HOUSE FINANCE COMMITTEE April 7, 2015 9:03 a.m. 9:03:02 AM CALL TO ORDER Co-Chair Thompson called the House Finance Committee meeting to order at 9:03 a.m. MEMBERS PRESENT Representative Mark Neuman, Co-Chair Representative Steve Thompson, Co-Chair Representative Dan Saddler, Vice-Chair Representative Bryce Edgmon Representative Les Gara Representative Lynn Gattis Representative David Guttenberg Representative Scott Kawasaki Representative Cathy Munoz Representative Lance Pruitt Representative Tammie Wilson MEMBERS ABSENT None ALSO PRESENT Representative Liz Vazquez, Valerie Davidson, Commissioner, Department of Health and Social Services; Jon Sherwood, Deputy Commissioner, Medicaid and Health Care Policy, Department of Health and Social Services;. SUMMARY HB 148 MEDICAL ASSISTANCE COVERAGE; REFORM HB 148 was HEARD and HELD in committee for further consideration. 9:03:20 AM Co-Chair Thompson discussed housekeeping. HOUSE BILL NO. 148 "An Act relating to medical assistance reform measures; relating to eligibility for medical assistance coverage; relating to medical assistance cost containment measures by the Department of Health and Social Services; and providing for an effective date." 9:04:08 AM VALERIE DAVIDSON, COMMISSIONER, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, shared that the bill would accomplish Medicaid reform and expansion. She relayed that the original legislation had been based on Governor Walker's Healthy Alaska Plan, which could be found on the department's website at dhss.alaska.gov. Additional information on Medicaid expansion and reform could also be located on Governor Walker's homepage at gov.alaska.gov. She stressed that the legislation would be beneficial for Alaskans, for the economy, for the state general fund, and would be a catalyst for reform. She detailed that Medicaid expansion would extend healthcare to an additional 42,000 Alaskans including low income Alaskans, Alaskans without dependent children between the ages of 19-64, who were not otherwise eligible for Medicaid or Medicare. She added that these individuals had incomes of up to 138 percent of the federal poverty level: $20,314, for a single adult and $27,500, combined income for a married couple. The bill would extend coverage to adults that were in the "donut hole" that was created when the U.S. Supreme Court decided that Medicaid expansion for states would be optional and not mandatory; these Alaskans did not earn enough money to qualify for a Marketplace Plan, did not qualify for the regular Medicaid program, and earned approximately $14,720, single income, per year. She relayed that under the legislation more Alaskans would receive preventive, as well as primary care, and behavioral health services. She revealed the 5 most common causes of death in the state: cancer, heart disease, unintentional injury, stroke, and chronic lower respiratory disease; four of the causes were preventable if caught early enough. She stressed that people could not work, hunt, or fish if they were not well enough to do so, and the bill would provide a mechanism for them to access healthcare services. 9:09:03 AM Commissioner Davidson discussed the possible positive impacts on the economy. She stated that the bill would bring in $146 million in new federal dollars for FY 16, and over $1 billion by 2021. She said that the bill would provide for the expansion group a higher federal match, which would result in an immediate economic boost to the state. In the first calendar year of 2016, the federal match would be 100 percent. In transitions over the next 3 years, from 95, to 94, to 93 percent federal match, then to 90 percent from 2002, and beyond. She offered that the current match for Medicaid was 50/50. She said that the department had already indicated to the centers of Medicare and Medicaid services, who administered and authorized the program, in addition to the state, that Alaska's participation was conditioned upon a 90 percent match. She stressed that the new federal dollars in the economy offered an opportunity for the state in the form of $1 billion pumped into the economy over the next 6 years. She believed that the legislation would be healthy for the state's general fund budget. She explained that, currently, the state paid for healthcare services with 100 percent state general fund dollars; transitioning the state's healthcare costs to Medicaid through the expansion would save the state approximately $6 million in the first year: $4 million in corrections spending; $1 million in the Chronic and Acute Medical Assistance Program; and $1.5 million in behavioral health grants. She shared that the general fund off-sets would cumulatively total $108 million in the first 6 years. She spoke to potential savings in the area of recidivism. She opined that the projected numbers for the state inmate population predicted the need for another prison, similar to Goose Creek Correctional Center, using resources that the state did not have. She offered that the state could either invest in the health of Alaskans through Medicaid expansion, or invest in the construction of a new prison. She said that other states had shown that investing state general fund dollars in behavioral health services had resulted in significantly reduced recidivism rates. 9:12:44 AM Commissioner Davidson asserted that the best opportunity to finance an effort to reduce recidivism rates was to expand Medicaid. She revealed that the majority of the prison population would be eligible for Medicaid. She said that when individuals currently in prison received care, medical or behavioral, continuing care once the inmate was released was a challenge. Representative Wilson wondered whether the commissioner would take questions during the introduction. Commissioner Davidson replied that she was nearly finished with her presentation. She explained that the bill contained reform opportunities; the department believed that expansion would be a catalyst to reform and were building on reforms that were already underway. She stated that the legislation would direct the department to examine all available options for improving the Medicaid program, and to limit costs. She asserted that the department recognized that the existing Medicaid program was not sustainable given the current budget constraints; Medicaid reform was necessary not only for the expansion population, but for the entire population of the state. She spoke to reforms found within the legislation and noted that the bill would provide broad demonstration authority for the examination of payment reform, care management, workforce development, innovation, and innovative service delivery models. 9:16:16 AM JON SHERWOOD, DEPUTY COMMISSIONER, MEDICAID AND HEALTH CARE POLICY, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, provided a sectional analysis: Section 1 Adopts intent language and legislative findings related to Medicaid expansion and the need to reform the existing Medicaid program, including instructing the Department of Health and Social Services (DHSS) to propose legislation to implement a provider tax in January 2016, to help offset the cost of the Medicaid program. Section 2 Amends AS 44.23.075 to exclude the expansion population from the current Permanent Fund Hold Harmless program. He added that with the advent of the Affordable Care Act states were required to use a new methodology to count income for certain eligibility groups: children, pregnant women, parents and caretaker relatives, and the expansion population. The methodology was referred to as modified adjusted gross income (MAGI), a tax based methodology of counting income that was used by the Internal Revenue Service (IRS). He explained that the methodology eliminated the disregards that states had previously applied to income before making an eligibility determination. Section 2 amended the statute for the Permanent Fund Dividend (PFD) Hold Harmless Program, which was a program working under the premise that the state should not count the yearly dividend as income when making determinations for people applying for public assistance, including Medicaid, unless required by federal law. If required by federal law, a Hold Harmless benefit would be provided for up to four months. He reiterated that the program was intended to protect individuals from loss of a benefit for one time income and provided up to four months of benefits. He said that under the MAGI rules, the department was forced to count the PFD as income. He stated that the department had struggled to reconcile the different pertinent statutes. He added that individuals that might be ineligible as a result of receiving the PFD would be eligible to receive health insurance through the federally facilitated marketplace, the insurance would be significantly subsidized through the income tax credits provided by the market place. He explained that unlike the situation where a person lost their benefits as a result of receiving the PFD, the person would be ineligible for the Medicaid expansion group but eligible for health insurance coverage subsidized through the exchange. 9:21:34 AM Mr. Sherwood relayed that the expansion group would be exempt from the Hold Harmless Program. He continued with the sectional analysis: Section 3 Amends the duties of the department under AS 47.05.010 to include a requirement that DHSS develop a health care delivery model that encourages good nutrition and disease prevention. Section 4 Amends AS 47.05.200(a) to clarify the minimum number of audits that DHSS should conduct each year, along with instructions that DHSS should to the extent possible, minimize duplicative state and federal audits for Medicaid providers. Section 5 Amends AS 47.05.200(b) to allow DHSS to impose interest penalties on identified overpayments using the post-judgment statutory rate. Section 6 Adopts AS 47.05.250 that authorizes DHSS to develop provider fines through regulation for violations of AS 47.05, AS 47.07 or regulations adopted under those chapters. 9:26:14 AM Mr. Sherwood addressed Section 7: Section 7 Amends AS 47.07.020(b) including technical corrections related to eligibility for Medicaid authorized under the Affordable Care Act. This section also provides the authority for DHSS to expand Medicaid to adults aged 19-64 who are not caring for dependent children, are not disabled or pregnant, and who earn at or below 138 percent of the federal poverty guidelines for Alaska including the five percent income disregard. Mr. Sherwood explained that by converting to MAGI, the federal government had collapsed several categories of coverage, including many categories for children; AS 47.07.020(b) would be amended in order to better describe the group of children that would be covered. He furthered that existing categories of Medicaid that were converted to the MAGI methodology were required by the federal government to convert the old income standards to new standards in order to reflect the fact the disregards were no longer being used. The federal government would perform a calculation to determine the change of income that prompted the loss of the disregards. 9:29:54 AM Mr. Sherwood moved to Sections 8 and 9 of the bill: Section 8 This section amends AS 47.07.020(g) to clarify that, for a person whose Medicaid eligibility is not calculated using the modified adjusted gross income standard established in federal regulations, DHSS may not deny or delay the person's eligibility for medical assistance on the basis of a transfer of assets for less than fair market value if the person establishes to the satisfaction of the department that the denial or delay would work an undue hardship. It further requires that DHSS may only consider information provided by a person claiming undue hardship that the department has verified through a source other than the person's own statement. Section 9 Amends AS 47.07.020 (m) to clarify that, for persons whose Medicaid eligibility is not calculated using the modified adjusted gross income standard established in federal standards and as provided in Section 8 (above), the department shall impose a penalty period of ineligibility for the transfer of an asset for less than fair market value by an applicant or applicant's spouse consistent with federal rules. Mr. Sherwood related that the sections provided the technical adjustments necessary to reflect that Alaska was compliant with federal requirements. Section 10 Amends AS 47.07.030(d) to require the department to develop a primary care case management system or managed care organization contract including super-utilizers, who must enroll in the program and seek approval from a case manager before receiving certain services. Mr. Sherwood noted that the section had been added by the House Health and Social Services Committee. The previously discretionary provision would be mandatory. Section 11 Amends AS 47.07.030 to require a report to the legislature describing the costs for mandatory and optional Medicaid services. Section 12 Amends AS 47.07.036(b) to make conforming edits so this section of the statute is consistent with Section 13 of the bill. Section 13 Amends AS 47.07.036(d) to outline cost containment and reform measures that DHSS must undertake, including seeking demonstration waivers related to innovative service delivery models, and to include applying for other options under the Medicaid Act and improving telemedicine for Medicaid recipients. This section also requires DHSS to apply for an 1115 waiver for a demonstration project for one or more groups of Medicaid recipients in one or more geographic area. The demonstration project may include managed care organizations, community care organizations, or patient-centered medical homes, but at least one project will be a coordinated care project that operates within a fixed budget to reduce medical cost inflation, improve the quality of health care for recipients, and result in a healthier population. DHSS shall design the managed care system to reduce the growth in medical assistance expenditures by at least two percentage points, and the system must implement alternative payment methodologies and create a network of patient-centered primary care homes. The department shall prepare a report regarding the progress of this demonstration project and shall deliver it to the legislature by February 1, 2019. 9:34:21 AM Mr. Sherwood addressed Sections 14 and 15: Section 14 and 15 Amends AS 47.07.900(4) and (17) to remove the requirement that behavioral health providers be a grantee of the State of Alaska in order to bill Medicaid. Mr. Sherwood explained that the amendment would expand the base of providers for behavioral health services for Medicaid and align the state with federal law. Section 16 Authorizes DHSS to investigate the design of a demonstration project to help reduce pre-term births to include voluntary enrollment of approximately 500 recipients eligible for medical assistance. DHSS shall offer pregnancy counseling, nutritional counseling, and, as necessary, vitamin D supplementation. The project can be modeled after a project implemented in South Carolina. Mr. Sherwood said that the amendment, added by the House Health and Social Services Committee, instructs the state to develop a proposal to improve the pre-term birth rate in the state through the use of nutritional counselling and vitamin supplements. 9:36:01 AM Mr. Sherwood continued with the sectional analysis: Section 17 Authorizes DHSS to engage in a demonstration project for super-utilizers as outlined in section 13, and report to the legislature on the project. Mr. Sherwood said that the amendment was added in the CS consistent with the changes in Section 13. He continued with the analysis: Section 18 Outlines a series of records that DHSS must provide to the legislature relating efficacy of the reform measures taken by the Department, including any cost savings. Section 19 Authorizes DHSS to immediately amend its state plan and seek all necessary approvals consistent with this Act. Section 20 Authorizes DHSS to engage in emergency rule making under the Alaska Administrative Code to implement Medicaid reform measures and the provisions of this Act. Section 21 Provides that Section 20 of the Act is repealed on June 30, 2017. Section 22 Provides instructions to the revisors of the statutes to amend the title of AS 47.07.036 to include Medicaid Reform. Section 23 Provides that Section 19 and 20 are effective immediately. Section 24 Provides that all other sections of the Act are effective on August 1, 2015. Co-Chair Thompson provided members with a list of department staff available for questions. He reminded members that the meeting would end at 10:20 a.m. 9:39:55 AM Vice-Chair Saddler asked about Section 17 of the CS regarding managed care for super-utilizers. He pointed to Page 13, lines 21 through 26 of the bill: (1) establish a primary care case management system or a managed care organization contract under AS 47.07.030(d), as amended by sec. 10 of this Act, for super- utilizers, as identified by the department; and (2) deliver a report on the system or contract to the senate secretary and the chief clerk of the house of representatives and notify the legislature that the report is available. Vice-Chair Saddler queried the expected timeline for the reports to be completed and the systems to be up and running. Mr. Sherwood replied that the program would be an extension of a program already in operation for the managed care of super-utilizers, and that the department hoped to expand the program further. Vice-Chair Saddler asked if the program was for primary care management system or a management care organization (MCO). Mr. Sherwood answered that the primary care management model would be used. Vice-Chair Saddler reiterated his question about the report deadline. Mr. Sherwood responded that the report would be due January 2017. Vice-Chair Saddler asked when the super-utilizer program had begun. Mr. Sherwood replied that the program had begun in December 2014. Representative Wilson asked about the make-up of the 40,000 additional individuals that would be added due to expansion. 9:42:31 AM Commissioner Davidson replied that the nearly 42,000 that would be eligible under expansion were people who earned $9.52 per hour, based upon a 40 hour work week. She elaborated that 44 percent of the majority of the eligible population were Alaskans who were actively employed, 29 percent of the population were collecting unemployment insurance, which required them to be recently employed and actively seeking work; over 70 percent of people who would benefit from the expansion were employed or actively seeking employment. She said that 54 percent of the eligible population were male, 20 percent of that group were 19-34 years old. She said that experience had shown that this population was cheaper to cover because men did not get pregnant and generally did not actively seek healthcare coverage. 9:44:48 AM Representative Wilson understood that the majority of those covered by expansion were employed, but questioned why the employers were not covering healthcare costs. Commissioner Davidson replied that the number of employers offering health care to their employees had declined steadily over the past 20 years. She related that many of the employers in the state were small businesses who had not been able to afford to provide healthcare to their employees. Representative Wilson asked whether the option for providing healthcare at a discount had been explored. She expressed concern as to how the state providing healthcare would affect employers who were already providing healthcare. She wondered whether those small businesses could be added to the state healthcare system, rather than creating a new program. Commissioner Davidson replied that the option was not included in the legislation. She said that some might already have access to healthcare service through the Tribal Health System, Indian Health Service, 330 Clinics, or Community Health Centers, but that those programs were not health insurance - not a portable benefit, they were limited health coverage. She added that specialist services were not typically available through those centers, and without healthcare insurance people would not have access to those services. She said that 20 percent of Alaskan's did not have healthcare coverage, the bill reduced that number by 10 percent, and 90 percent of the expense would be covered by the federal government. Representative Wilson did not understand exactly who the bill was aiming to cover. She mentioned Texas corrections healthcare reform. She understood that there had been positive change in the Texas corrections system as a result of solely expansion. 9:49:48 AM Commissioner Davidson replied in the negative. She explained that she had chosen Texas as a comparison to Alaska due to a similar "tough on crime" mentality, which had failed to reduce recidivism rates. She detailed that Texas had invested with 100 percent general fund dollars in behavioral health services to reduce recidivism; Alaska now had the opportunity to achieve the same outcome using 90 percent federal dollars. Representative Wilson asserted that Medicaid expansion would not result in less people in jail. Representative Gara discussed savings listed by the administration that would occur under expansion. He believed the state was facing what could be a recession. He pointed to the department's claim that expansion would generate 4,000 jobs. He asked what the department could do to convince the committee that the numbers were real. 9:53:46 AM Commissioner Davidson explained that while inmates were incarcerated they were not eligible for Medicaid and had not been included as a part of the anticipated savings. She shared that the Department of Corrections (DOC) had deduced that the services for which inmates were eligible, or could be eligible, under expansion would be for contracted services not provided by the DOC. She explained that under federal law if the inmate required an overnight stay for their procedure they would be eligible for Medicaid under the expanded group. She said that the expected savings by DOC were reflected on the fiscal note. She noted that the first year of savings were targeted to be conservative, but would increase as the program gained inertia. The second area of savings was anticipated in the Chronic and Acute Medical Assistance (CAMA) program. Individuals in the CAMA program were typically high-dollar beneficiaries, paid for with 100 percent general fund dollars. She said that the savings numbers had been built on what the department expected to save based upon what was currently paid. She explained that behavioral health providers who received grants were going to have populations who would be covered under Medicaid expansion. She relayed that the dollar amounts in the fiscal notes had been based on trends over the past few years. She asserted that there were other ways to diversify the state's revenue, but that those would take time to provide financial results. She contended that Medicaid expansion was an immediate opportunity to diversify the state's portfolio, with $145 million in savings projected in the first year, and a cumulative total of over $1 billion. She spoke to the 4,000 projected new jobs. She said that the numbers came from an independent analysis, performed by Northern Economics. She clarified that the 4,000 jobs were not expected in the healthcare industry alone, but from other multiplier effects in the economy. 9:59:47 AM Mr. Sherwood informed the committee that the cost of expansion included one waiver and two new Medicaid options. The 1115 waiver was a demonstration waiver that would provide an innovative service delivery model with the tribal health system. He said that services provided to an Indian Health Services (IHS) beneficiary through a tribal health facility were reimbursed at 100 percent by the federal government. He stated that the demonstration waiver would focus on travel and accommodations. He relayed that the waiver would broaden its scope to treat tribal health organizations as accountable care, or community care, organizations. The department anticipated savings due to the change in funds, from 50 percent federal funds to 100 percent general funds, by bringing more services directly under the umbrella of tribal health facilities. He said that a reduction in overall spending was expected through better management of services. He continued to the 1915i option, which was a home and community based option that would provide coverage for services similar to the current waivers. The current waivers required that an individual meet a certain institutional level of care, primarily nursing home or intermediate care facilities for individuals with intellectual disabilities. He said that the 1915i would provide coverage to people that did not meet the current criteria. 10:04:27 AM Mr. Sherwood stated that the 1915k option would cover a variety of services that provided a level of personal assistance to an individual, and was limited to people that met an institutional level of care. He said that when the federal government passed the option, a provision was added that services under the option would receive an additional 6 percent in federal funds, for a total of 56 percent. He believed that a substantial amount of the state's home and community based waivered services, and a portion of the personal care services provided to waiver eligible individuals, could be converted to this option to receive the enhanced federal match. 10:05:48 AM Co-Chair Thompson noted that Co-Chair Neuman had joined the committee. Co-Chair Thompson asked about the administration's plan for managed care. Commissioner Davidson pointed out to the committee that the language in the bill was necessarily broad and included a host of payment reform. She explained that "managed care" was a defined legal term. She said that the rest of the country had moved away from managed care as a legal structure because it was outdated. She relayed that other states had looked into different models that were a hybrid of options, and could be more efficient and provided better value. She felt that managed care would limit the state; there was a difference between managing the care of a population, and a managed care organization. She mentioned that in Wyoming, managed care had not proven to work for that state prompting them to choose the super-utilizer program and to explore the patient center medical home model. She said that there were three demonstrations in Alaska that were testing patient centered medical homes. She shared that the department had issued a request for proposal (RFP) to would allow then to study what other states were doing on the issue of Medicaid reform. She relayed that Alaska was one of the last states using a fee for service system, which was an unsustainable model. 10:09:41 AM Co-Chair Neuman asked whether managed care could include private insurance companies. Commissioner Davidson replied that managed care in other states were often insurance companies but sometimes went through a broker. She related that the kind of innovation that the bill discussed could be accomplished through an insurance company. Co-Chair Neuman asked whether the state could buy private insurance, through managed care, for all uninsured Alaskans. Commissioner Davidson replied that the bill would begin expansion as soon as possible in order to immediately benefit from the federal dollars. The department hoped to look at additional models as the process moved forward. The expansion program written in the legislation mirrored the Medicaid program; as reforms were implemented in the Medicaid program, the expansion group would follow those reforms. 10:12:03 AM Co-Chair Neuman stated that the question was a yes or no question. Commissioner Davidson replied in the affirmative. Vice-Chair Saddler asked about the 1915 waivers and whether the state was required to consult with tribes before submitting a waiver request. Commissioner Davidson replied in the affirmative. Vice-Chair Saddler queried whether tribes had any veto power over the waiver requests. Mr. Sherwood replied that under the terms of consultation tribal communities did not have the ability to veto a proposal; however, the state would not force cooperation if tribal providers did not want to work with the state. He stated that the effort would have to be collaborative. He clarified that the state was required to consult with tribal entities on any changes to the Medicaid program that could potentially impact tribal beneficiaries. 10:15:25 AM Vice-Chair Saddler whether the state would not pursue a waiver over an objection from tribal entities. Mr. Sherwood answered that the state would have to come to an understanding agreement with tribal organizations in order to carry out the waiver. Commissioner Davidson elaborated that tribal health organizations in Alaska had been trying to pursue 1915 waivers with the state for the last 10 years. She said that three things were needed in order for the requests to be successful: tribal organizations needed to be willing, have a strong partnership with the state, and have approval from the Centers for Medicare and Medicaid Services (CMS). She stated that over the past few years CMS had approved 1915 waivers with tribes and tribal organizations in other states. Vice-Chair Saddler asked if the state had sought 1915i and 1915k waivers in the past. Mr. Sherwood replied in the negative. He elaborated that there had been past work done developing proposals for the use of 1915k waivers, but it had not been pursued by the prior administration. Vice-Chair Saddler understood that there had been prior consideration but not been a formal request. Mr. Sherwood replied in the affirmative. He said that a number of initiatives had been put on hold during the transition to the new claims payment system. Vice-Chair Saddler assumed that challenges with the computer system had precluded the department from going forward with the 1915i and 1915k waivers. Mr. Sherwood responded that the primary consideration had been the timing of making a substantial change in the waiver system, while simultaneously making a change in the new claims payment system. Commissioner Davidson interjected that the 1915i and 1915k options had been available under the Affordable Care Act since October 2010. She furthered that this was an opportunity to refinance programs that were currently provided, in order to benefit from the additional 50 percent federal match under the 1915i option, and an additional 6 percent match under the 1915k option. She gave that 6 percent might not seem like a lot, but given the state's fiscal climate it would be significant. Vice-Chair Saddler understood that there had been a decline in Medicaid providers in the state, and wondered whether that would affect the delivery of services to the expansion group. Mr. Sherwood did not believe the decline was continuing. He asserted that a significant part of past decline had been due to the fact that, historically, Medicaid had not required periodic program reenrollment. He explained that the department had a process of dis-enrolling inactive providers. He offered to provide more information on the matter at a later date. Vice-Chair Saddler asked whether dis-enrolling providers would affect the expanded number of people seeking services. Commissioner Davidson replied that approximately 40,000 people would be eligible - and 20,000 would sign up in the first year, with 26,000 signing up in the out years. She said that concerns existed as to whether providers would be able to deliver services, particularly in the area of behavioral health, which was why the prerequisite that a behavioral health providers had to be a grant recipient in order to bill Medicaid would be removed. She stated that the demand for behavioral health services in the state were significant and that the department looked forward to providing those services to Alaskans in need. Vice-Chair Saddler queried whether the removal of the behavioral health grantee status requirement would be sufficient to address the impact of 20,000 additional recipients. Commissioner Davidson believed it would be a start. She furthered that one of the reform opportunities included in the bill would pursue alternative provider types. She said that there were providers in the state that currently provided services, but at a limited capacity, and additional work could be done on the issue. Co-Chair Thompson discussed housekeeping. HB 148 was HEARD and HELD in committee for further consideration. ADJOURNMENT 10:23:33 AM The meeting was adjourned at 10:23 a.m.