HOUSE BILL NO. 152 An Act relating to payment rates under the Medicaid program for health facilities and to budgeting, accounting, and reporting requirements for those facilities; abolishing the Medicaid Rate Advisory Commission; and providing for an effective date. JOEL GILBERTSON, COMMISSIONER, DEPARTMENT OF HEALTH & SOCIAL SERVICES, introduced HB 152. He explained that under the authority of Article III, Section 18, of the Alaska Constitution, HB 152 was being transmitted to provide greater flexibility to the Department of Health & Social Services to set Medicaid payment rates for Alaska's hospitals, nursing homes and other health care facilities. The proposed bill would eliminate the Medicaid Rate Advisory Commission and place the responsibility for calculating and setting Medicaid payment rates for health care facilities under the general authority of the Department of Health and Social Services. Commissioner Gilbertson added, historically, the Medicaid facility rate setting process has been extremely cumbersome and costly for both the State and the health care facilities. The current rate-setting process is both a barrier to effective cost containment as well as problematic for assuring adequate reimbursement for Alaska's diverse mix of health care facilities. Passage of the legislation would allow the Department to develop in regulation a more flexible, cost-effective rate setting process that would allow the Department to take into account the appropriations made by the Legislature for the Medicaid program when establishing rates. Commissioner Gilbertson offered to answer questions of the Committee. Representative Croft asked what "fair and reasonable" rates would be replaced with. BOB LABBE, DEPUTY DIRECTOR, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, responded that it would be facility specific, fair rates for reasonable costs. The Department is interested in looking at grouping facilities of a certain type or size as an option rather than facility specific. He observed that when the change was complete, the Department would aim to provide a fair rate while reimbursing reasonable costs. Facility specific does not provide cost management incentives. Representative Croft recommended that there should be overriding standards indicated somewhere. Mr. Labbe explained that the replacement standard would comply with what the federal government now provides, rates that are adequate and with reasonable service. There are federal requirements, which the State will have to follow. The Department is proposing not to do any more than the feds require. Commissioner Gilbertson referenced the fiscal note, noting the savings. He explained that the bill eliminates the need for expenditures that support commission members' travel, per diem and other related support costs. Representative Croft inquired who currently sits on that Commission. Mr. Labbe replied that there are five members on the Commission: · A physician, · A certified public accountant (CPA), · A public member, · A Department of Health & Social Services representative, and · A facility administrator. Co-Chair Harris referenced the letter contained in the member's packets from the Governor, who recommends eliminating the Medicaid Rate Advisory Commission. That agency has the responsibility of establishing Medicaid rates. He thought such action would provide the Department more flexibility for determining the Medicaid payment amounts, thus, saving money. Commissioner Gilbertson advised that Commission currently serves only in an advisory capacity and that rate setting authority currently rests with the Department. He pointed out that associated with that legislation is an appeal of the Bouren amendment. By repealing that language, there would be additional discretion within the Department to develop multiple methodologies, which is where the savings emerges. Having one methodology for all the facilities would not necessarily reflect the relative efficiency of the various facilities. This action would reduce any excess payments being made to any facility. Co-Chair Harris asked how long had the Bouren Amendment been in place. Mr. Labbe replied it was placed in federal law in 1982 and repealed in 1997. The Bouren Amendment was initially intended to provide flexibility to the states in establishing rates. Because of extensive litigation, the amendment had the reverse effect and years later, after many federal lawsuits, the amendment was repealed. Co-Chair Harris questioned if it had been the policy of the previous Administration to do things in less beneficial ways to relieve the Medicaid amount the State receives. Commissioner Gilbertson commented that there are always various considerations when making changes to Medicaid and those individuals affected by the changes. At present time, the Administration believes that the State must have greater authority and discretion in setting rates that reflect the actual costs. Co-Chair Harris remembered that in past years, he had requested the Department to get the costs of the Medicaid program down. He voiced frustration that there had not been the motivation to accomplish that. He voiced his support for the current work of the Department. Representative Croft pointed out that the bill would save about $10 thousand dollars by getting rid of a significant public process. He claimed that the public input, which comes from the Commission, is worth that amount of money. Co-Chair Harris rebutted that eliminating the Commission would only save about $10 thousand dollars, however, the process that the Department would then go through will save considerably more by being more flexible in rates and the optional rates. Representative Croft emphasized that it would lower the rates paid to providers in many areas, which are already too low. He added that stopping the benefits to these people have caused tremendous political fights. He emphasized that they can be called "cost containments", but in reality, they are getting rid of services. Co-Chair Williams stated that the bill would be HELD for further discussion. HOUSE BILL NO. 152 An Act relating to payment rates under the Medicaid program for health facilities and to budgeting, accounting, and reporting requirements for those facilities; abolishing the Medicaid Rate Advisory Commission; and providing for an effective date. Representative Croft MOVED to report HB 152 out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HB 152 was reported out of Committee with a "do pass" recommendation and with fiscal note #1 by the Department of Health and Social Services.