SB 45-DIRECT HEALTH AGREEMENT: NOT INSURANCE  3:31:20 PM CHAIR WILSON announced the consideration of SENATE BILL NO. 45 "An Act relating to insurance; relating to direct health care agreements; and relating to unfair trade practices." 3:31:40 PM EMILY RICCI, Deputy Commissioner, Department of Health, Juneau, Alaska, introduced herself. 3:32:04 PM CHAIR WILSON asked why SB 45 did not include Medicaid. He asked the department to discuss the differences between Medicare and Medicaid as they relate to SB 45. 3:32:44 PM RENEE GAYHART, Director, Health Care Services, Department of Health, Juneau, Alaska, stated that Medicare is not needs-based and is funded entirely by the federal government. It was based on being 65 years old and other conditions. Recipients of Medicare pay deductibles, copays, and premiums. On the other hand, Medicaid is fully needs-based. It is funded jointly by the federal and state governments. Medicaid coordinates benefits, so it is the payer of last resort in all cases. The payer of last resort means all liabilities, such as workman's compensation, group insurance, and court orders pay before Medicaid. The only payer that would come after Medicaid would be Indian Health Services (HIS). Centers for Medicare and Medicaid Services (CMS) cannot add direct contracting. CMS did an innovative project in 2020 that allowed Medicare recipients to enter into direct healthcare agreements. The project benefited Medicare recipients because they paid deductibles and premiums. Since Medicaid is the payer of last resort, that advantage does not apply. CMS approved Medicaid on a limited basis for managed care states. Alaska is not a managed care state; it is a full fee-for- service state. 3:35:31 PM At ease. 3:36:47 PM CHAIR WILSON reconvened the meeting. 3:36:53 PM SENATOR DUNBAR said he spoke with some primary care physicians who expressed concern that the direct healthcare model skims wealthy people away from clinics that accept Medicaid. In effect, it renders those clinics unsustainable and forces them to change their business model. He asked if there is evidence that SB 45 would lead to a reduction in offices accepting Medicaid. 3:38:21 PM MS. RICCI replied that it is difficult to predict how utilization would shift providers' business practices. She said she would look at other states and report to the committee. States that may have leveraged direct health care programs for Medicaid beneficiaries are states with managed care, which is different than what SB 45 contemplates for Alaska. Alaska is a fee-for-service state so it would need a programmatic demonstration project. 3:40:03 PM SENATOR DUNBAR reiterated that he would like to know whether the number of doctors accepting Medicaid decreases in states that allow direct health care agreements, especially those analogous to Alaska. 3:40:43 PM SENATOR GIESSEL said the government cares for seniors and aids children. She stated her understanding that there is no copay mandated for a Medicaid patient who visits a doctor because Alaska is a fee-for-service state. However, Medicare is a program that a provider opts into. She asked whether it is true that a provider can opt out of Medicare and offer direct care services to senior citizens over age 65. MS. RICCI said that is true. 3:41:50 PM SENATOR GIESSEL opined that the direct care model would fill a crucial gap in Anchorage due to the closing of the Regional Senior Care Clinic. In Alaska, Medicaid pays a higher reimbursement than Medicare. Providers avoid senior care because it is complex, and the reimbursement is extremely low. She opined there is likely no risk of Medicaid patients switching to a direct health care provider since they pay no money for service. The direct care model benefits seniors because most healthcare professionals have opted out of Medicare. 3:43:50 PM SENATOR GIESSEL asked if the committee could hear from Dr. Erickson, a direct care services physician. 3:44:17 PM DR. WADE ERICKSON, Direct Care Services Physician, Capstone Family Medical, Wasilla, Alaska, introduced himself. 3:44:26 PM SENATOR GIESSEL asked what Dr. Erickson's rationale was for offering direct health care agreements and the pros and cons. 3:44:41 PM MR. ERICKSON said forty-four states offer the direct health care model. It has successfully created access for underinsured, small businesses, and individuals who do not meet the income thresholds for Medicaid or have enough money to purchase a plan on the individual market. He stated that his attorney informed him that the direct health care model falls under a gray area of Title 21. Therefore, he decided to work on cleaning up the gray area before starting a larger medical practice. He said many people and businesses have expressed interest in the direct care model, and he is hopeful it will be another means for people to access affordable care. 3:47:05 PM SENATOR GIESSEL asked what benefits the direct health care model offers seniors. 3:47:16 PM MR. ERICKSON said there is a significant need for primary care physicians for seniors in Anchorage. Direct health care agreements are permissible with Medicare if the physician is not a Medicare-enrolled provider. He said other states are doing Medicare pilot programs. 3:48:17 PM SENATOR TOBIN said SB 45 prohibits businesses from negotiating direct healthcare agreements for their employees. She asked if employers would be paying the periodic fee for differing employee agreements or if there would be a collective negotiation presented to the employer by the employees. 3:48:55 PM MR. ERICKSON replied that, for practical purposes, an employer generally approaches a clinic with the number of employees needing a plan. Usually, the human resources department of a small company or the owner presents an offer to the employees. 3:49:36 PM CHAIR WILSON said he knows a behavioral health employer that offers a cash health care benefit. Employees can use the money as they choose, but the intent is to offset the cost of health care needs. MR. ERICKSON stated he had offered cash benefits for health care to his employees. 3:50:05 PM SENATOR TOBIN asked how an employee would obtain affordable medications, such as birth control or asthma inhalers. 3:50:26 PM MR. ERICKSON replied that employees can contract with various health care providers under SB 45, such as behavioral health care providers, primary care providers, dentists, optometrists, and pharmacists. An employee could also look for a primary care provider that offers a generic prescription drug benefit. There are organizations in the Lower 48 working to combine drug benefits with direct primary care as an add-on service. However, most providers do not offer a pharmaceutical benefit; they provide a prescription to a pharmacy. Physicians typically discuss affordable and available medication options with patients. Most direct primary care providers in the Lower 48 can provide patients affordable access to the top 100 drugs they prescribe. He opined that there will always be issues with high- end drugs for cancer and autoimmune diseases. Patients will need insurance for these drugs to be affordable. Luckily, most people do not require high-end drugs. 3:53:39 PM CHAIR WILSON set an amendment deadline and held SB 45 in committee.