that
maintained an HCA. The two closest states models were the
State of Washington and the State of Oregon. Meeting with
the states had been helpful in formulating the Phase II
report, which dealt with consolidated plan administration.
9:41:15 AM
Mr. Reese referenced slide 18, "Phase II Report
Observations - Wide range of health plan actuarial values,"
which showed two bubble charts entitled 'State Agencies and
Political Subdivisions,' and 'School District Health
Plans.' He stated that PRM had captured data as to the
health plan actuarial value, or what proportion of covered
charges would be covered by a plan. He discussed the
dimensions of the two graphs.
Mr. Reese referenced an earlier question about demographics
of the insurance pool population. He shared that the data
on the slide was adjusted for the age and gender
demographics of the underlying populations in the groups.
Mr. Reese noted that the charts were using the same scale,
which helped illustrate the observation that there was a
fairly wide range of actuarial values and health plans from
below 75 percent to about 95 percent. The majority of the
employees in state agencies were in health plans with
actuarial values of 85 percent or higher; whereas the
majority of school employees were in health plans with
actuarial values below 85 percent.
Senator von Imhof interpreted that it would be ideal to be
in the upper left-hand corner of the graphs with a higher
value plan with a lower cost.
Mr. Reese agreed.
Senator von Imhof asked how the state could get most of the
plans into the upper left-hand corner of the graphs.
Mr. Reese considered the graph on the left, where it was
possible to see trailing smaller plans. He thought the
topic that needed more study was why two plans with the
same actuarial value were imbalanced in cost, even when
adjusting for demographics. The topic would be addressed
further in later slides.
Mr. Reese addressed slide 19, "School Districts -
Comparison of Plans in Public Education Health Trust (PEHT)
to those not in PEHT." The slide showed a bubble graph to
demonstrate differences in plans that participated in the
public education health trust and those that did not.
9:46:54 AM
Mr. Reese pointed to slide 20, "School Districts -
Comparison of Plans in Health Care Cost Management
Corporation of Alaska (HCCMCA) vs not in HCCMCA." The slide
showed a graph, with those participating in HCCMCA in
bronze, and the blue were not.
Senator von Imhof thought the obvious conclusion was that
one was better off not in a trust.
Senator Micciche referenced slide 19, and asked Mr. Reese
to share some factors about the trust, so that the
committee might better understand the issue.
Ms. Reese discussed the use of a composite rate, through
which a health plan collected the same amount of money
regardless of the number of people in a household, which
could be affecting underlying costs. He thought a
subsequent slide would address the matter. He discussed the
uniqueness of the state, including higher healthcare costs,
difficulty reaching specialty services, and the
relationship with employers covering all lives in a
household.
Senator Micciche thought Mr. Reese was expressing that it
was the same cost to cover an employee as to cover an
employee and family.
Mr. Reese answered in the affirmative. He referenced slide
19, that showed two similar plans providing the same level
of benefit for vastly different costs. He thought the
difference could be related to a policy of the plan sponsor
with regard to the number of covered lives per household.
9:51:32 AM
Senator von Imhof asked if some of the bubbles on the slide
represented a household cost that was higher versus the
cost being covered by the employer or the trust.
Mr. Reese asked to advance to slide 23.
Mr. Rand spoke to slide 23, "Observation: Spousal premium
requirements impact enrollment, which impacts total
employer cost." He thought that there was some interaction
between public funded employer-sponsored healthcare plans
in Alaska, and plans provided in the private sector. He
thought it was notable that about 40 percent of United
States workers in the private sector were in families where
both spouses were employed. Many employers were requiring
significantly higher contributions for spousal and
dependent coverage than for employee-only coverage. An
employer that provided generous benefits, low
contributions, or a composite rate would have a plan that
would naturally be chosen by a couple or family.
Mr. Rand continued his remarks. He thought there was a cost
shift to employers with generous plans and low or no
additional contribution rates for dependents' coverage. He
thought the chart and regression line on slide 23 showed
the correlation between higher contributions for
dependents' coverage and the percentage of participants who
elected to cover family members. For every $50 in additive
contribution for spousal coverage, there was a 10 percent
decline in the percentage of participants covering spouses
under health plans. The plan that was more generous and
less costly ended up carrying claims costs that could
otherwise have bene shared with other employers in dual
income households.
Mr. Rand continued to discuss slide 23. He estimated that
for every 1 percent decline in dependents' participation,
there was a 1 percent decline in the cost of the plan. One
recommendation in the Phase 2 report was that any HCA-
administered plan moved away from composite rates and
followed the more common practice of having dependent
coverage tiers with different rates. Such tiers would not
preclude a participating entity from continuing to use a
composite rate, but it would highlight the issue and give
some incentive for publicly funded plans in Alaska to take
steps to undo the cost-shifting that was happening.
Co-Chair MacKinnon handed the gavel to Co-Chair Hoffman.
9:56:55 AM
Senator von Imhof noted that there were five public
entities that had chosen to cover the entire cost of adding
a spouse for coverage. She asked for confirmation that
public entities made the choice to cover the cost at the
expense of other costs.
Mr. Reese answered in the affirmative. He had heard from a
number of school districts that had difficulty recruiting
and retaining staff and had used the spousal coverage as a
recruiting tool.
Co-Chair Hoffman handed the gavel back to Co-Chair
MacKinnon.
Mr. Rand stated that one of thing things PRM had noted
while conducting the study was that there was a very large
number of Alaskans that were covered by the federal
government. The percentage of non-participation for those
that were eligible for Federal Employees Health Benefits
(FEHB) was about 9 percent, while in Alaska the percentage
of participation approached 30 percent. He thought the
number was driven by the fact that many of the individuals
had spouses that worked for the state or other employers.
He thought that in effect, the federal government was
benefitting taxpayers by the disparity in participation
rates compared to the rest of the country.
9:59:55 AM
Senator von Imhof presumed that people were choosing the
more generous state employee healthcare plan over the
federal plan because there was more value per dollar in the
state plan.
Mr. Rand agreed. He noted that the actuarial value of
federal plan was less generous than that of the state
employee plans.
Senator von Imhof commented on the 9 percent of federal
employees that declined coverage nationally versus 30
percent in Alaska. She concluded that the national plans
seemed more similarly aligned versus the plans in Alaska,
which did not seem aligned.
Mr. Rand answered in the affirmative. Private sector
employees had been very aggressive in taking steps to
ensure that in dual-income households the other employers
plan was selected. In a recent survey reported by Willis
Towers Watson, 28 percent of respondents reported that
there was a spousal surcharge, which was being more
commonly used in the private sector. The surcharge required
payment from employees who were eligible to identify if a
spouse had access to other coverage.
10:03:08 AM
Mr. Reese spoke to slide 24, "Phase II Report - Status Quo:
Expected Cost in 2021 is $1.19 billion." The slide showed a
bar graph that had started with a baseline projection of
expected costs through 2021.
Mr. Reese discussed slide 25, "Coordinated Health Plan
Administration Projected savings over the next five years
by model." The slide showed a table of projected savings.
He discussed the models depicted on the table. He observed
that the second model assumed that all school districts
would be in one pool and all political subdivisions and
state employees would be in a separate pool. Rather than
being voluntary, all plans would come at the expiration of
the collective bargaining agreement. Thereby the pool size
would be larger and the opportunities for coordinated plan
administration savings would be larger.
Mr. Reese continued to discuss the table on slide 25. He
addressed Model 3, which was a different model of state-
administered captive, for those individuals that were self-
insured. Model 5 included an option for individuals to gain
access to a broader pool covering school districts and
political subdivision, with the assumption that individuals
might not have local access to a marketplace.
10:07:01 AM
Senator Micciche thought it seemed like the single risk
pool would be more financially efficient in Model 1 than in
Model 2. He asked if the difference was because there was
an opt-out provision in Model 1.
Mr. Rand agreed and thought that he had been overly
optimistic in depicting savings under Model 1. He thought
the two relevant data points were the experience of the
Washington and Oregon HCAs. The Oregon HCA required that
all school districts participate in the HCA plan with an
opt-out only available with a showing of comparable
benefits in lower cost. Very few school districts had opted
out. He explained that Washington had the opposite rule;
both school districts and local jurisdictions were able to
elect in the plan. The percentage of participation among
school districts was under 5 percent.
Mr. Rand referenced the many plans in operation in Alaska.
He discussed the difference in the plans and thought
consolidation could maintain development of best practices.
10:10:37 AM
Senator Micciche asked if theoretically that the plan that
would deliver the greatest cost savings (a single risk pool
requiring participation) was not on the chart.
Mr. Rand stated that there would be three very large risk
pools, only recommended by PRM because the structure was
already in place. School districts had different needs,
with differing bargaining contracts. The differing needs
were also reflected in earlier bubble charts. He did not
think that somewhat lesser consolidation would be a
significant bar to much greater efficiencies and ultimately
lower costs.
Co-Chair MacKinnon asked about the reference to an ideal
number of 100,000 lives covered in a pool.
Mr. Reese stated that there were some elements to the two
risk pools where the rate-setting and underlying experience
would be separate. There was some coordination that would
be expected to take place across the plans. He used the
example of a single pharmacy contract covering all covered
lives. Even at the consolidated school district level there
was at least 50,000 covered lives. He stated that there was
not that much to be gained going from 50,000 to 100,000
lives, as most economic savings had already been achieved
at the 50,000 size.
Mr. Reese moved to slide 26, "Summary Recommendations for
Coordinated Health Plan Administration":
1. State of Alaska establish a Health Care Authority
(HCA) with three separate pools: one pool for retirees
and two pools for employees, with separate pools for
school district employees and all other governmental
employees.
2. All entities be required to participate in the HCA
when first feasible and no later than upon the
expiration of the current collective bargaining
agreement.
3. The HCA develop multiple plan options for medical,
prescription drugs, dental, and vision benefits to
provide a wide range in health plan choices to meet
the recruitment and retention needs of the various
employers and the health plan needs of their
employees.
4. The HCA establish standard premium rates for the
plans that reflect the expected costs of each plan
option taking into account the covered population and
expected health care utilization.
5. The HCA establish a tiered premium rate structure,
with separate rates that vary with the size and
composition of the household.
6. A Health Care Committee or Board be established to
provide insight and oversight to the HCA.
10:15:32 AM
Senator Micciche asked about findings for Model 5 on slide
25 and asked if a private exchange was likely to realize a
savings from the status quo.
Mr. Reese answered in the affirmative.
Vice-Chair Bishop had questions as to how the state might
unwind the trust agreements inside the collective
bargaining agreements.
Co-Chair MacKinnon noted that there had been a similar
report with similar recommendations, and Vice-Chair Bishop
was pointing out a key contention point. She referenced
constitutionally guaranteed benefits for retirees, and
agreement with bargaining units. The committee had
previously looked at some staged approaches to working with
trusts or others. She referenced a report and thought
previous information matched what the administration was
presenting. She thought that Vice-Chair Bishop had rightly
pointed out that not all people wanted to be in the same
pool.
10:18:02 AM
Ms. Ricci read slide 27, "MAFA Report," and reminded the
committee that that the data being considered was from a
point in time in 2016. She noted that the AlaskaCare plan
had changed since that time. She did not think any changes
affected the findings in a significant way.
Ms. Ricci discussed slide 28, "Overview":
Areas of focus: Public employee plans
Activities:
o Peer review
o Identify any additional Alaska-specific
purchasing strategies
Ms. Ricci considered that the MAFA report, done by Mark
Foster, had looked at opportunities for an HCA focusing on
public employee groups. She summarized that the PRM Phase I
report was what happened if groups pooled in the same way
they did currently but came together to find products to
purchase together to gain savings. The savings identified
by PRM were not particularly high-magnitude at less than
$10 million after an annual $900 million spend.
Ms. Ricci discussed Phase II of PRM's report. She thought
that Phase II represented what happened when the entities
made changes such as pooling differently or administering
differently. There would be more significant savings given
the magnitude of change. She discussed a continuum of
change being contemplated and contemplated the import of
the amount of change all entities were willing to
undertake.
10:21:03 AM
Ms. Ricci addressed slide 29, "Key Observations/Findings":
Aggregate cost of public employee plans in 2017 will
be $956.5 million (PRM findings)
Annual inflation (8%-12%, 2014-2016) exceeds US growth
rate (5%-6%, 2014-2016)
Primary driver of higher prices in Alaska is highly
concentrated medical services markets
Public employer groups are highly fragmented (100
plans covering 44,000 employees)
The largest group only 3.76% of the employer health
insurance market
Consolidation of public employees would expand scale
to 114,000 covered lives and dramatically increase
market share
Health care growth is crowding out wage growth:
"In aggregate, Alaska employees have foregone an
estimated $2.74 billion in wage increases that
have been crowded out by excessive health
plan/medical service costs over the past decade."
Ms. Ricci reminded that the groups considered in the
"public employee plans" listed on the slide included Alaska
state employees (in and out of union health trusts), school
district employees, political subdivision employees, and
the University of Alaska. She discussed health care prices
versus the concept of cost. The report also found that the
increase in the dollars spent on health care came at a cost
to other areas. She thought the last bullet on the slide
had been misinterpreted that foregone healthcare costs
would translate directly into a pay raise.
Ms. Ricci pointed to slide 30, "Potential Public Employee
Savings Estimates":
$655 million over 7 years
8.7% public employee spend
o $23 million/annually year one
o $127 million/annually when mature
Savings achieved through:
2.4% reduction (PRM estimate)
o Health plan management and pooled purchasing
6.3% reduction
o Increase collective employer purchasing power to
improve health outcomes and reduce excessive costs
growth
Ms. Ricci outlined strategies to achieve the 6.3 percent
reduction as mentioned on the slide: accelerated health
plan tiering, value-based insurance design, and referenced-
based pricing.
Ms. Ricci discussed slide 31, "Outline of Savings
Estimates," which showed a table. She noted that the
figures included an assumed increase in primary care
utilization, along with the assumptions on savings.
10:26:09 AM
Ms. Ricci turned to slide 32, "MAFA Key Recommendations":
1. Create a health care authority for public employees
2. Allow groups to opt-out only under specific
circumstances
3. Build and sustain local expertise and professional
staff to support the authority
4. Consolidate health plan data analytics and
procurement under the authority
5. Benchmark reference pricing and performance
6. Increase the use and development of value-based
plan design
SCOTT WITTMAN, PACIFIC HEALTH POLICY GROUP (via
teleconference), discussed slide 33, "Pacific Health Policy
Group - Health Care Authority Feasibility Study Medicaid
Technical Assistance." He discussed his firm, which was
almost exclusively engaged in working with states and the
Medicaid program to develop new programs and evaluate
existing programs. The firm had experience working with
half the states in the country.
Mr. Wittman spoke to slide 34, "Overview":
Areas of focus:
o The Pacific Health Policy Group (PHPG) was
retained by the Department of Administration to
provide input regarding Medicaid-specific
considerations for the development of a Health
Care Authority (Authority)
Activities:
o Provide background on national and Alaska
Medicaid programs
o Outline other states efforts to
consolidate/coordinate public health plans &
Medicaid
o Describe HCA or HCA-like structures
o Identify approaches that Alaska could consider
o Outline a provisional governance model
Mr. Wittman summarized that his firm was hired specifically
to present and evaluate Medicaid considerations as it would
relate to formation of an HCA in Alaska.
10:29:32 AM
Mr. Wittman discussed slide 35, "HCAs in Other States":
Features
HCA Structure/Governance Model is Dependent on:
Role of HCA
o Public employees only v. all state-funded health
plans
o Administration (if Authority is an "umbrella"
agency)
o Coordination/support (board with agency
representation)
o Oversight (regulatory role)
o Development of multi-payer initiatives (commercial
payer representation)
o Advance health reform
Autonomy v. accountability
o Benefits/risks of independence
o Legislative control/appropriations process
Mr. Wittman discussed the table on the slide, entitled
"Overview of Health Care Authorities." He pointed out that
Washington and Oregon were only two states that included
comprehensive healthcare health care purchasing for both
public employees and Medicaid. Uniquely, the State of
Oklahoma HCA was solely the Medicaid program. There were a
number of other HCA's that had different roles related to
health planning or regulatory activities.
Mr. Wittman moved to slide 36, "Health Care Authority
Design Elements":
An Authority would have the following responsibilities
o Strong analytic capacity to support objective
analysis and capability to access health care
data
o Fiscal management and administration of health
benefits for publicly-funded health programs
o Integration and coordination of certain
administrative functions
o Development of approaches that ensure access to
care
o Monitoring and enhancement of the Alaska health
care delivery system
An Authority's responsibilities, including its role as
it relates to Medicaid, requires additional evaluation
Existing examples include: Permanent Fund, Mental
Health Authority, Alaska Housing and Finance
Corporation, etc.
Mr. Wittman discussed the slide and pondered that an HCA
could include stakeholder input. He thought that generally
the notion of an HCA was to create some autonomy compared
to a public agency or department within state government.
The authority would have an assigned role, and generally
had a board structure. The legislature would generally cede
some control to an authority.
10:33:10 AM
Senator von Imhof asked why Medicaid needed additional
evaluation and inquired as to what type of evaluation Mr.
Wittman was seeking to perform.
Mr. Wittman stated that his group would need to take a
detailed look at how the state government was organized. He
considered that shifting Medicaid to an HCA would be a
major transformation. Shifting Medicaid from DHSS to an
authority would be creating an entity that would have
responsibility for all the state's healthcare funding and
administration. He stated that the analysis pertaining to
savings was difficult as it was a function of any reforms
that were initiated.
Mr. Wittman continued to address Senator von Imhof's
question, noting that there were additional analyses
related to administrative costs, as Medicaid shared funding
with the federal government. There was a detailed cost
allocation plan that drove the number of federal Medicaid
dollars that determined the number of staff in state
government. It was important to consider what functions
would be transferred to an HCA to determine the impact on
the administrative budget and state dollars. He thought
that the evaluation was more of a question about where the
state wanted to go in terms of healthcare; balanced against
the fact that it was known that healthcare and other social
programs were interrelated, and social deterrents to health
drove healthcare costs. He suggested an argument could be
made for aligning social programs with the Medicaid
program. Conversely, an argument could be made that the
government should align its healthcare programs. He
acknowledged that there was data and fiscal analysis to be
done, but more so there was importance in evaluating the
priorities and objectives of what would be best for how the
state administered the programs.
10:36:23 AM
Mr. Wittman displayed slide 37, "PHPG Provisional Model":
Authority would be overseen by a Board:
o One Board Chair appointed by Governor
o Two additional members appointed by Governor
o One member appointed by Senate President
o One member appointed by Speaker of House
o Two non-voting members who are active heads of
principal Alaska State government departments
Executive Director head of Authority w/three divisions
Standing & ad-hoc committees:
o Member advisory group
o Provider council
o Health information technology group
o Quality & health transformation committee
Mr. Wittman referenced the flow chart on the right-hand
side of the slide. He discussed a hypothetical HCA
structure in which there was still some accountability and
relationship back to the elected body and the
administration. He noted that as he envisioned it, all HCA
employees would be state employees. The model included an
executive director, under which there were committees on
health care transformation, operations, and finance.
Vice-Chair Bishop observed that the standing ad-hoc
committees on the slide could bring a great deal of value
and ensure the success of the board that would oversee an
HCA.
10:39:14 AM
Mr. Wittman referenced slide 38, "Key Observations/Findings
- Medicaid":
Alaska Medicaid background:
o Alaska's Medicaid program covers more than 1 in
4 Alaskans
o Over 185,000 Alaskans were enrolled in May of
2017
o Enrollment grew by 23% from May 2016 to 2017
o Nearly 40% of Alaska Medicaid clients are
American Indian/Alaska Native (AI/AN)
o Federal government funds approximately 65% of
the program
Mr. Wittman thought it was important to note that in
exchange for the significant federal funding of Medicaid,
there was complexity in the eligibility rules and how
benefits were administered. He suggested that the state
would need to proceed with healthcare changes within the
structure of how the Medicaid program was organized.
Senator Micciche asked about existing HCAs and wondered if
the authorities had success in balancing proponents of
healthcare spending with more fiscally conservative
priorities. He thought Alaska did not have as much
financial business background focused on fiscal balance. He
referenced the suggested HCA structure on slide 37.
Mr. Wittman thought other healthcare authorities had done a
good job at making the best use of scarce public resources.
He had worked extensively in the State of Oklahoma, which
operated under an authority structure. He had not seen any
particular sacrifice through lack of funds and thought the
same applied with the states of Washington and Oregon. He
referenced the importance of ad hoc committees as well as
federal oversights as sureties that the program was not
purely driven by the desire to push down programs to
achieve savings. He thought the question of alignment
between healthcare and social determinants could be
addressed under an HCA structure, or a structure by which
health and human services were combined under the same
department. He thought there could be differences of
opinion and priorities but considered that there was an
opportunity to align healthcare with other social programs.
10:43:23 AM
Mr. Wittman addressed slide 39, "2016 Alaska Medicaid
Enrollment and Expenditures":
o 16% of enrollees (Old Age Assistance, Dual Eligible,
Waiver Populations and Blind/Disabled categories)
accounted 44 % of total expenditures.
Mr. Wittman explained that the slide, as well as the
following slide, illustrated that healthcare purchasing and
Medicaid were quite different. Medicaid served Alaskans
with complex needs, and he thought the chart helped
illustrate the fact. The chart helped to amplify that 44
percent of the expenditures were for 16 percent of the
eligibility group.
Mr. Wittman pointed to slide 40, "2016 Expenditures by
Service Category," which showed two pie charts entitled
'Alaska Medicaid' and 'AlaskaCare Active Employees.' The
charts showed the distribution of spending under the two
different groups. He noted that the pharmacy component of
Medicaid spending was relatively small as compared to that
of the AlaskaCare active employees' amount. He pointed out
items that were a significant part of Medicaid spending,
while the same items were not present in spending for
AlaskaCare active employees.
Mr. Wittman continued to discuss slide 40. He discussed the
number of providers and the breadth of the provider network
that was managed by Medicaid, as compared to the
administration of a public employee plan. He spoke to the
complexity of the Medicaid program and Medicaid
requirements, which he thought should be acknowledged when
considering consolidation of purchasing or administration.
10:47:28 AM
Mr. Wittman looked at slide 41, "Integration with Health
Care Authorities:"
Examples exist but they are limited (Oregon &
Washington)
o Differences in program requirements create
complexity and challenges to integration
o Success dependent on administrative or
structural framework to support coordination
Mr. Wittman looked at the flow chart that illustrated the
administrative/structure framework continuum that showed
movement from interdepartmental collaboration that was
informal to a more formal consolidated entity of an HCA. It
had been observed in literature that sometimes less formal
kinds of collaboration tended to be less effective as they
were directed by the governor or legislature, which
experienced turnover. Resolution of competing priorities
was also more challenging in an informal structure.
Mr. Wittman turned to slide 42, "Approaches for
Integration/Coordination":
1) Coordinate and/or integrate purchasing efforts with
Medicaid
2) Develop a common benefit design across public payer
programs and Medicaid
3) Fully integrate Medicaid as part of an Authority
These ideas require additional analysis before a
decision is made; but they are a starting point for
policy discussion and future analysis.
Mr. Wittman discussed needs and service patterns of
different populations.
10:50:43 AM
Mr. Wittman referenced slide 43, "Medicaid Considerations":
Summary of key factors for consideration include:
o Medicaid operates under a complex regulatory
framework
o DHSS is organized to address health and social
needs
o Impact on current operations
Additional analyses to evaluate the feasibility of the
three approaches are organized within the following
objectives:
o Impact on administrative costs
o Impact on health care expenditures and growth
o Impact on quality of care and access to care
Mr. Wittman referenced federal rules and the Medicaid
Management Information System (MMIS), which had its own set
of rules. He thought it could be complex when considering
consolidation across public payers. He referenced
literature that stressed the importance of the role of
social determinants to address both health and social needs
and healthcare costs. He thought it was important for a
smaller state such as Alaska that DHSS employees might
function in more than one role.
Mr. Wittman continued discussing slide 43. When considering
moving Medicaid, there might be opportunities for
efficiencies but additionally a need might be created. He
noted that individuals working in multiple roles was part
of the Medicaid cost allocation plan, the mechanism by
which the federal government helped to support the
administrative functions of the state.
Mr. Wittman continued that he had frequently he found that
Medicaid did significantly support some administrative
functions that helped to administer other programs. There
could be a financial impact as a result depending on what
programs did transfer to an HCA. He used the example of
home and community-based services as a program that could
benefit from being still administered by HESS instead of
transitioning to an HCA because of the complexity and
overlap with federal funding sources.
Mr. Wittman continued to discuss slide 43 and referenced
the bottom two bullets. He did not think there was a
difference between administering a program through an
authority and through a different way. Rather, the
direction of the entity managing the Medicaid program would
have the most effect.
10:55:24 AM
Co-Chair MacKinnon asked members to submit questions and
forward to her office to submit to the administration.
Mr. Wittman looked at slide 44, "Coordinated/Integrated
Purchasing":
Types of Coordinated Purchasing
o Examples include:
Coordinated care and payment reform (e.g.,
Maryland, Vermont)
Common provider management requirements such as
network adequacy and program integrity for
managed care (e.g., New York)
Designated directors or chief medical officers
across agencies to facilitate coordination of
quality initiatives (e.g., Oregon, Washington)
Consolidated or coordinated provider contracts
and related activities (e.g., Georgia)
Successful coordination is dependent on:
o Structural framework
o Sufficient resources
o Sustained leadership/direction
o Shared vision and values
Mr. Wittman summarized that the last two slides pertained
to potentially coordinating across public departments. He
stated that there was quite a bit more detail in the
reports. Additionally, the slides addressed the common
benefit model, which addressed a different approach to how
healthcare was purchased.
Co-Chair Hoffman referenced slide 40, which listed the 2016
expenditures by service category. He asked about a total
dollar amount for the categories for 2016.
Mr. Wittman stated that the figures were in the report.
Co-Chair MacKinnon asked the administration to provide her
office with a dollar breakdown for the two pie charts on
slide 40.
Ms. Ricci relayed that all of the webinars and reports were
available online.
Co-Chair MacKinnon noted that Office of Management and
Budget Director Pat Pitney was in the audience.
Senator Micciche thought it appeared as thought slide 39
lined up with another document he had received.
Co-Chair MacKinnon reminded that the slide was dated for
2016. She asked the administration to follow up on the
matter.
Co-Chair MacKinnon thought the presentation included
information from other states and provided much information
to consider.
Commissioner Ridle acknowledged the breadth of information
presented. She offered to provide individual briefings for
committee members.
Co-Chair MacKinnon asked if the commissioner gave the same
presentation to the Senate Health and Social Services
Committee.
Commissioner Ridle answered in the negative.
Co-Chair MacKinnon discussed the agenda for the following
day.
ADJOURNMENT
11:00:59 AM
The meeting was adjourned at 11:00 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 020818 DOA HCA Presentation.pdf |
SFIN 2/8/2018 9:00:00 AM |
SB 144 |