SENATE BILL NO. 74 "An Act relating to permanent fund dividends; relating to a medical assistance reform program; establishing a personal health savings account program for medical assistance recipients; relating to the duties of the Department of Health and Social Services; establishing medical assistance demonstration projects; and relating to a study by the Department of Health and Social Services." 9:31:18 AM Co-Chair Kelly MOVED to ADOPT proposed committee substitute for SB 74, Work Draft 29-LS0692\U (3/4/16, Glover). Co-Chair MacKinnon OJBECTED for discussion. ERIN SHINE, STAFF, SENATOR ANNA MACKINNON, discussed the CS for SB 74, and explained that the work draft incorporated all of the amendments that had passed the previous week. She highlighted two additional changes reflected in the CS and directed attention to page 39, line 15 of the bill. The change added the word "retirees" to the draft, after it had been inadvertently omitted in the amendment pertaining to the Healthcare Authority study with the Department of Administration. She pointed out another change on page 40, lines 27 through 31 of the bill. Previously, the section had required all of the False Claims Act to require a two- thirds vote; after conversation with the legal department, members decided to remove the sections that did not require a two-thirds vote. Co-Chair MacKinnon WITHDREW her OBJECTION. There being NO further OBJECTION, it was so ordered. 9:33:42 AM Co-Chair MacKinnon directed the committee's attention to an overview document prepared by the department "DHSS Fiscal Impacts for CSSB74(FIN), version U - with amendments," (copy on file). She explained that the document encompassed all of the fiscal notes that were in draft form, but were not anticipated to change. She thought the overview would simplify the process of examining the fiscal impact, and detailed that she and Senator Kelly's staff had met with the department and LFD over the weekend to update the fiscal notes. She furthered that she had observed a reaction from committee members pertaining to the number of personnel being requested by the department to implement the Medicaid program, as well as observing less savings than expected. 9:35:08 AM Co-Chair MacKinnon directed attention to the FY2017 column of the document, which reflected what the subcommittees had already done. She noted that as the committee moved forward with implementation of reform, it had identified savings in various areas. Consequently the department had been unable to reflect the savings on the fiscal note, because the savings was not a result of direct policy in the bill. She continued that there was explanation on the fiscal note that explicated the situation. She anticipated savings of over $100 million, and pointed out that the number from FY 17 was different than previously considered numbers because the fiscal notes were not reflecting what was happening in subcommittee in terms of cost savings on travel and other items. Co-Chair MacKinnon reminded the committee and the public that the document being reviewed was only for DHSS, and did not reflect savings in the Department of Law or other areas. 9:37:40 AM Co-Chair Kelly expressed appreciation for the work that was completed over the weekend. He was in favor of incorporating the aforementioned note in the fiscal note. He discussed making departmental reductions to reflect savings created through the passage of the bill as it moved through committees. 9:38:31 AM Co-Chair MacKinnon commented that the Senate Finance Subcommittee on Medicaid would work with colleagues in the House to identify additional funding sources that might be available. She relayed that the Mental Health Trust Board had indicated some willingness to examine the implementation of the behavioral health changes. She anticipated additional changes to fiscal notes and additional collaboration during the bill process. 9:39:13 AM Vice-Chair Micciche asked for clarification on the savings reflected between the "Grand Total" table on the first page of the fiscal impacts document, and the table on the second page. He asked if the department could explain the difference between the two tables. 9:39:58 AM JON SHERWOOD, DEPUTY COMMISSIONER, MEDICAID AND HEALTH CARE POLICY, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, addressed Vice-Chair Micciche's question regarding the tables on the fiscal impacts document. He clarified that the table on first page of the document reflected every provision of the bill and totaled them. The table on second page was comprised of items which resulted in significant savings. He noted that there were some provisions of the bill that did not get included in the table, and was more intended as a reference to observe cost saving measures and individual impacts. He continued that the tables did not attempt to incorporate every provision in every fiscal note, and there were some expenses that would not be reflected in the summary table on the first page. 9:41:02 AM Mr. Sherwood relayed that the department had seriously considered the committee's comments from the previous week, and had examined its assumptions and timelines. Further, the department had looked at the bill amendments and made some significant changes, and in some cases had moved up its timelines. He specified that with the incorporation of the provisions proposed in the budget subcommittees, the tribal claiming timeline was effectively moved up. Additionally, the start of 1915(I) and 1915(K) provisions were both moved up by six months. Mr. Sherwood continued to discuss the bill and the fiscal impacts sheet, noting that the department had identified potential savings in areas of primary care case management, telehealth, and pioneer homes (as a result of an amendment). The department had also found some reductions in positions and capital costs. He thought the co-chair had done a great job of summarizing the first table, in terms of the net effect of the bill. He pointed out that savings totaling over $31 million in FY 17 was projected to grow in GF to almost $114 million by FY 22. He added that the bill also resulted in total fund reductions beginning in FY 17 and growing through FY 22. Mr. Sherwood discussed the "Positions" table on the first page, noting that the department reduced the total request for positions. The department would add seven positions in FY 17, including four positions to work on enhanced or accelerated tribal claiming (also included in the budget subcommittee proposal). He quantified that effectively, the department reduced five of the positions it had asked for previously. The amount of positions would peak at nine in FY 18 while completing start-up work, gradually paring back to five net positions as efficiencies were achieved as a result of Medicaid reform. 9:43:23 AM Co-Chair Kelly clarified that his earlier mention of 27 positions was incorrect. Co-Chair MacKinnon explained that the subcommittee had gone through an exercise with the department to reduce positions, and the number had changed over time. The subcommittee was trying to reflect the changes to create transparency for the public. 9:44:18 AM Mr. Sherwood discussed the "Capital Budget Costs" table on page 1 of the document, explaining that capital costs had gone down to a total of $9.1 million and were comprised of 90 percent federal funds. In addition to adjusting some assumptions, the department had reallocated some costs more appropriately. He noted that the committee might observe some numbers had moved between fiscal note components, but that overall there had been a net reduction. 9:44:53 AM Co-Chair MacKinnon asked if the department had looked at the 50-50 funding ratio on some items and consider how the state might present a case to the federal government to have some positions or capital costs specifically covered at a 90-10 rate in aid of trying to work toward eliminating fraud in the system (and other items). Mr. Sherwood answered in the affirmative. He elaborated that the department reviewed areas that indicated a 50-50 funding ratio. He thought the state had a substantial case it could make to the federal government. He thought the department's initial presentation might have been more conservative due to caution and uncertainty. 9:45:43 AM Co-Chair MacKinnon discussed the explanation of benefits process for individuals receiving services through Medicaid. She considered it was a false claims reporting augmentation which was new to the system, and by virtue of its inherent authentication with the patient [to help prevent fraud] should qualify for a 90-10 split. Mr. Sherwood concurred. 9:46:36 AM Vice-Chair Micciche thought it was difficult to quantify the savings at the current time without knowing the effectiveness of the changes. He mentioned reductions in emergency care through primary care and case management, the Prescription Drug Monitoring Program and behavioral health improvements, reduction of travel through telehealth, changes to pioneer homes, and reduction in fraud and abuse. He asked if it would take a couple of years to observe the results of the improvements. Mr. Sherwood stated that the department was trying to be reasonable in its projections, and thought one of the challenges was to avoid the double-counting savings through different reform efforts. He used the example of saving funds on travel through using both a tribal claiming initiative as well as telehealth. He furthered that the department's telehealth estimates did not include substantial components of travel due to concerns about double-counting. 9:48:35 AM Co-Chair Kelly appreciated the level of scrutiny that Mr. Sherwood had described. He discussed earlier comments pertaining to quantifying budgets and thought Mr. Sherwood had employed conservative thinking as he examined the numbers. 9:49:10 AM Co-Chair MacKinnon understood that two fiscal notes had been eliminated. Mr. Sherwood thought one of the two fiscal notes in question had come back. He clarified that one fiscal note for the Administrative Services support was gone. He had previously thought that a fiscal note for the Division of Public Assistance could be eliminated, but the department had realized it was necessary to show a component in the fiscal note. 9:50:10 AM Co-Chair MacKinnon pointed out that there were two additional fiscal notes that needed updating. Mr. Sherwood relayed that he would be making further comments on the document, then would discuss the two additional fiscal notes. He added that there one new fiscal note that could be easily summarized in the cost savings table rather than a more detailed discussion. Co-Chair MacKinnon directed attention to fiscal note component number 2077 and component number 2662; for a Medicaid services appropriation, and an appropriation to Medicaid services - senior disabilities. 9:51:48 AM Mr. Sherwood highlighted the "Savings Measures (UGF)" table on page 2 of the document, noting that the table included the additional funds anticipated to be saved in the tribal claiming policy change. He noted that the department had increased and accelerated the savings in primary care case management, and also showed savings in telehealth beginning in FY 18. He highlighted savings of approximately $1 million GF annually as a result of an amendment the previous week to the payment assistance language, which would correspond the new fiscal note for the pioneer homes. The department was also able to reduce the start-up cost for the eligibility verification system, and identify some operational savings in the same area. Mr. Sherwood summarized that one thing that was not in the fiscal notes was the impacts of the work to develop more effective and integrated behavior health system and 1115 waiver. 9:53:27 AM KAREN FORREST, DEPUTY COMMISSIONER, COMMISSIONER'S OFFICE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, noted that the department expected that behavioral health reform (as demonstrated in the bill but not shown in the fiscal notes) would result in significant savings in other state agencies and municipalities across the state. She particularly expected to see savings in the criminal justice system, the Department of Corrections, the Alaska Court System, and the Department of Public Safety. She thought it was hard to quantify potential savings at the current time, and highlighted past committee testimony regarding the importance of behavioral health reform as it pertained to the criminal justice reinvestment and reform. 9:54:29 AM Co-Chair MacKinnon asked if Ms. Forrest would be giving an indeterminate fiscal note related to a separate corrections bill that was in the committee process. She wondered about the possibility of additional savings that committee members might need to take into account when considering the bill. Ms. Forrest avowed to look into the matter. 9:54:51 AM Mr. Sherwood directed attention to fiscal note component number 2077 for healthcare Medicaid services, which he explained was the largest component of the Medicaid services and had the most features. He pointed out a very small increase in operating cost for FY 17, but a substantial reduction in GF. He discussed the savings to the program that would start at over $3.7 million in FY 18, and growing to over $28 million in FY 22. He referred to the substantial reduction in GF, reducing from approximately $27 million in the first year to over $60 million in FY 22. 9:56:35 AM Mr. Sherwood continued to discuss the fiscal note, and pointed out an error pertaining to position requests. He reported a capital cost of $6.9 million associated with the fiscal note. He explained that the fiscal note encompassed a number of provisions relating to sections of the bill relating to fraud. He mentioned savings from the False Claims Act, savings from the self-review for overpayment, savings from civil penalties, and projected savings from the civil forfeiture provisions. He added that savings would be reflected in the summary document on the first table on the first page. He discussed primary care case management, which showed savings beginning in FY 18. He mentioned the health homes options, which would save the state substantial amounts of money. He pointed out telehealth provisions, the coordinated care demonstration projects, and the hospital emergency room reduction project, which were all included in the fiscal note. There were savings associated with the tribal health travel claiming, as well as provisions for a health information infrastructure plan. He clarified that although the health information infrastructure plan did involve a modest expense, almost all of the funds were a 90-10 federal money. 9:58:55 AM Mr. Sherwood addressed fiscal note component number 2662, for senior and disabilities Medicaid services, and noted that the allocation involved three different provisions. There would be an impact to services in the tribal claiming change, which showed strictly as a fund source switch. The second provision concerned 1915(k), which would create a new home and community-based program to provide personal care services for people who qualified for waivers, and came with an enhanced match rate 6 percent greater than the regular match rate. Consequently, the department would move personal care services from the current optional service to the 1915(k) option; and there would be a fund source switch after receipt of enhanced federal funds. He discussed the third provision, the 1915(i) option under Medicaid, in which a new option would be used for home and community- based services to cover individuals currently receiving services through state-funded programs under the Medicaid program. He continued that rather than paying for the services at 100 percent general fund, the state would get a 50 percent federal match. Mr. Sherwood continued to the fiscal note, communicating that other fiscal notes demonstrated reductions in grant programs that equaled the amount of increased operating costs; the fiscal note showed $5.8 million beginning in FY 18 and growing to $17 million by FY 22. He summarized that the fiscal note encompassed where the state would pick up the general fund cost as well as the federal cost and savings. He highlighted the capital cost of $1.2 million, which was 90-10 funded; and recognized that the department needed to allocate some of the funds that it had put in other fiscal notes for capital projects to senior and disability services. 10:01:43 AM Mr. Sherwood addressed fiscal note component number 2671, an allocation for pioneer homes, and explained that the fiscal note reflected a change in fund source. Due to the language in a recent amendment to the pioneer home payment assistance program, the department believed it could collect additional funds from the Medicaid waiver program as opposed to having to pay for it out of the state's payment assistance plan. The fiscal note showed a reduction in GF, which was a reduction to the payment assistance plan and an increase in interagency receipts that received the federal Medicaid funds into the pioneer home budget. 10:03:33 AM Vice-Chair Micciche asked what part of the bill the fiscal note corresponded to. Mr. Sherwood pointed out language on page 35, lines 21 through 23, pertaining to requiring an individual applying for medical assistance coverage to provide the decision letter regarding the application. 10:04:44 AM Mr. Sherwood recalled that he misspoke earlier regarding changes to fiscal notes. The fiscal note addressing behavioral health administration had not been eliminated, in aid of demonstrating reductions in staff. The department had eliminated the Public Assistance Administration fiscal note and combined information in to the fiscal note component number 237 addressing the fraud component. 10:05:41 AM Co-Chair MacKinnon expressed appreciation for the work the department had done over the previous weekend. Co-Chair MacKinnon reminded the public that the fiscal impacts document being addressed was only pertaining to DHSS and no other agencies. 10:07:08 AM AT EASE 10:08:57 AM RECONVENED Vice-Chair Micciche reviewed fiscal note component number 45, for centralized administrative services in the office of the commissioner of Department of Health and Social Services. He listed a personal services cost of $134,600 in FY 17, combined with a services cost of $700,000 for a total of $834,600. He pointed out there was a further cost in FY 18 of $33,600 in personal services, and then no cost from FY 19 through FY 22. He clarified that the funds were for a temporary position in FY 17 and FY 18 and there was no capital cost. 10:10:17 AM }John Boucher, Deputy Commissioner, Department of Administration{ addressed the fiscal note. He understood that the intent of the health care authority feasibility study referenced in the fiscal note was to provide impetus for a broader discussion of healthcare spending in the state beyond Medicaid benefit recipients. He mentioned a study by Commonwealth North that had quantified the total state spend (including Medicaid) at $1.55 billion. He did not think the total had included some of the indirect costs through the foundation formula for teachers and other categories. He read from the analysis section of the fiscal note: The Committee Substitute for SB 74 requires the Department of Administration, in collaboration with the Legislative Finance Committees, to procure a study to determine the feasibility of creating a health care authority that could coordinate health care plans and consolidate purchasing effectiveness for all state employees, retired state employees, retired teachers, medical assistance recipients, University of Alaska, state corporation, and school district employees. Mr. Boucher continued to discuss the fiscal note, pointing out that it required the feasibility study to be completed on or before June 30, 2017. He relayed that the department had looked at comparable studies the previous week, and found that they cost around $350,000. He thought considering the scope of the study, and the public process, the state would need to rely on other states that had examined the same topics. He estimated that the state could spend up to $700,000 on the study. He specified that the department envisioned one temporary position to manage the study through the commissioner's office. 10:12:58 AM Co-Chair MacKinnon clarified that Senator Dunleavy had proposed a similar study previously. She hoped that the administration would review the report and consider the challenges that the legislature had faced in extracting information needed to evaluate long-term benefits for Alaskans. She emphasized the need for awareness of the bargaining cycle that determined health benefits as the state moved forward to look at health care savings. 10:13:56 AM Senator Dunleavy asked about the fiscal note narrative, and wondered if active teachers were included under the heading of 'school district employees,' Mr. Boucher answered in the affirmative, and stated that the language in the bill referred to "direct and indirect funding by the state of Alaska." He had not listed every group that could potentially be covered. He thought one challenge the study would have to meet was determining the most important scope first. He thought it would be important to ensure that the state received the best value out of the study. 10:15:04 AM Co-Chair MacKinnon emphasized that the state spent an incredible amount of money on insurance through local governments and through state government entities. Individual communities and larger cities were also negotiating for health benefits. She thought that the state had incredible buying power that had been fractured. She thought there was a belief that with such great buying power, the people of Alaska should not be paying some of the costs of the benefits being received. She hoped, through collaboration with the administration, to bring the bargaining units together and try and get better services with the money being spent. 10:16:09 AM Co-Chair Kelly thought it was important to address some comments made by Senator Dunleavy when the committee worked on the issue three years prior. He recounted that there had been a different financial environment at the time, and Medicaid expansion created a much larger pool. 10:16:55 AM Senator Dunleavy agreed that there had been a different financial climate when the topic was discussed previously. He referred to certain groups in opposition to health care consolidation. He furthered that with a worsening financial climate, he hoped that the overall benefit to the state would take precedence over a small amount of groups that would not benefit from such consolidation. 10:17:28 AM Mr. Boucher stated that the department looked forward to the challenge of moving forward with Medicaid reform, and thought that everyone recognized that the state was spending a tremendous amount on healthcare. He thought that it was a good idea for the state to leverage its buying power. 10:17:51 AM Vice-Chair Micciche discussed fiscal note component number 2203, for criminal appeals and special prosecution in the Department of Law's Criminal Division. He reviewed the total operating costs from FY 17 through FY 22 at $365,000, comprised of $273,700 in federal receipts and of $91,300 in state funds. The fiscal note listed two full-time positions from FY 17 through FY 22. There was a change in positive revenues of about $500,000 per year. 10:18:40 AM }John Skidmore, Director, Criminal Division, Department of Law{ addressed the fiscal note, making note of one substantive change. The department had changed the funding from GF to statutorily designated receipts (SDR) after responded to members concerns about the added number of positions associated with the legislation. Additionally, DOL had indicated that the state would be collecting significant monies from fraud, which would serve as the new fund source. He noted that in the first year the funds would been split equally between GF and SDR to allow the program to develop fully. Thereafter the funds would be 100 percent SDR. 10:20:15 AM Senator Dunleavy cautioned careful and cognizant reflection on the collection of department funding, and hoped it would be done the right way. He thought a number of members would be observing the process and listening to their constituents on the matter. Senator Dunleavy asked if Mr. Skidmore's division also prosecuted permanent fund dividend (PFD) fraud. Mr. Skidmore stated that there was a prosecutor within the Office of Special Prosecutions that prosecuted PFD fraud. He added that he agreed with Senator Dunleavy that collection of fraud funds needed to be monitored carefully, and it was not the department's intent to go after individuals simply for the point of recovering money. He clarified that the act [the proposed Medical Assistance False Claim and Reporting Act] was set up so that the state could collect attorney's fees, the same way in which one would in most civil cases. Senator Dunleavy used an example of other states collecting greater and greater amounts of fees through traffic violations. He was concerned that the collection was done in the right way and that people were not overstepping their authority. 10:22:15 AM Vice-Chair Micciche appreciated Mr. Skidmore's earlier comments, and thought he had been conservative in the estimated change in revenues from fraud collection. He recounted historical cases of fraud in Alaska and imagined that a dedicated effort could result in significant savings for the state. He expressed appreciation for Mr. Boucher's explanation and efforts. He hoped that the message was being conveyed regarding fraud and abuse of the Medicaid system. 10:23:24 AM Senator Bishop thought the sections of the bill referring to fraud set a high bar for the burden of proof in order for the attorney general to proceed. Mr. Boucher stated that there was a higher burden of proof for the claims than there was for the grand jury. He added that there was a lower burden of proof to pursue the cases civilly rather than criminally. 10:24:29 AM Senator Hoffman expressed concern that the state constitution did not allow for dedicated funds. He referred to the potential savings of $800,000 in the first year. He wondered if the cost would be recurring every year. He thought there could be substantial increases to DOL's budget and bottom line, and wondered if the SDR would increase cumulatively over time. Mr. Skidmore stated that DOL anticipated that in the first year there would be initial start-up activities, and would build momentum in the future. He specified that each year there would be payouts of Medicaid monies. Consequently, each year the department expected to pursue anyone that was engaged in fraudulent activities and thereby collect designated receipts estimated in the amount listed on the fiscal note. The amount $91,300 was the state's portion of funding the positions, which were 75 percent funded by the federal government. He confirmed that the amount would be recurring. 10:27:28 AM AT EASE 10:28:00 AM RECONVENED Co-Chair Kelly thanked staff. Co-Chair Kelly MOVED to REPORT CSSB 74(FIN) out of committee with individual recommendations and the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CSSB 74(FIN) was REPORTED out of committee with individual recommendations and with 1 new fiscal impact note from the Department of Administration; 1 new fiscal impact note from the Department of Commerce, Community and Economic Development; 1 new fiscal impact note from the Department of Law; and 13 new fiscal impact notes from the Department of Health and Social Services. Co-Chair MacKinnon thanked staff // She // She hoped 10:30:49 AM Senator Bishop briefly // 10:31:29 AM AT EASE 10:31:41 AM RECONVENED Co-Chair MacKinnon discussed the schedule. Co-Chair MacKinnon handed the gavel to Co-Chair Kelly. 10:32:49 AM RECESSED 3:49:42 PM RECONVENED