HOUSE BILL NO. 96 "An Act relating to Alaska Pioneers' Home and Alaska Veterans' Home rates and services." 2:57:32 PM REPRESENTATIVE ZACK FIELDS, BILL SPONSOR, introduced himself. REPRESENTATIVE LADDIE SHAW, BILL SPONSOR, introduced himself. Representative Fields thanked the committee for allowing him to present HB 96. He turned to slide 2: "Goal of House Bill 96" to explain the goals of the legislation. He offered that the bill had a couple of simple goals. The first goal was to maintain the Pioneer Homes' commitment for Alaska elders. The following day marked the 106th anniversary of the Pioneer Homes system. The second goal was to grow revenues and improve the financial stability of the Pioneers Home. He thanked Representative Shaw, Representative Ortiz, and Representative Josephson for being the original cosponsors of the bill. He also thanked Representative Johnston for co-chairing the Health and Social Services Committee and making sure there was adequate funding for the Pioneer Homes. The bill was a two- part effort of making sure there was adequate funding while at the same time addressing the statutes. He turned the presentation over to Representative Shaw to talk about his involvement with the bill and some of the reasons he was working to protect the Pioneer Homes. Representative Shaw explained that when he was working for the administration in 1999, he was looking at the potential for a Veteran's home in Alaska, as it did not have one at the time. The cost of building a Veteran's home would be cost prohibitive. Instead, he approached the Pioneer Homes to discuss the possibility of tying in with the Pioneer Homes system. He had hoped to bring about a Veteran's home in the state regardless of its size. The Pioneer Homes were onboard with the idea. The process was initiated in 2001 and designated the Pioneer Home in Palmer as the Pioneer and Veteran's Home for Alaska. He was about to establish a Veteran's home commitment. Alaska ended up being the last of the 50 states to have its own Veteran's home. The process took place and was initiated after he had left the administration in 2003. It was put into place in 2007. Currently, the State of Alaska had a representation of a Veteran's home. He was pleased to be an initial part of the process. Representative Fields turned to slide 3: "Pioneer Homes: Background." He thought Representative Shaw helped frame the backdrop which was that Alaska had an amazing system built over the previous 100 years in Sitka, Fairbanks, Palmer, Anchorage, Ketchikan, and Juneau. However, currently the Pioneer Homes faced some challenges which he asserted were two-fold. Currently, Pioneer Home rates were adjusted by regulation. It was a time-consuming contentious process. He surmised that because the regulation process was time-consuming and contentions, the real value of rates had actually fallen by about 15 percent. In other words, the real value of rates had fallen as the division had adjusted rates periodically but not enough to keep pace with real value. At the same time, the state had an aging population with a rising rate of dementia. He reported that about half of residents had dementia. The state also had budgetary challenges. The goal of the bill was to protect the incredible system that so many Alaskans, including Representatives Shaw, helped build. 3:01:06 PM Representative Fields moved to slide 4: "Resident Population." He highlight an important point with respect to the financial sustainability of the Pioneer Homes: Presently 51 percent of residents were self-pay. In other words, they paid the advertised rates in the respective Pioneer Homes and contributed about $17 million annually to the system. It was very significant in terms of the system being self-supporting. One of the reasons he introduced the bill and one of his concerns was inadvertently pushing out self-pay people. The departments were not allowed to advertise the rates, which were very high. He wanted to avoid having an adverse selection process, where self-pay people leave and go to private care, while those who would take their places would be more subsidized by the state. He suggested that if that were to happen the state would find itself with more obligations as the number of self-pay residents declined. He did not have a problem with having a larger population of poor seniors supported by the state. However, looking at the long-time mission of the Pioneer Homes, the diversity of their population was integral to their mission. He thought the housing should continue to be affordable even for those families that could pay their own way. Representative Fields reviewed the changes to the committee substitute on slide 5: "Committee Substitute for House Bill 96." The rates were adjusted to reflect real cost increases since 2004. Levels 4 and 5 were added to allow for more complex care, so the bill would have 5 levels of care consistent with the direction of the department. It was consistent with the Agnew Beck Report which was issued following SB 74 [Legislation passed in 2016: Short Title: Medicaid Reform; Telemedicine; Drug Database] in broader Medicaid reforms. Representative Sullivan-Leonard had heard that for some residents, because of a change in their health like Dementia or Alzheimer's, they were being transferred from the Pioneer Homes to Alaska Psychiatric Institute (API) for care or housing. If the information was correct, she asked that Representative Fields provide an explanation. She wondered if the added levels of care took the circumstance into account. Representative Fields had not heard about residents being transferred from Pioneer Homes to API. However, he was aware of seniors with complex behavior health issues including severe dementia who were housed at API for a cost of more than a half million dollars per year per person. He reported that Agnew Beck and DHSS wanted to have behavioral health neighborhoods in some of the Pioneer Homes where people with severe dementia would be physically separated to be safe - a care level of 5. He noted that the cost of level 5 care was about $15,000 per month, which was expensive but much less than $500,000 per year, per person. He thought, when looking at the broader system of how to save money in healthcare and long-term care, the Pioneer Homes were an important part. Some of the most expensive-to-care-for seniors could be taken out of API and placed into the Pioneer Homes system in a safe environment while saving hundreds of dollars. It would be part of a broader evolution where there was an increasingly elderly population at the Pioneer Homes with a rising rate of residents with dementia. Co-Chair Wilson asked Representative Fields to explain the difference between assisted living and a nursing home, since the Pioneer Homes were no longer nursing homes. Representative Fields responded that assisted living generally had a lower acuity or intensity of care compared to a nursing home. There were different reimbursement rates for federal healthcare programs. He understood that Medicaid-eligible residents in the Pioneer Homes were under the Residential Supported Living (RSL) Medicaid Program which billed at a daily rate of approximately $160 per day resulting in a cost of $4880 per month. The monthly amount was not sufficient to cover the cost for the higher level of care. Aside from level 5, the Pioneer Homes system was assisted living, just higher on the acuity scale. The Pioneer Homes system served an important need. He elaborated that in some cases in the private market, a person would have a difficult time finding assisted living homes at a higher level of care for people with dementia. He concluded that the Pioneer Homes offered a higher acuity of care without reaching the level of care at a nursing home. Co-Chair Wilson asked what the rate would be if the Pioneer Homes were nursing homes. Representative Fields did not know the rates in terms of the federal programs. In a subsequent slide he would discuss the significant cost differences. 3:06:07 PM Vice-Chair Johnston thought there might be a great output of capital costs for the Pioneer Homes system to the meet the requirements of a nursing home. Co-Chair Wilson was concerned with trying to provide a certain level of care without being certified to provide that level of care. Vice-Chair Johnston clarified that the Pioneer Home in Anchorage had a separate wing for patients with dementia. Representative Fields added that there was a wide range of category for assisted living. The Pioneer Homes system fell within the assisted living category. It was not at the nursing home rate. Many of the Pioneer Home residents were at the upper end of the spectrum for assisted living care. Co-Chair Wilson agreed that many of the homes fell under the assisted living category. She was concerned that the Pioneer Homes were starting to behave like nursing homes where the level of care was much different. She was trying to better understand the line of distinction between assisted living and nursing home care. She thought the committee could get her queries answered at a later time. Representative Fields turned to slide 6: "CSHB 96: Proposed Levels of Care." He reported that under the committee substitute there was a wide range of rates. The goal was to be competitive and to keep self-pay people in the system with relatively affordable rates of care for level 1 and 2. Under the committee substitute (CS) the rate increases could be annual and could be as high as the Social Security rate of inflation - a more efficient process that could keep pace with the cost of care, rather than having to go through the more arduous public comment process. The concept would ideally keep the state from falling back into a hole like it had over the previous 15 years. Representative Tilton asked about the Social Security rate of inflation compared to a health care inflation rate she had heard of that was higher. Representative Fields responded that he was aware of the health care rate of inflation which had generally been higher. Most of the Pioneer Homes' costs related to personnel were higher. He mentioned that the sum had been discussed in the Health and Social Services Committee. He suggested that, in reality, the Pioneer Homes' costs would not perfectly reflect either the health care costs or the CPI [Consumer Price Index]. He thought it would be somewhere in the middle. Representative Fields explained slide 7: "Complexity of Care." The slide reflected the changes from 3 levels of care to 5 levels of care. He reiterated the levels of care were consistent with where the department was going and consistent with Agnew Beck and the broader changes made to the state's health care system in SB 74. 3:09:44 PM Representative Fields reviewed slide 8: "Would you buy a $37 hamburger?" He stated that Pioneer Homes were assisted living homes which existed in a competitive marketplace. He reemphasized the importance of retaining the self-paying residents. He commended the Pioneer Homes' staff and Department of Health and Social Services (DHSS) leadership at the division director level about adapting to changing in very challenging circumstances. His concern with the department's proposed rate increases was that it was assuming inelastic demand - if a certain price was charged, fees would be collected from a significant number of people. He had heard from people in his district and people who had left the Pioneer Homes system based on the threat of price increases. They were self-pay residents. He did not want to see the state go into an adverse selection process where more and more residents were fully subsidized by the state. He believed it was in the interest as a state to have a financially viable system with a health mix of self-pay individuals. Representative Fields continued that under the CS, the prices for levels 1 and 2 of care would continue to be competitive in Alaska's region and to make sure to retain the self-paying individuals that contributed $17 million annually to the system. The bill did not put a cap on the rates for level 5 because it was a different set of reimbursement that was separate from Residential Support Living (RSL). The state could set a high price at level 5 and continue to save money as a state by shifting people out of API and other environments that were less appropriate. Representative Fields turned to slide 9: "Cost of Long-Term Care in Pacific Northwest" which was an illustration of regional costs. He pointed out that in the Pacific Northwest and in Anchorage assisted living care rates were in the range of $5000 to $6000 which was competitive with the bill he had laid out. Representative Fields moved to slide 10: "Social Security Cost of Living Adjustment." He explained that the slide was an illustration of the Cost of Living Adjustment (COLA). He indicated that if the state had been adjusting rates every year, it would not have fallen into a hole like the state had over the previous 15 years. He thanked the committee for hearing his presentation and made himself available for questions. Representative Josephson asked how the cost increases proposed in the bill compared to the administration's regulatory increase. Representative Fields replied that they were substantially less. He returned to side 8. He pointed out that the blue bars represented the current monthly rate; the orange bars reflected the department's proposal; and the green bar indicated rates advertised under the bill. Representative Josephson asked what the administration was going to do with the extra dollars. Representative Fields responded that the administration's proposal regarding advertised rates corresponded to a change in the way they put forward a budget. The department still requested a significant amount of general funds but changed it to a needs-based payment assistance program. The reality was that either under the administration's plan or the bill, the state would continue to invest a significant amount of money into the Pioneer Homes. The question remained about what the advertised rated would be. He deferred to the division for additional details. Representative Josephson referred to the topic of state assistance. He wondered about the difference between the general fund subsidy and state assistance. Representative Fields responded that the orange bars equated to what the division said was the true cost of providing care. In looking at the difference between the green bar and the orange bar for level 1, there would be a small differential between what people paid and the actual cost to provide care, if HB 96 passed as written. The traditional general fund allocation would fill the very small gap. Under the administration's bill, if people were able to pay the rates, there would be no gaps and no state subsidy needed. Representative Carpenter asked if there was an inverse relationship with demand. He wondered if there was more demand at level 1 than level 5 and across the spectrum. Representative Fields replied that he thought people recognized the Pioneer Homes provided quality care and many people got on the waitlist before they were at level 4. He reemphasized the importance of having competitive pricing at levels 1 and 2 because, regardless of when people actually enter the Pioneer Homes, many of them get on the list before being at level 1. Once people enter the Pioneer Homes it was not unusual for people to move up the tiers. They might end up paying at levels 1, 2 and 3. 3:15:30 PM Co-Chair Wilson OPENED Public Testimony 3:15:48 PM MARGIE BEEDLE, SELF, JUNEAU (via teleconference), reported being in support of HB 96. She represented 119 people that had signed a letter in support of the bill. Her mother was a self-pay resident of the Pioneer Home in Juneau. The governor's budget proposed increases up to 140 percent for some residents to mitigate the state's cost to run the Pioneer Homes. The governor's proposal illuminated how much the state had subsidized the Pioneer Homes previously. She informed the committee that many of the residents of the Pioneer Home came to Juneau before statehood. They helped develop and defend the state. She mentioned that they paid a state income tax for most of the years they had worked including during the time of inception of the Pioneer Homes. She thought the people in the Pioneer Homes had contributed greatly to the state and deserved proper care. She relayed a number of contributions made by the elderly in the community. Her mother worked until she was 87 years old. She had been good and generous to the community. She thought the state should meet her half way at supporting her care. House Bill 96 was a compromise. She urged support for the bill. She submitted a letter signed by 120 people. 3:19:31 PM BRAD RIDER, SELF, JUNEAU (via teleconference), favored HB 96 and supported Alaska's elders. He thought they had been kicked around with all of the suggested pieces of legislation. He opined that from the beginning of time people have taken care of their elders and thought the state should continue to do so. He reiterated his support of the bill. 3:21:11 PM FRED KOKEN, SELF, JUNEAU (via teleconference), appreciated the committee's time. He had been a resident of Alaska for about 50 years. His wife was a resident of the Pioneer Home in Juneau. He had worked in the state for 30 years as a financial consultant. He relayed that when he received the information regarding the administration's proposed rate increase, it was like a punch in the gut. He suggested that the current residents within the Pioneer Homes should be grandfathered with the prices they currently paid and had budgeted for. He implored members to support HB 96 and urged them not to balance the budget on the backs of the elderly. 3:23:25 PM JANET HENDERSON, SELF, JUNEAU, reported that her mother was currently in the Pioneer Home. Her mother had worked in the school district and her father had worked as a contractor and an employee of the state. Both parents had paid into the system and planned to enter into the Pioneer Home. Her mother was scared about the future and finances. She supported the bill. She did not think it was fair to raise the elders' rent by 140 percent. 3:25:07 PM AVES THOMPSON, SELF, ANCHORAGE (via teleconference), thought HB 96 was a step in the right direction. His wife was currently in the Anchorage Pioneer Home. He paid over $6,795 per month for his wife to be there. The annual cost was over $81,540 per year. The governor's proposed change would increase the rate to $13,333 per month or $159,996 per year. The annual increase would equate to $78,456. He thought the increase was driven by the fact that the governor's amended budget proposal zeroed out about $34 million in undesignated general funds shifting the entire fund source to user fees. He continued that the Alaska House of Representatives just passed a budget that included the fund shift. However, it was not a budget reduction, it was a change in the fund source shifting all of the burden to the user. Mr. Thompson continued that his wife was a self-paying resident of the Pioneer Home and received no monetary subsidies from the state or federal governments. He had a small amount of long-term care insurance that would last about 12 to 13 months. The rest of the cost was paid for by their retirement income and personal savings. The proposed cost increase would displace his wife out of the Pioneer Home. In the long run, many of the residents would be subsidized by public dollars. The proposed 30 percent increase remained excessive in his mind. He quoted Representative Foster from an article in the Anchorage Daily News. He urged members to carefully consider the impact of an increase and to support HB 96. 3:29:17 PM SHARON LONG, SELF, ANCHORAGE (via teleconference), was the wife of a 2-year resident of the Pioneer Home and a friend of a 92-year-old resident, Mrs. Lucy Gross. Lucy could not sit back and watch Alaska's pioneers and veterans get bludgeoned with exploited rates. She created a petition that members should have that gave families a voice. She urged members to read the letter signed by over 1120 people petitioning a change in the proposed increase in rates. She was speaking on behalf of the petitioners who were scared and bewildered by how the state they helped build was threatening their financial bearings and peace of mind. She thanked the committee for attempting to find a legislative solution to repeal the regulatory authority under which the administration was making unprecedented and draconian changes to the mission and operation of the Pioneer Homes and for confirming existing rates as drafted in the original version of HB 96. She thought the Social Security COLA was a rational and incremental approach to increases and something people could plan for. She encouraged the committee to do the right thing for the elders of the state. 3:32:10 PM WILLIAM HARRINGTON, SELF, ANCHORAGE (via teleconference), was a 70-year-old resident and believed an elder subsidy should be equal for all residents. He proposed several amendments to the bill. He thought a business should be run by a business or should be out of business. He suggested the golden years would be tough everywhere. He hoped the legislature could come up with some solutions. 3:33:26 PM ROCKY PLOTNICK, SELF, ANCHORAGE (via teleconference), thanked members for hearing her testimony. She was currently looking for assisted living in Seattle for her 92-year-old mother. She was testifying in favor of HB 96. Her husband was in his 70s and lived in the Anchorage Pioneer Home with Parkinson's disease. He had spent most of his years as a physician working throughout Alaska. He was a level 2 self-pay resident. Currently, they paid $56,304 per month. If HB 96 were to pass, their costs at the Pioneer Home would increase to $75,600 per month. She hoped the rate would not increase any more than what was proposed in HB 96. She was grateful to know that her husband was safe at the Pioneer Home. 3:36:22 PM GEORGE PAUL, SELF, WASILLA (via teleconference), supported the concept of HB 96. He had been in the nursing field since 1999. He supported the governor's proposed amendment. He had worked at two different Pioneer Homes and currently worked at a private assisted living facility. He spoke of the different services provided at the Pioneer Homes that were not provided at private sector facilities. He provided some examples. He argued that services such as physical therapy that had to be sought independently of a private facility should be subsidized to make things equitable. 3:40:09 PM Co-Chair Wilson CLOSED Public Testimony. Co-Chair Wilson indicated amendments were due Thursday, May 2, 2019 by 5:00 P.M. The committee would review amendments and the fiscal notes at another hearing. HB 96 was HEARD and HELD in committee for further consideration.