CHAIRMAN RIEGER called the Senate Health, Education and Social Services (HESS) Committee to order at 1:40 p.m. He introduced SB 284 (COMPREHENSIVE HEALTH INSURANCE ACT) as the only order of business before the committee. He welcomed the listen only teleconference sites of Anchorage, Fairbanks, Barrow, Cordova, Homer, Seward, and Sitka. DR. TOM NIGHSWANDER, physician at the Alaska Native Medical Center, stated that he was choosen to help bring together SB 114 and SB 205. He said that health care reform should involve promoting healthy Alaskans, but if they become ill access to care should be provided. This care should have an appropriate provider, the correct amount of high quality care, and a reasonable cost. Number 090 Dr. Tom Nighswander commented that the question facing the committee regarding health care reform should be what would be appropriate for Alaskans. He informed the committee of a series of health care problems facing Alaska that federal legislation will probably not help. He pointed out that some of the issues in rural health care are not addressed in federal legislation. Dr. Tom Nighswander detailed the cross-section of interests represented at the meetings leading to SB 284. He identified the principle of universal coverage, the need to address the cost of care, and the need for public involvement with all aspects of the plan as the main tenets that developed from these meetings. He commented that SB 284 ended up better than a combination of SB 114 and SB 205. He pointed out that the issues of public health, preventive medicine, wellness, and many others were present in SB 284 due to public input. Number 217 Dr. Tom Nighswander acknowledged that SB 284 does not define a benefit package, therefore, the total cost is unknown. SB 284 also does not define a financing plan. Although those issues are not addressed, there is a process set up to deal with those issues. He noted that SB 284 is a phased approach to health care reform which develops an infrastructure allowing the ability to address anything proposed at the state or federal level. He stated that conceptually SB 248: (1) would provide universal coverage of a yet to be defined standard benefit package to all Alaskan residents with the services provided by all licensed practitioners in the state; (2) would focus on public health, preventive medicine, and wellness; (3) would protect the individual choice of a provider; (4) would initially establish a voluntary mechanism for cost control which states that if it is not effective after three years, some mandatory procedures would be invoked; (5) would establish a peer group which monitors quality, utilization, and cost. He recognized that SB 284 does not prohibit a resident from purchasing services beyond what was provided in the benefit package, but that would be paid for by the individual. Dr. Tom Nighswander explained that SB 284 creates a health insurance corporation in the state. The corporation would create and implement a public process to tackle the issues of the benefit package and various financing options. The corporation would also collect data regarding the costs of services and the type of services being provided around the state. He emphasized that half the residents of Alaska have services provided by the federal government. This lead to the request of waivers so that the corporation would be able to obtain cost and utilization data from various federal programs in existence. He emphasized the mandates of the corporation regarding public health, wellness, and a long term care plan. He explained that the incentives for primary care providers to work in rural areas is important to Alaska. Number 323 Dr. Tom Nighswander discussed the market based single payer system of the cost control section. A single payer system implies a health insurance fund which would be channeled through a single payer mechanism. This single payer mechanism could be the corporation or an insurance company which would administer the plan and pay the premiums. He explained that the market based aspect was submitted by the physicians and hospitals to introduce free market competition. The market base would require all providers, both physicians and hospitals, to publish and make available to the customer the prices for their services. Dr. Tom Nighswander continued his discussion of the cost control section. He stated that there would be a base year of the cost of providing health care based on the data received from the first years of the corporation. This base year would become an expenditure target with escalators, but the target could be modified in the future based on the factors listed in SB 284. He noted that there would also be subtargets, a target to be met each year, within the budget. Dr. Tom Nighswander noted that regarding cost control, SB 284 expects that providers of care would voluntarily comply with expenditures. This mechanism for voluntary compliance is not detailed in SB 284. He pointed out that the health care community in Alaska is a very connected network. He also mentioned controlling quality and utilization with this voluntary compliance idea. He believed that the best way to address the issue of quality would be through peer groups. Dr. Nighswander explained that if the voluntary compliance does not work substantially after three years, mandatory expenditure targets would be imposed by SB 284. Number 401 SENATOR DUNCAN expressed appreciation for Dr. Nighswander's work with SB 284. He pointed out that although SB 284 would not immediately accomplish the three issues Dr. Nighswander noted earlier, they are recognized and given deadlines by SB 284. He noted that SB 284 defines a cost control system and places a deadline. SB 284 also recognizes universal coverage as the guiding principle or purpose leading to the market based single payer system. SB 284 speaks to designing of the system. He emphasized the providers and public involvement utilized in SB 284. SB 284 specifies the public involvement process. He noted that the following licensed providers: marital and family therapists, direct entry midwives, physician assistants, clinical social workers, emergency medical practitioners, and intensive care paramedics were not included in SB 284. Those exclusions were an oversight and would be corrected. SENATOR LEMAN suggested that there are less than 76,000 Alaskans without health care coverage. He stated that regardless of the number of Alaskans without health care coverage, among those are people who choose not to have coverage. He recognized that all Alaskans would pay for health care coverage in this pool SB 284 creates. He expressed interest in the issue of personal responsibility and hoped that SB 284 did address this issue. He noted that Clinton's national plan does not seem to recognize the difference in lifestyle choices. He said that recognition of lifestyle choices with varied rates according to your choice would be a more attractive package. In response to Senator Leman's concern, DR. TOM NIGHSWANDER stated that co-payments are included in SB 284. SENATOR LEMAN asked if SB 284 addressed those people seeking health care outside the state of Alaska. DR. TOM NIGHSWANDER said that issue was not specifically addressed in SB 284. Dr. Nighswander explained that the intent of SB 284 was to address health care provided in the state of Alaska. SENATOR DUNCAN explained that SB 284 specifies all the provider groups so that their services could be considered under the benefit package. The benefit plan would encourage the use of in-state facilities and providers. He stated that a physician who does not provide a service or believes the patient would be better served outside the state can refer the patient outside the state. DR. TOM NIGHSWANDER said that would have to be allowed in the benefit plan. He clarified that generally those cases would be highly specialized services that are not provided in the state of Alaska. Number 513 SENATOR LEMAN suggested that paying for transportation costs should be limited to those cases Dr. Nighswander mentioned regarding referrals. DR. TOM NIGHSWANDER agreed with Senator Leman. SENATOR DUNCAN emphasized that the focus on transportation was intended for the costs of transport from a rural area to a provider's location. Senator Duncan stated that Clinton's federal plan does not address Alaska's transportation realities, which is one reason Alaska should consider its own plan. SENATOR LEMAN asked what happens to those satisfied with their current coverage, could there be mandatory enrollment. DR. TOM NIGHSWANDER anticipated that a standard benefit package would cover all Alaskans. SENATOR DUNCAN clarified that under the market based single payer system every resident of the state would have the same comprehensive benefit package available to them or provided for them. Senator Duncan asserted that a resident could purchase supplemental insurance, but that resident would continue to finance the single payer system. SENATOR LEMAN questioned who will pay and how will they pay. DR. TOM NIGHSWANDER agreed that the debate will focus on that issue. SENATOR MILLER asked what would be the incentive or disincentive for price shopping with the market based single payer system. DR. TOM NIGHSWANDER noted that although the amount of co-insurance has not been decided, it could be substantial which would promote price shopping. SENATOR SALO expressed shock that half of all Alaskans were federally insured in some way. She pointed out that in some cases, like Southeast Alaska, travelling to Seattle is a closer and a more economical option. She suggested an exchange system. She requested more explanation of preventive care and public health. TAPE 94-8, SIDE B Number 580 DR. TOM NIGHSWANDER explained the different categories of preventive health measures. SB 284 recognizes the need for preventive medicine, wellness, and public health; however, SB 284 does not define them. He commented that when individuals and communities take control of their personal health, the public health issues will advance. SENATOR SALO stated that she believed health care should be reformed due to reading that over 20 percent of the medical dollars spent in America are spent in relation to collecting the bill. She further noted that only 2 percent is spent on preventive medicine. She asked if those figures were correct. DR. TOM NIGHSWANDER said that was well documented. He discussed a self-insurance example. He stated that the single payer system tries not to create a bureaucracy. He acknowledged that there are savings to be had. SENATOR DUNCAN agreed with Senator Salo on the need for public health. He pointed out that pages 16 and 17 of SB 284 state that the corporation would develop a public health improvement plan with a number of responsibilities. DR. TOM NIGHSWANDER commented that private discussions posed having dual responsibilities of the commissions in the future. SENATOR DUNCAN addressed the sticker shock issue. He stated that sticker shock will occur if nothing is done. Health care costs in the future will increase if the system is not reformed. He noted that most studies propose a rerouting of money. The outset may have higher premiums, but they will be less than a non-reformed commission. CHAIRMAN RIEGER asked Dr. Nighswander to compare today to twenty years into the future. DR. TOM NIGHSWANDER noted the many technological advances regarding the changes in health care. Number 490 CHAIRMAN RIEGER requested an estimate of the increase in cost due to increased consumption. DR. TOM NIGHSWANDER discussed the Hawaii plan where a common benefit package was implemented for most all of the residents. The results were excellent in comparison to other countries. CHAIRMAN RIEGER asked for an estimate of what the cost is likely to become; is consumption going to grow per capita due to better technologies. DR. TOM NIGHSWANDER pointed out that often a technology is adopted before its proven efficacious. He explained some technologies that illustrated his point. He did not have a specific figure. He stated that other industrialized countries spend less of their GNP with the same outcome as the U.S. and in some measures better results. He emphasized that more public satisfaction occur in those other countries as compared to the U.S. SENATOR SALO suggested reviewing the economic aspect of preventive care. DR. TOM NIGHSWANDER posed mammograms as an example of preventive care and its economic benefits. CHAIRMAN RIEGER inquired of Dr. Nighswander's opinion on the market base with published prices. He asked if the difference in costs of providers would be fractionally covered by the proposed policy or would the full incremental cost be covered. DR. TOM NIGHSWANDER stated that the full incremental cost would be covered if it falls within the price range structure, the individual may have to pay a little extra. SENATOR DUNCAN reiterated that if a service is covered in the benefit package then the reimbursement would be at the level stated in the package. He expressed his belief that publishing fees would bring the fees closer together. Number 370 CHAIRMAN RIEGER asked if Dr. Nighswander had a position on the rate schedule of the plan. DR. TOM NIGHSWANDER noted that there are some provisions for some different rates. CHAIRMAN RIEGER referred to page 5 lines 23 and 24 where the varying rate depends on family status. Chairman Rieger asked how far would family status be subdivided. SENATOR DUNCAN labelled this section as a transitional section. He explained that when a single payer system is achieved the rates would not vary. There would not be dependent coverage either. CHAIRMAN RIEGER asked, "how is the child going to pay that child's premium?" SENATOR DUNCAN said, "That would be part of the financing mechanisms that would be determined. What I'm saying is, I for example, my policy wouldn't cover my dependent's. Every resident of the state would have an insurance policy under a single payer system. Everybody would be covered." SENATOR RIEGER said, "Someone is going to pay for that." SENATOR DUNCAN said, "Of course they're going to pay for it, but that would be part of the financing of how you provide a package for 590,000 Alaskans whether it's a payroll tax or a sales tax, or an income tax. But it's not necessarily separate premiums, except if the individual had to pay a 10 percent co-payment. Then of course, I as a parent would probably pay for my three year old's co-payment. I don't think I would expect them to do that. This was the move towards community rating that we talked about in insurance reform that would be in the transitional phase. Although I might add that because we are going to have supplemental insurance allowed, that would have continued to apply even after the single payer system because supplemental insurance would be available to people over and above what the comprehensive package was." CHAIRMAN RIEGER inquired if the individual would get the same coverage independent of personal habits. DR. TOM NIGHSWANDER said that was not addressed directly; SB 284 has a standard benefit package for everyone. SENATOR DUNCAN explained that part of the corporation's responsibilities would be to design incentives to encourage healthy lifestyles through wellness programs and the like. He envisioned that the individual's deductible could be different if enrolled in a wellness program. DR. TOM NIGHSWANDER agreed that the language of SB 284 allows flexibility to do such. CHAIRMAN RIEGER asked what would happen with the money that the federal government uses in covering over half of all Alaskans. DR. TOM NIGHSWANDER said that this is a phased approach. Dr. Nighswander explained that initially only federal waivers would be used to obtain cost and utilization information. Dr. Nighswander noted a system where federal money would go to a central resource in the state, like the health corporation. Then the state would become the grantor of grants in the system now in place. Number 285 CHAIRMAN RIEGER asked if this bill speaks to practice parameters. DR. TOM NIGHSWANDER said that it only speaks to practice parameters in peer control of utilization and quality. CHAIRMAN RIEGER asked if the definition of health care providers and services are the same definition the federal government uses when they say that health care is 14 percent of GDP. DR. TOM NIGHSWANDER said that the definitions would be the same if long- term care was included. SENATOR DUNCAN pointed out that it was included on line 4 page 19. DR. TOM NIGHSWANDER noted that the federal definition also includes mental health services, but the big issue would be the long-term care. SENATOR SALO asked if Dr. Nighswander felt that encouraging individuals to use existing technologies was a public health issue. DR. TOM NIGHSWANDER said that he agreed and that it could also be viewed as a community issue. SENATOR SALO questioned what technology existing now or in the future would be affordable and useful in terms of prevention. She asked Dr. Nighswander's opinion regarding whether there will be more or less incentives to move forward under this reform. DR. TOM NIGHSWANDER stated that there should be built-in incentives to encourage healthy lifestyles. SENATOR SALO discussed differing views on the healthy lifestyles aspect of health care. CHAIRMAN RIEGER asked if there should be a mandatory co-payment on consumption of all but the most fundamental health service. DR. TOM NIGHSWANDER said yes. Dr. Nighswander explained that over utilization is an issue and there has to be some sort of disincentive which supports allowing co-insurance. Dr. Nighswander noted that some types of preventive issues should be easily availed without co-insurance being an obstacle. SENATOR SALO asked if there was discussion on co-payments being financial obstacles in some cases. DR. TOM NIGHSWANDER informed the committee that this issue was addressed. He explained that a waiver could be used based on some type of income test in which the co-payment could be augmented by other funds or even waived. Number 180 CHAIRMAN RIEGER noted that on Friday public testimony will be heard on both health care bills. He suggested that anyone with lengthy testimony could prepare written comments so that everyone could be heard in a timely manner.