SB 109-MEDICAID COST CONTAINMENT & PRIORITY LIST  CHAIR FRED DYSON announced SB 109 to be up for consideration. COMMISSIONER JOEL GILBERTSON, Department of Health and Social Services (DHSS), said SB 109 is the third bill in the Medicaid package that is necessary to bring about fiscal stability to the Medicaid program for Alaska. He explained: It would eliminate the Medicaid options list found in AS 47.07.035. This establishes a priority list of how the department will go about bringing cost savings in years in which the legislature does not appropriate sufficient funds to carry out Medicaid operations for an entire 12-month period. Under the options list, if the Legislature does not allocate funds to fully fund the Medicaid program for a year, the department is directed to work its way down the options list to achieve the cost savings necessary to effectively manage the program within the amount of money that is appropriated by the legislature. The administration's position is that while there must an effort to administer the program within the confines of the amount of funds that are appropriated by the Legislature, the options list is not the most effective or the most beneficial way of going about cost containment. The options list itself is not reviewed annually and is not necessarily a list of the most beneficial ways of going about cost containment. As an example, he noted DHSS would have to eliminate prescription drug coverage and wheel chairs before it could touch the eligibility standards for individuals with high incomes. He continued: The Governor's bill will replace that language with broad direction to the department to engage in cost containment necessary to achieve the same level of savings and will provide instead, as guidance, that first the department must pursue all other reasonable cost containment measures before eliminating any eligibility group or service. Second, that the department should aggressively pursue strategies to maximize federal financial participation in the Medicaid program and third, that the cost containment decision should be made in the manner that best reflects the needs and interests of eligible Medicaid populations. We believe with this guidance and direction, the department will have greater flexibility in achieving the same level of cost savings without going through an options list that it is the administration's position is not effectively managing the program. It doesn't really balance the relative benefits of cost containment tools and, in addition, takes things off the table until other things are removed first, which we believe further exacerbates the acute care costs, such as removing prescription drug coverage before you would eliminate an eligibility population who is at the top level of our Medicaid program. The intent of the options list is preserved in the Governor's legislation, which is directing the department to initiate cost containment measures to live within its means and what is appropriated to it.... SENATOR GRETCHEN GUESS asked if the cost containment measures have to be exhausted within the BRU or the department and what the burden of proof is before services are dropped. COMMISSIONER GILBERTSON responded that the department has regulatory authority to enact a number of cost containment measures that bring about large savings to the Medicaid population without actually affecting eligibility or a service that's provided, for example pharmaceutical usage or reimbursement rates to providers. This would be done department- wide where Medicaid services are provided. SENATOR GUESS asked how he would make those decisions. She was concerned that the department would decide who got what and when. She asked, "How are you going to decide dropping off a population versus dropping off a procedure and where is that in the bill? It makes me very nervous to turn over that authority...." She also wanted to know if groups of people would be ineligible or individuals would be ineligible. COMMISSIONER GILBERTSON said DHSS is including a fiscal note that shows no savings, because the department doesn't anticipate requiring any additional cost containment if the budget passes in the form submitted by the Governor. He understood her concern, but thought the department is in the best position to engage in that type of policy decision-making. He thought those decisions would be a burden for the Legislature. As they move forward, his strategy is to maintain cost savings within the program without going towards eligibility groups. He didn't think that is necessary. He remarked: We can bring about tremendous savings by moving forward on a broad agenda to maximize federal resources to work with our travel partners to see ways we can capture a greater amount of federal revenues for carrying out the trust responsibility the federal government has for Alaska Native Medicaid beneficiaries and working with the Denali Commission to try and build up capacity within the tribal health care system. Also, we can have tremendous savings by looking at the way we provide services in doing case management and looking at using preferred drugs that stay away from eligibility populations. Naturally, if funds are not appropriated to allow us to run the Medicaid program even after these cost containment measures are moved forward, we'll have to do something.... SENATOR GUESS said she trusted that during any administration, the department would try to do everything it can before it removes people from the rolls or removes procedures, but he is asking the legislature to hand over that decision-making authority to the department. She questioned, "How would costs and benefits be weighed in the department?" She also wanted clarification on whether DHSS would determine that individuals not receive a procedure or group of procedures or groups of individuals. MR. LABBE responded: The Medicaid program structure provides for coverage for groups of individuals that are either mandatory or optional in categories of service rather than individual procedures. For instance, we may not cover physical therapy for, in this case, adults. Children are mandatory for the services. I think one of the things I was concerned about is if we had a large budget reduction and we're starting to cut off all these services, we're only cutting off services for the adult population - senior, disabled adult. We're not touching the children. At the same time, the committee has been discussing reducing eligibility levels for kids. It may make more sense to do a balance and the way the list is constructed, you would never get to the other discussion of eligibility groups until you essentially have gone through all of the services. So, you would eliminate wheel chairs and prescription drugs for some of our more frail population and may still be covering higher income individual children, which is why I've not felt this is an effective tool for a long time. TAPE 03-14, SIDE A    MR. LABBE said they can make decisions on groups, broad eligibility guidelines and on services, but the department doesn't have the ability to make discrete decisions on one individual's access to a single procedure. SENATOR GUESS noted that the bill contains no requirement that the department submit a report to the legislature yet it makes a big change in policy in one year. She recommended that a report to the legislature be required. CHAIR DYSON thought that might go into the "Measures" section. MR. ROBERT BRIGGS, staff attorney, Disability Law Center of Alaska, Juneau, raised some important points. If the bill passes, the department's exercise of discretion will still be constrained by the Administrative Procedures Act and the department must comply with federal mandates to provide services that are sufficient in amount, duration, and scope to accomplish the purposes of the Act. However, this bill raises potential constitutional issues. The Alaska Supreme Court in the case of State v. Fairbanks North Star Borough, 1987, found the issues of delegation of legislative appropriation of authority and separation of powers unconstitutional. There is also the potential argument that section 3 of the bill raises equal protection problems. It basically talks about how cost containment measures will be implemented and appears to grandfather-in the benefits of those people who were lucky enough to have their benefits approved and in place before the cost containment measures are implemented. CHAIR DYSON asked if Mr. Briggs was suggesting that this approach would be dubious if scrutinized by the court if the department didn't do a fair job of looking after the interests of people. MR. BRIGGS said he just wanted to raise the question and hedged that his research is dated and relates back to the pro rata reductions bill. CHAIR DYSON pointed out that this bill is different. MR. BRIGGS agreed. SENATOR GREEN moved to pass SB 109 from committee with individual recommendations and the accompanying fiscal note. SENATOR DAVIS objected. The motion to move SB 109 from committee carried with SENATORS GREEN, WILKEN and DYSON voting yea and SENATORS GUESS AND DAVIS voting nay.