SENATE JOINT RESOLUTION NO. 6 Relating to a reduction in the Federal Medical Assistance Percentage for Alaskans, and urging the United States Congress to take action to prevent the reduction. SENATOR GARY WILKEN, CO-CHAIR, SENATE FINANCE, read the sponsor statement for SJR 6: Senate Joint Resolution 6 urges federal action to maintain the current level of federal funding for the state's Medicaid program. The U.S. Department of Health and Human Services recently announced that the federal share of the medical assistance program, known as the Federal Medical Assistance Percentage (FMAP), will be reduced by 7.58% on October 1, 2005. The reduction in the FMAP will result in an approximately $53 million loss in federal Medicaid dollars in fiscal year 2006 and $73 million in fiscal year 2007. It is imperative that Congress and the federal administration know and understand the reasons behind the high level of health care costs in Alaska. Senate Joint Resolution 6 requests Congress to take action to correct the formula flaw that resulted in the proposed substantial FMAP reduction and to take whatever measures necessary to hold Alaska harmless from the reduction in the Federal Medical Assistance Percentage for Alaska. Please join me in support of our state Medical program and endorse Senate Joint Resolution 6. 1:44:33 PM Representative Weyhrauch asked how 7.58 percent was determined and if it only applies to Alaska. Senator Wilken deferred to Commissioner Gilbertson. JOEL GILBERTSON, COMMISSIONER, DEPARTMENT OF HEALTH & SOCIAL SERVICES, explained that the Medicaid program, a partnership between state and federal government, was created in 1965 to provide health care coverage and to reimburse some social services, primarily for needy and low income populations. Each state has its own Medicaid "match rate" or Federal Medical Assistance Percentage (FMAP). The formula was based on a state's per capita income over a certain period of time and the national per capita average. Mississippi has always received the highest level of federal support, which is 80 percent. The lowest amount of federal support is 50 percent, which is what Alaska paid until 1997 when Senator Frank Murkowski had the amount adjusted to slightly over 40 percent for three years, bringing in $100 billion in additional federal support. Senator Murkowski passed further legislation, a five-year extension, which brought in an additional $200 billion in federal support. Commissioner Gilbertson noted that the Medicaid match rate is not paid on every claim. A sizeable percent of Medicaid volume goes through services provided to Alaska Natives in a Native non-profit 638 or in an Indian Health Services (IHS) compacted facility, which are reimbursed at 100 percent. The expiration of the five-year Medicaid adjustment is Oct. 1, 2005, and Alaska's per capita income has increased. Those two factors plus the fact that there was a recalculation of how to determine per capita income, which involves including employer contributions to retirement plans as income earned, have led to a great reduction in Alaska's Medicaid match support from 57.58 percent to 50 percent. Commissioner Gilbertson maintained that the reason Alaska was so successful in getting Medicaid match reductions twice before is because the formula is fundamentally flawed. It looks solely at per capita income and does not consider cost of delivering health care, which is exponentially higher in Alaska. He suggested that the formula should reflect this higher cost. Senate Joint Resolution 6 encourages a resolution to hold Alaska harmless this year and work toward a solution. 1:52:08 PM Commissioner Gilbertson related that the impact on the next fiscal year would be a loss of $53 million of Medicaid support, which would have to be replaced by general funds or by service reductions. The impact on FY 2007 would be a loss of $73 million. Over the next ten years the total impact would be $914 million. He noted that other states are affected, but not by as much. Wyoming's match rate drops by three points. He concluded that Alaska's reduction is unprecedented in history. Representative Hawker referred to the chart "Impact of FMAP Reduction on State Match" (copy on file.) He argued that the impact of reduction is understated because a linear growth trend for Medicaid expenditures is being used. He suggested that growth rate has been exponential rather than linear. Commissioner Gilbertson agreed that it is difficult to predict growth rate in the Medicaid program because there are moving targets such as population changes. He called this chart "our best guess" at projections. Representative Hawker noted legislators could also exacerbate the situation with further additions to the program such as adult dental care. Commissioner Gilbertson responded that he personally supports the dental care policy and other preventative programs. He concluded that it is fair to say reductions in Medicaid programs could lead to increases in services by the state outside of Medicaid. 1:56:08 PM Representative Hawker observed that the federal formula includes personal income levels and as incomes go up the willingness to match goes down. The assumption is that state income has increased as the per capita has increased, which is true everywhere except Alaska. Commissioner Gilbertson responded that the formula is fundamentally flawed; the cost of delivery and care has to be included in it. Representative Croft mentioned a recent trip to Bethel where members of the committee met with the head of the Yukon- Kuskokwim Health Corporation (YKHC). They visited the Bethel prenatal center, recently taken over by YKHC, which now gets 100 percent Medicaid match. There was discussion about other areas where that same percentage of match could be received. He asked about the advantages and disadvantages of moving from partial to full funding of Medicaid and why it is not done more often. Commissioner Gilbertson explained that Mr. Peltola, President and CEO of YKHC, helped to set up a planning group and management team to move such integration projects forward in his region. They found that a number of service delivery providers were not eligible to receive 100 percent reimbursement from Medicaid. He explained the Native Health Care Improvement Act, which allows Native-operated facilities to bill for services under Medicaid. He related the benefits for dual eligibility. He noted that a large portion of the current Medicaid claim volume for services to Alaska Natives goes outside of the IHS system and can only be reimbursed under the base rate. He stressed that he has had a number of dialogues with Alaska Native Health Care to try to built up its system and not create a new, general fund responsibility. An effort was made, with the help of MR. Peltola, to move all services under the umbrella of one Native Health Corporation. He pointed out downstream benefits: elimination of a wait list, increased services, and general fund savings. He suggested that integration of these services is a strong opportunity to strengthen the system and save money, but there has to be consensus at the community level. He concluded that more opportunities would be found in rural regions where there are large Alaska Native populations and strong native health corporations, plus local consensus. 2:05:44 PM Representative Croft asked if any Alaskan Native could obtain this service and why there would be a wait list. Mr. Gilbertson replied that the service has to be in a region where there is a qualified Native provider. There has to be a "dual eligible served by a 638" in order to get 100 percent reimbursement. He pointed out that currently 40 percent of Medicaid beneficiaries are Alaska Native. The challenge is that there is no integrated managed care in this state and individuals can go wherever they want to receive health service. He pointed out that there is a need to expand services. Commissioner Gilbertson informed the committee that currently there is a dispute between the states and the federal government concerning the Native Health Care Improvement Act. The Department of Health and Social Services believes that Congress intended the language which states, "services provided through an IHS facility are reimbursed at 100 percent FMAT" to also include referral and contract. He provided examples of the department's interpretation of the intended language. Greater clarity of this language would make it easier to collect 100 percent reimbursement because then contract and referral networks could deliver the services. Representative Croft clarified, in that case, the individual would go to the facility, even if it were not an Indian Health provider, be referred, and then be able to receive full Medicaid reimbursement. 2:11:29 PM Representative Croft asked Commissioner Gilbertson to talk to the sponsor about encouraging clarification of that language before the resolution goes to Congress. He inquired if it would be best to do a Congressional resolution or a judicial resolution. Commissioner Gilbertson replied that the Medicaid match rate is statute and will not be handled by the courts. He opined that it would be resolved by an act of Congress with Congressman Young's help. 2:13:46 PM Co-Chair Meyer asked if an Alaska Native could choose either an Alaska Native Hospital or Providence Hospital when medical services are the same. Commissioner Gilbertson said that is correct. The state does not manage service delivery; it authorizes the service and licenses the providers. 2:15:07 PM Co-Chair Meyer closed public testimony. Representative Weyhrauch referred to line 11, page 2, "gasoline prices in much of rural Alaska are close to $6 a gallon" and opined that gas is expensive in other areas of Alaska, as well. He MOVED to ADOPT Amendment 1, which would delete "are" and substitute "can be". There being NO OBJECTION, it was so ordered. Representative Foster MOVED to report HCR SJR 6 out of Committee, as amended, with the accompanying zero fiscal notes. HCS SJR 6 was REPORTED out of Committee as amended with a "do pass" recommendation and with four zero fiscal notes from the Department of Health and Social Services. 2:17:29 PM At ease. 2:21:21 PM