HOUSE FINANCE COMMITTEE January 27, 2016 1:32 p.m. 1:32:00 PM CALL TO ORDER Co-Chair Neuman called the House Finance Committee meeting to order at 1:32 p.m. MEMBERS PRESENT Representative Mark Neuman, Co-Chair Representative Steve Thompson, Co-Chair Representative Dan Saddler, Vice-Chair Representative Bryce Edgmon Representative Les Gara Representative Lynn Gattis Representative David Guttenberg Representative Scott Kawasaki Representative Cathy Munoz Representative Lance Pruitt Representative Tammie Wilson MEMBERS ABSENT None ALSO PRESENT Russ Webb, Chair, Board of Directors, Alaska Mental Health Trust Authority; Jeff Jessee, Chief Executive Officer, Alaska Mental Health Trust Authority; John Morrison, Executive Director, Trust Land Office; Valerie Davidson, Commissioner, Department of Health and Social Services; Sana Efird, Assistant Commissioner, Department of Health and Social Services. SUMMARY FY 17 BUDGET OVERVIEWS: ALASKA MENTAL HEALTH TRUST AUTHORITY DEPARTMENT OF HEALTH AND SOCIAL SERVICES Co-Chair Neuman discussed the meeting agenda. ^FY 17 BUDGET OVERVIEW: ALASKA MENTAL HEALTH TRUST AUTHORITY 1:32:43 PM RUSS WEBB, CHAIR, BOARD OF DIRECTORS, ALASKA MENTAL HEALTH TRUST AUTHORITY (AMHTA), introduced other AMHTA directors. He relayed that he was pleased to present to the committee in his role and he believed the trust was a great organization. He added that he would be much more pleased if the price of oil was high. However, he did recall that when he had been the deputy commissioner of the Department of Health and Social Services, oil had been under $20 per barrel, but there had been a lot of it. He provided a PowerPoint presentation titled "House Finance Committee" dated January 27, 2016 (copy on file). He introduced his colleagues (listed on slide 2): Trustees · Russ Webb, chair · Mary Jane Michael, vice chair · Larry Norene, secretary · Laraine Derr · Paula Easley · Carlton Smith Mr. Webb acknowledged AMHTA's new trustee Jerome Selby. He provided background information about Mr. Selby. Additionally, he introduced executive directors of the trust's advisory boards that included the Advisory Board on Alcoholism and Drug Abuse, the Alaska Commission on Aging, and the Governor's Council on Disabilities and Special Education. He turned to slide 3 titled "Trust Beneficiaries": Approximate Number of Trust Beneficiaries Mental Illness: 34,000 Developmental Disabilities: 13,000 Chronic Alcoholism/Substance-Related Disorders: 20,000 Alzheimer's disease and related dementias: 6,000 Traumatic Brain Injury: 11,000 Mr. Webb added that the number of individuals with Alzheimer's and related dementia was probably growing quickly. Representative Gattis asked if the categories on slide 3 overlapped. She asked how many people the trust was actually serving. Mr. Webb answered that the figures (on slide 3) were an estimate of the number of beneficiaries in the population. He detailed that each of the programs served a different number. He agreed that many of the trust's beneficiaries had co-occurring conditions, but he did not have a precise number. JEFF JESSEE, CHIEF EXECUTIVE OFFICER, ALASKA MENTAL HEALTH TRUST AUTHORITY, agreed that the trust did not know exactly how many people there were with co-occurring disorders, but there was definitely overlap between the categories (on slide 3). Representative Gattis asked if any of the numbers shown on slide 3 were overlapping. She noted that the slide showed a total of 84,000 individuals. She wondered if there could possibly be far fewer individuals because they had co- occurrences. Mr. Jessee answered that there could be overlap, but it was not substantial. He detailed that the numbers on slide 3 were categorized by the primary diagnosis. He continued that it was synthetic national data and there was not a way of actually counting beneficiaries in Alaska. Representative Gattis would follow up on how the number had been arrived upon. Mr. Webb addressed slide 4 titled "Established Focus Areas": 1. Disability Justice 2. Substance Abuse Prevention & Treatment 3. Beneficiary Employment & Engagement 4. Workforce Development 5. Housing and Long-term Services & Supports 1:39:13 PM Co-Chair Neuman asked members to hold their questions until after the presentation. Co-Chair Thompson asked how many of the trust's beneficiaries were currently incarcerated. Mr. Webb replied that on any given day trust beneficiaries could account for up to 65 percent of the correctional population. Over the course of the year they accounted for about 40 percent. Mr. Jessee moved to slide 5 and discussed the trust's current priorities to help the legislature build a sustainable budget. The trust's beneficiaries were very impacted by the legislature's action on the budget. He stated that if the legislature could not build a sustainable budget the trust's beneficiaries would not have access to needed services. The two primary areas the trust saw tremendous opportunity for savings and partnering with the legislature were Medicaid redesign and justice reinvestment. He elaborated that the trust believed the areas were interrelated in a significant way. He pointed to a bubble chart on slide 5 and indicated that behavioral health system reform and Medicaid expansion provided a significant opportunity from a programmatic and budget standpoint to do the necessary redesign and reinvestment in order to bring the budget areas under better control. Mr. Webb addressed slide 6 titled "Why is the Trust so Engaged with Medicaid Redesign?" He shared that when he had worked for DHSS, the department had already begun - at $8.00 per barrel oil - pursuing a strategy to refinance services funded with General Funds (GF) only, with Medicaid, in part to gain the benefit of the federal match and cut down with GF costs. It was a strategy the state had continued to pursue with what he believed was everyone's blessing. He stated that systems serving trust beneficiaries were currently funded primarily through Medicaid. He furthered that Medicaid services represented the largest portion of the trust's comprehensive integrated mental health system of care. He stressed that AMHTA was committed to the sustainability of the Medicaid program. He emphasized that it had to be sustainable or services for trust beneficiaries would fall apart. There were currently opportunities, which had not existed when the department had first begun Medicaid refinancing, to change the way services were structured to obtain better outcomes. He discussed that there were ways to gain greater federal participation, which were part of the redesign process. Mr. Webb stressed the importance of making Medicaid work. He furthered that because of the way the federal program was structured there were a number of things that had prevented the state from making the best use of the Medicaid funds. For example, when the state had refinanced services with Medicaid some individuals became ineligible in the behavioral health system. He detailed that there were critical populations (i.e. young men at high risk for involvement with criminal justice system), in many ways due to substance abuse, traumatic brain injuries, and mental illnesses, who could not access services because they could not get through the Medicaid door; therefore, some of the services had fallen off. He stressed that the state needed to make the system work for getting the needed outcomes at a sustainable level. 1:44:26 PM Mr. Jessee addressed slide 7 titled "Medicaid Redesign": · The Trust has invested over $600,000 this year on various contracts to provide a strong base of information and options to help the state make strategic decisions regarding Medicaid redesign. Mr. Jessee relayed that the trust understood that the effort would be a long-term process. He added that the department had already been in the process of looking at reforms and other ways of transforming the state's Medicaid system. He noted that the process would have to be accelerated going forward. He furthered that the trust knew it was a long haul, but it was used to that. He explained that AMHTA bridged administrations and legislatures. For example, the Bring the Kids Home program had been an eight- year effort across three different administrations. Mr. Jessee turned to slide 8 and addressed that funding had been used for technical assistance contracts to look at Medicaid reform from a national perspective. He elaborated that AMHTA had retained the services of Charles Curie (former director of the federal Substance Abuse and Mental Health Services Administration under the [George W.] Bush Administration) who had taken a particular interest in Alaska and had spent time in its rural areas. He furthered that Mr. Curie was currently a consultant for many states going through Medicaid reform. Mr. Curie was consulting with Alaska particularly in behavioral health areas to help determine lessons the state could take from other states. He noted that Mr. Curie had been very helpful to AMHTA and DHSS. 1:46:36 PM Mr. Jessee addressed slide 9 titled "Redesign...Now and in the Future." He noted that just because the reforms were under consideration did not mean they would all happen at once. He read from the slide: A number of reforms are already under consideration · 1915 (i)/(k) state plan options for Home-and Community-Based services · Primary Care Access Initiative · Behavioral Health Access Initiative · Data Analytics/IT infrastructure · Pilot Accountable Care Organizations · Alternative Benefit Plans for Expansion Population Mr. Jessee expounded that if services could be integrated into primary care, recipients would get better service, sooner, and at a lower cost. He stated that getting primary care on board with AMHTA beneficiaries was a high priority. He stressed that access to behavioral health services was a problem. They could not throw money at the services; therefore, it was necessary to determine how to increase effectivity and efficiency. He stated that it would not work if AMHTA could not collect and analyze data about the reforms as they were taking place. He cited Bring the Kids Home as an example and stated that nothing worked exactly how it was drawn up on paper; it was necessary to keep following and analyzing the data to make changes along the way. He stated that looking at how the state could start managing care would be critical to saving money. All of the items listed on slide 9 were already under analysis. He stated there were many more options. He relayed that the multitude of moving parts was challenging. He pointed to various forms of legislation and at least two major reports currently before the legislature (slide 10). He continued that somehow during the current session the items needed to be included in a Medicaid reform bill. He stressed that passing a bill was critical and AMHTA was willing to do anything to help facilitate the process. He believed that the Senate Finance Committee had appointed a subcommittee to look at the different bills and reports to determine putting legislation together. Mr. Webb addressed slide 12 titled "Why is the Trust so engaged with Justice Reinvestment?": · Trust beneficiaries account for more than 40% bookings and 40% of DOC population, each year · For felony offenses, Trust beneficiaries remain in jail twice as long as non-beneficiaries · Recidivism rates are approximately twice as high for Trust beneficiaries Mr. Webb elaborated that in some institutions the number of trust beneficiaries was as high as 75 percent. On any given day, 65 percent of inmates were trust beneficiaries. He believed that for misdemeanor offenses, trust beneficiaries spent 2.5 times longer in jail than non-beneficiaries. He referred to the governor's report on DOC related to deaths that had occurred in DOC (some of whom were trust beneficiaries). He explained that the victim and perpetrator in most recent death in Anchorage were both trust beneficiaries. He detailed that the victim had been under an AS Title 47 hold - due to alcohol or mental illness - and should not have been confined. The trust had been working on getting services in place to prevent individuals from getting into the criminal justice system; and if obtained to be treated well and safe and to get out as quickly as possible. He stressed the need for services in the community in order to help individuals succeed and stay out of prison. He emphasized that justice reinvestment was critical to AMHTA. 1:51:56 PM Mr. Jessee addressed how to keep beneficiaries from going back to jail on slide 13. The slide illustrated the three- legged stool model that included: housing, employment, and support for recovery. He moved to slide 14 titled "Justice Reinvestment": There is a critical intersection between criminal justice reform and Medicaid expansion and re-design in re-establishing access to behavioral health services for Trust beneficiaries at high risk of and with involvement in the criminal justice system. Mr. Jessee addressed some of the obvious savings. For example, the state saved money when DOC sent an inmate to a hospital to get them signed up for Medicaid in order for the federal government to pay most of the bill instead of using General Funds as it was currently doing. Many other parts were dependent upon looking at Medicaid as a way of funding many of the components. He furthered that DHSS was being proactive in working with the federal government to get some flexibility in the state's Medicaid program that could really help related to justice reinvestment. 1:53:19 PM Mr. Jessee addressed "What's Next?" on slide 15. He pointed to a visionary moment a couple of years earlier in the House Finance Committee where the co-chair [Co-Chair Neuman] had placed intent language in the budget that brought together the Alaska Housing Finance Corporation (AHFC), the Department of Labor and Workforce Development, and AMHTA to begin to address how to change the criminal justice system. He stated that the recidivism reduction plan had set the stage and started the momentum. He highlighted that the collapse in the price of oil had made recidivism reduction even more exigent. He addressed other items on the slide: · Recidivism Reduction Plan · DOC -Prisoner Reentry Initiative (AK-PRI) · Pew Public Safety Initiative, Justice Reinvestment Project · Criminal Justice Commission · SB 91 · Alaska Justice Information Center Mr. Jessee elaborated that he hoped a plan would incorporate as many recommendations from SB 91 (sponsored by Senator John Coghill) as possible. He addressed the final point on slide 15 and relayed that the joint funding of the Alaska Justice Information Center had come from the House Finance Committee. He detailed that the center allowed for the collection and analysis of the data about the justice reforms in order to be data driven and thoughtful as the system evolved. He explained that Medicaid reform and justice reinvestment were integrally related. Mr. Jessee spoke to the trust's long-term funding strategy on slide 16. He referred to talk he had heard from the legislature about the trust's propensity to come up with program ideas that used GF as a fund source, which created a challenge. He agreed that the trust did do some of that, which was one of the values of the trust; it was a venture capital fund that allowed AMHTA to try some ideas to determine what worked. He furthered that much of the trust's funding also went to long-term ongoing projects. He detailed that 39 percent of the trust's budget came through the state budget in the form of Mental Health Trust Authority Authorized Receipts (MHTAAR) and 25 percent came from authority grants. Between the two, 65 percent of the trust's budget was committed to long-term support of programs. He explained that there was not just a focus on the "next shiniest thing," but about supporting key parts of the mental health program. The trust recognized that the current year was a huge challenge for the budget. He addressed FY 17 operating increments on slide 17. The primary focus for the upcoming year was on information technology and telehealth service system improvements. The improvements were part of the effort to build a sustainable budget by using IT and telemedicine to reduce costs. The more the trust could do to serve people remotely would be a big cost saver. 1:57:56 PM Mr. Jessee addressed the FY 17 capital budget request on slide 18. He explained that the capital budget was not the normal bricks and mortar - most of the money was not for constructing things. For example, many of the funds for the Homeless Assistance Project and the Special Needs Housing Grant were for ongoing operating, which were granted annually for three-year periods. He stressed that it was absolutely critical that the capital budget remain in the budget because it accounted for a critical safety net for the trust's most vulnerable beneficiaries. He turned to slide 19 titled "Cash Assets at End of FY15." The pie chart broke out the trusts cash assets, which totaled $550 million. He detailed that the total included a combination of the original settlement, inflation proofing, Trust Land Office contributions ($100 million), Trust Land Office real estate acquisitions, unrealized appreciation, and budget reserves (the most critical part of the trust's budget). He explained that the budget reserves were needed for the trust to continue to make a payout in times of recession. Mr. Jessee relayed that the trust used a percentage of market value (POMV) strategy rather than relying on income, profit, or loss from year-to-year (slide 20). Currently the POMV for the trust's payout was 4.25 percent. The FY 17 anticipated income was presented on slide 21. He detailed that the payout equaled approximately $20 million. He explained that the prior year's average lapse was approximately $3 million. He noted that if an agency did not use all of the money the trust had allocated, the funds were deposited back into the fund and were available for reallocation by the trustees in future years. The land office average spendable income was over $4 million. The average interest was $187,000 and total anticipated income was almost $29 million per year. Mr. Jessee turned to slide 22 titled "Payout History." The chart illustrated that the payout had started at a fairly low level, primarily because the budget reserve was built up over time. As the reserve had grown and had been inflation proofed, trustees had been able to increase the payout. He pointed out that income had also increased over time. 2:00:59 PM Mr. Webb turned to slide 23 titled "Trust Land Office": GOAL: Match or exceed spendable income generated by cash investments KEY STRATEGIES: · Acquiring income-generating real estate · Exploring and marketing mineral resources · Land trade with Forest Service to increase marketable timber Mr. Webb stated that AMHTA understood that "we are all in this together." The trustees recognized that it was their responsibility to do everything possible to help generate income that the trust could use to provide services, supports, and venture capital for trust beneficiaries. He highlighted that the trust had 1 million acres of land, but half of the total only included subsurface rights. All of the impediments that hindered development of the resource base in Alaska applied to the trust just as they applied to the private sector. He added that the trust faced some additional challenges that the private sector did not necessarily face. He discussed that the trust had a good bit of principal and income generated by the Trust Land Office. The trustees recognized that the trust had to do more and had set an ambitious goal for the land office to match or exceed spendable income generated by cash investments (from non-cash investments). The trust had asked John Morrison (executive director of the Trust Land Office) to develop a plan to achieve the goal as quickly as possible over time, with the recognition that it would not occur over night. He noted that there would be interim goals along the way to ensure progress was made. JOHN MORRISON, EXECUTIVE DIRECTOR, TRUST LAND OFFICE, highlighted slide 24 titled "Trust Land Office Annual Revenue - FY1995-FY2015." The slide included a graph representing the income the Trust Land Office had generated since inception in 1995. He pointed out that in the 20 years the land office had generated $180 million in principal and income revenue. The land office mission was to maximize revenue for the trust; it made all of its resources decisions in the best interest of the trust and its beneficiaries. He shared that the office had taken on the mantra to diversify, develop, and defend the trust assets. He pointed to the left side of the graph (1995 to 2010) and noted that 2011 had been a pivotal year of change. He noted that the various colors on the bars represented income streams from different trust assets. He detailed that pink and green represented land and timber transactions, which were both non-repeatable events. The transactions had been large cash contributions of mostly principal that were available to be invested. However, he noted that once the land had been sold or the timber had been harvested it was gone. Beginning in 2010 and 2011 the land office had taken on an active engagement to diversify its income streams, specifically focusing on areas where it could generate predictable and repeatable income revenue, which was much more difficult to come by than one-time infusions of principal from the sale of an asset. Over time, the land office had developed from a typical land office towards a sophisticated, fixed asset model manager. 2:05:35 PM Mr. Morrison addressed a chart on slide 25 related to changing timber revenue from FY 95 to FY 15. The darker green portion of the chart represented timber revenue since inception compared to all other revenue shown in light green. The land office and been working with the U.S. Forest Service for many years in Southeast Alaska to exchange roughly 20,000 acres of trust land with 20,000 acres of forest service land across several communities. Much of the land the land office wanted to exchange was located in areas that were not as marketable as they would like; the land office hoped to trade it for other land including trees that would be marketable and harvestable. In the future, the trust expected to come forward with legislation to move the exchange forward. Additionally, the land office could not focus on any one resource base. He elaborated that at one point in time timber had provided plenty of revenue, but those days were gone. Mr. Morrison turned to a chart on slide 26 and addressed revenues versus expenditures. The chart illustrated principal revenue in blue and income revenue in green. He pointed out that the income revenue was always above operating expenses (shown in purple). The land office strived to specifically provide more income revenue than costs. He believed the land office was providing great value to the trust in its responsible management of the assets. He noted that the income revenue line was directionally correct with a continuous increase over time. 2:08:11 PM Mr. Webb thanked the committee for its time. Co-Chair Neuman noted that in the past there had been discussion on how treatment after arrest would impact recidivism. He asked for Mr. Jessee's thoughts on the issue. Mr. Jessee replied that a huge percentage of the state's jail population were pretrial individuals. He explained that most of the crimes were associated with substance abuse. He stated that if treatment could be delivered to the individuals at the point of entry into prison - when many of the individuals were highly motivated to get out of trouble by getting sober - it would be a huge piece of the long-term strategy to bring budgetary stability to the criminal justice system. He emphasized that the more the state could do to provide access to treatment before individuals even went to trial, would be a huge step forward. Currently there was not capacity to deliver treatment even to individuals who wanted the services. Co-Chair Neuman remarked on Mr. Jessee's earlier testimony that the first thing they were trying to develop was a recidivism reduction plan, which had been followed with work by Pew and beneficiaries' recommendations. He surmised that the next step would be to work towards allowing treatment after arrest. He stated that in many cases it took two years before a person was sentenced. He remarked that the goal was to provide people with opportunities to access treatment. Mr. Jessee agreed. Vice-Chair Saddler wondered how many beneficiaries knew they were beneficiaries. Mr. Webb answered that individuals receiving services knew they were beneficiaries. He did not have specific numbers for each of the various programs, but could work with DHSS to get the information to the committee. He believed there were many individuals who were either undiagnosed and did not know or who may be diagnosed but may not be aware they were a trust beneficiary. He did not know how to count that. 2:11:12 PM Representative Gattis referred to a person who had been in Goose Creek Correctional Center who had been released from prison in the past month. She elaborated that he was a military veteran with post-traumatic stress disorder. The individual had been fearful about leaving jail because he knew that without treatment he would probably reoffend. The individual had begged to receive treatment. She stated that it had been very difficult to figure out how to gain access to services. She emphasized the importance of improving the system. Representative Gara referred to a discrepancy between the number of people needing treatment and the available treatment. He believed there was a growing recognition in the legislature that the situation did not provide a cost savings. He wondered if there was a measurement on what the state and private sector would need to do to raise the level of available treatment to match the level of those needing it. He spoke specifically to heroin addiction and noted that many communities did not have the treatment available. He furthered that when individuals did not have access to treatment they committed felonies and made drug dealers more powerful. He asked about the specific treatment lag related to heroin abuse. Mr. Jessee answered that there was not an effective system to determine the overall unmet need. Many agencies did not keep a waitlist; therefore, it was not possible to track the number of people who had asked for services. He knew the lag was substantial, because they knew of many individuals who had sought treatment but had not received access. The key was to find the most efficient way to provide access to treatment, which was the reason they were looking at primary care, a funding mechanism, and some cost-effective systems that were not just stand alone silo programs. He stated that Medicaid expansion was a huge piece of the picture. He remarked that Medicaid expansion would apply to single individuals between the ages of 18 and 65 who did not have much money. He remarked that the cohort sounded like many of the individuals coming out of prison. He relayed that thousands of the individuals would be eligible for Medicaid under expansion. He addressed the heroin issue and stated that it was getting worse every day. He believed there was work to be done along the entire continuum, beginning with physicians and how they prescribe opioids. More importantly, was how physicians worked with their patients to get them successfully off opioids. He stated that even the treatment community was chasing the capacity issue. 2:15:54 PM Representative Gara addressed the lands issue. He stated that he was not a big fan of giving the Trust Land Office the most controversial lands to make money off of. He spoke specifically to the Chuitna Mine, which was now in the hands of the land office. He stated that many people knew the pros and cons of the specific project. He spoke to the litigation and permitting costs in defending opposition to the mine from fishermen and village residents. He asked if the land office paying for the litigation or if it was funded by the Department of Natural Resources. Mr. Morrison answered that as the land holder, the trust had a lessee pursuing the mine. If the land office was a party to the lawsuit it would bear the cost, otherwise it was not the land office's responsibility. He added that the land office was only the land owner and not a permitting agency. Representative Gara asked if the Chuitna Mine had cost the land office money. Mr. Morrison replied in the affirmative. He detailed that there had been some significant costs to the land office pertaining to staff time and resources, in addition to interaction with the attorney general's office. Representative Kawasaki thanked Mr. Jessee for serving on the Criminal Justice Commission and remarked on the importance of seeing the value in the continuum. He noted there were numerous criminal justice reforms coming through in tandem partly due to a rising corrections budget including options such as supervised release. He asked if the trust would be prepared for individuals coming out of the prison system. He wondered how to prevent recidivism once the individuals were out. Mr. Jessee answered that the trust and the departments had been working hard on the issue in a collaborative way. He spoke to the positive working relationship between the current [DHSS] department and other agencies. He noted that recently the commission had been lamenting that DHSS did not have a seat on the commission. He spoke to the importance of the relationship and collaboration between the different involved agencies. He stressed the importance of getting something done. Representative Kawasaki asked whether Mr. Jessee believed that if the bills including sentencing reform and supervised release pass that DHSS and AMHTA would be able to take up "that part, that sort of slack..." Mr. Jessee answered that a Medicaid reform bill also needed to be passed. 2:20:10 PM Representative Kawasaki asked for an explanation of income generating real estate (slide 23) related to the Trust Land Office. He asked if it was in-state housing or out-of-state acquisitions. Mr. Morrison answered that the land office's income generating real estate was solely focused on out-of-state acquisitions of a variety of different real estate. Co-Chair Neuman asked Mr. Morrison for a report on the land office's total land, leases, land for sale, and other in order to learn how the office operated. He asked for a report on the Chuitna Mine project and the associated costs. Representative Edgmon commended the presenters for providing a presentation focused on sustainable budgeting. He remarked that three-quarters of the state's inmates were in the non-violent category. He asked about the 60 percent portion of the prison population with mental illness. He queried what portion of the non-violent offenders struggled with mental illness. Mr. Webb answered that the commission had a report done related to inmate information and they would provide it to the committee. He did not recall the percentage or if the data was broken out by violent versus non-violent offenders. He recalled that it was primarily broken out into misdemeanor versus felony cases. He shared that he had been a probation officer in the past and his wife was currently a district court judge who ran the mental health court in Anchorage. He assured the committee that virtually all individuals in the mental health court were trust beneficiaries and many individuals in regular court hearings were trust beneficiaries as well. He noted that the vast majority of those offenders were non-violent. He stated that there were non-violent offenders who were held in corrections for lengthy time periods, sometimes awaiting a competency evaluation. He elaborated that sometimes a person was held longer in corrections awaiting an evaluation than they would if they were actually sentenced. He stated that it was a significant problem. He stated that trust beneficiary felons spent twice as long in prison as non-beneficiary felons, while trust beneficiary misdemeanants spent 2.5 times as long in prison when compared to non-beneficiary misdemeanants. He concluded that it was a significant portion of the overall corrections population and cost. 2:25:15 PM Mr. Jessee added that a large number of the non-violent offenders were in prison for drug or alcohol offences. He stated that the country had learned the hard way that it was not possible to imprison its way to solving the addition problem and the war on drugs. Additionally, it was very expensive. He stated that there were a significant number of people in prison for non-violent offences who were addicts and that prison was not helping them. Representative Edgmon noted that Mr. Jessee had placed emphasis on Medicaid expansion and its value to AMHTA. He asked about the trust's reach to beneficiaries and how expansion would allow services to stretch. Mr. Jessee answered that individuals who were now eligible had been unresourced [prior to Medicaid expansion]. He detailed that individuals going to a mental health center or substance abuse treatment provider were often told by providers that they only received a certain amount of grant money, lost money on every Medicaid person they served, and had to use some of their grant money to subsidize the low Medicaid reimbursement rate. He questioned how many totally unresourced individuals could be brought into service - the answer was not very many. He furthered that by increasing eligibility for what amounted to health insurance allowed providers to have a payment source to begin to build the capacity needed to serve people. He spoke to criminal justice reform and discussed that many individuals were in jail due to substance abuse issues. He discussed that DOC had begun to rebuild its treatment programs for individuals in prison, but if there was no support for recovery upon release from prison, the individuals would go back to prison. He stated that overlaying the Medicaid expansion population with the individuals coming out of prison indicated that it was the same group. He added that it was the group the state had to resource in order to have the capacity to do justice reinvestment. 2:28:13 PM Representative Wilson spoke about the timing of assessments. She wondered how much the state was spending on assessments (down the line versus pretrial) and whether there was follow up to determine whether treatment was received. She was interested to know how many more assessments would be needed in pretrial. She wondered about current treatment in jails. She knew there was very little treatment offered in Fairbanks jails. She wondered if individuals going through treatment received a certificate or other. She wondered how many of the trust clients were "mixed up" in the Office of Children's Services (OCS) process. She guessed that the figure exceeded 80 percent. She believed an area that was not discussed frequently was whether a person received appropriate treatment or merely treatment that enabled the state to check a box that treatment had occurred. She wondered if there was anyone following up with the clientele, she did not believe so. She discussed the state tearing families apart and the difficulty of putting them back together. She needed help to understand how AMHTA worked with that population, which was also competing for a limited amount of mental health treatment services. She reasoned that unless someone was keeping track, it would be very difficult to determine where the funds needed to go. She continued that it had nothing to do with Medicaid expansion; the group currently qualified for Medicaid. She wondered if AMHTA had looked at the specific population. Mr. Webb replied that he had been a child protection social worker in the past. He affirmed that when AMHTA had looked at its cases, approximately 80 percent involved substance abuse on the part of the parent or caretaker. He stated that children's mental health was covered with Medicaid; many, but not all parents had Medicaid coverage. He stressed that the capacity issue was the big problem. He questioned whether there was capacity to provide appropriate treatment for parents when it was needed and whether the individuals would accept the treatment. He relayed that he had learned from his past experience that the state did not have the capacity. He did not know the current figure related to kids placed in out-of-home care. He stated that it used to be much too long; it was also expensive. He agreed with statements made by Representative Wilson. Many of the children ended up in the juvenile justice system and later the adult criminal justice system. He had personally witnessed the situation from a child's early formative years, through the juvenile justice system, and on to the criminal justice system. He emphasized that it was a common occurrence. 2:33:20 PM Representative Wilson remarked that the state spent a lot of money on parents in court when nothing was truly happening. She did not believe the money was spent in an intelligent way. She stated that the parents did not have an advocate. She stressed that it was the Office of Children's Services, not parents' services. She believed it was time to place more focus on the parents, who she believed were doing their best. She stated that if the money currently being spent could be channeled to the right places, it could stop the current trend, and the state would win in many areas. She understood that AMHTA had a full plate, but she hoped the issue was on its radar. Mr. Webb answered that the issue was on AMHTA's radar. Representative Munoz referred to Mr. Webb's testimony about a case in Anchorage where a person had been murdered in prison. She shared that she had grown up with the individual in Juneau. She detailed that a number of failures had occurred consecutively with the man's case. She made corrections related to the situation. She explained that he should have never been held in prison. She furthered that he had been picked up for loitering and had been held in prison for two weeks before his legal guardian was contacted; he had been murdered in jail the following day. Prior to the arrest, he had been living in stable housing until the State of Alaska had shut down the group home where he had lived. The state had failed to follow him into a new housing placement. She spoke to the importance of follow through. Mr. Webb replied that both the victim and perpetrator had been through his wife's mental health court. His wife had been the judge who had ordered the competency evaluation of the perpetrator. He stated that the case had been heartbreaking. He spoke to system failures and relayed that both the victim and perpetrator had been in jail because they had both lost housing. 2:37:14 PM Representative Guttenberg believed the trust's work was going down a positive path and was providing the state with tools for improvement. He wondered about the optimum place to provide treatment in one place in order to prevent something negative from happening. He wondered how many people the state could keep out of jail by giving a certain number of treatments in order to prevent fewer people from going to jail and to decrease violence. He wondered if there was an optimal number related to treatment. He asked if there was a program indicating that the state was moving in the right direction. He reasoned that at some point when funds to corrections were cut, negative things happened in other areas. Mr. Webb answered that he did not believe such a report existed. He spoke to the importance of the question. He stated that everything is a balance. He furthered that the state was balancing public safety with the cost of creating public safety. Over the years the state had put all of its "eggs in the basket" of confinement and punishment to achieve public safety. He discussed that government was risk adverse; it was hard to take a chance and it was much easier for district attorneys to recommend the harshest penalty, be tough on crime, and recommend no bail because it protected the attorney for acting in the interest of public safety. He relayed that the goal was to get smarter in how the state did business by assessing actual risk that people present. There were tools available to assess and mitigate risk. He did not know if an absolute cost could be placed on achieving the balance, but he was happy for the trust to look into the issue. He relayed that other states (e.g. Texas) had undertaken similar system reforms. Mr. Jessee replied that there was no easy button. He stated that the goal was to find the sweet spot where the investment was bringing a desired return without throwing a lot of money at the last piece. He used the Bring the Kids Home program as an example. He detailed that there were still 100 kids out-of-state because the cost for developing services in Alaska for the specialized population was prohibitive. He communicated that the state would be looking for the same sweet spot in the justice system reforms as well. He referred to Medicaid fraud and the associated costs. He stated that it was possible to spend $100 million and still not catch every fraudulent case. He relayed that the state could not afford to provide treatment to everyone, all of the time, at any time. He addressed determining how much treatment to provide based on a positive return on investment. He stated that it was not a relevant question at the current stage because it was too far off. He believed the time would come where the state did get close enough to address the question. He reasoned that if the state kept watching the data and analyzing the results, he believed the state would know when it reached the point of diminishing returns. 2:43:10 PM Representative Guttenberg noted that many times it was possible to see how treatment versus no treatment impacted individuals by tracking two or three individuals. He spoke to the difference in court time, jail time, and the re- criminalization process. He was aware there was no sweet spot or easy answer. However, the more examples provided would help the legislature to focus on making the right decisions. Co-Chair Neuman stated that the legislature and Congress funded behavioral health programs for substance abuse treatment. He opined that the problem was getting the money to the street. He stated there were behavioral health programs that did not apply for grants due to the cumbersome amount of associated paperwork needed for compliance. He wondered if the flow of funds to clients was impeded due to too much regulation. Mr. Jessee replied in the affirmative. He agreed that accountability was needed, but people needed to be able to do their jobs to achieve desired outcomes instead of spending too much time on paperwork. The department had asked Tom Chard with the Behavioral Health Association and Kate Burkhart with the mental health and alcohol boards to look at the issue and they had come up with a good list of recommendations for some changes. He was not certain about the current status of the department's process. He relayed that it would be a piece of the behavioral health redesign within the larger Medicaid redesign. He questioned how to find the sweet spot for accountability without impeding the outcome that was trying to be achieved. He stated that having a willing partner at the department was a huge piece of the puzzle that had not always been available. Co-Chair Neuman thanked the presenters and stated that AMHTA provided significant and respected work. AT EASE 2:47:19 PM RECONVENED 2:53:03 PM ^FY 17 BUDGET OVERVIEW: DEPARTMENT OF HEALTH AND SOCIAL SERVICES 2:53:15 PM VALERIE DAVIDSON, COMMISSIONER, DEPARTMENT OF HEALTH AND SOCIAL SERVICES (DHSS), provided a PowerPoint presentation titled "Department of Health and Social Services, House Finance, FY2017 Department Overview" dated January 27, 2016 (copy on file). She expressed appreciation for the opportunity to present the department's overview in furtherance of their mission to promote and protect the health and wellbeing of Alaskans. She indicated that additional detail would be provided by the department's divisions during the budget subcommittee process. She introduced various colleagues within DHSS. 2:55:26 PM Commissioner Davidson addressed slides 3 through 6 that included detail on the department's eight divisions and their directors. The Alaska Pioneer Homes was run by Vickie Wilson and its mission was to provide the highest quality of life in a safe home environment for older Alaskans and veterans. The Division of Behavioral Health acting director was Randall Burns and the division's mission was to manage an integrated and comprehensive behavioral health system based on sound policy, effective practices, and partnerships. The Office of Children's Services was directed by Christy Lawton and the mission was to prevent and respond to child maltreatment in order to ensure safe children and strong families. The Division of Health Care Services was directed by Margaret Brodie and their mission was to manage healthcare coverage for Alaskans in need. The Division of Juvenile Justice was run by Rob Wood and the division's mission was to hold juvenile offenders accountable for their behavior, promote the safety and restoration of victims and communities, and assist offenders and their families in developing skills to prevent crime. The Division of Public Assistance was directed by Sean O'Brien and aimed to provide self- sufficiency and basic living expenses to Alaskans in need. The Division of Public Health was directed by Dr. Jay Butler and worked to protect and promote the health of Alaskans. The Division of Senior and Disabilities Services was run by Duane Mayes and its mission was to promote the independence of Alaskan seniors and persons with physical and developmental disabilities. 2:57:27 PM Co-Chair Neuman asked Commissioner Davidson to return to slide 3 and review numbers on the slides. Commissioner Davidson returned to slide 3 and detailed that the Alaska Pioneer Homes represented about 2.3 percent ($62 million total including $32 million in undesignated general funds (UGF)) of the department's FY 16 operating budget. Co-Chair Neuman spoke to the state's aging senior population, the waiting list to get into the Pioneer Homes, and the increase in the cost in medical services. He asked if there was an expectation that the cost to operate the Pioneer Homes would increase. Commissioner Davidson answered that there had been an increasing level of acuity in Pioneer Homes' residents. She detailed that in the past some of the residents had only required Level 1 services (a low number of services). Presently the facilities were seeing an increased need for services (Levels 2 and 3). She furthered that because the state did not have many other providers offering Alzheimer's related services, the Pioneer Homes had become the default treatment centers in the state. Co-Chair Neuman remarked that individuals had the opportunity to stay in the Pioneer Home as their health deteriorated (based on income). He believed the cost for Level 3 services was $7,000 to $8,000 per resident per month, which was almost completely covered by the state. Commissioner Davidson replied that the department could provide the committee with a more detailed breakdown of the costs for each level of care at a later time. She affirmed that the higher levels of care were more expensive. She explained that typically Level 1 residents may be in the home because they had a spouse in the facility who required Level 2 or 3 services. Representative Wilson stated that numbers were needed to understand how many people the Pioneer Homes were serving in each of the three service levels. Commissioner Davidson replied that the department typically provided the information when the divisions did their detailed presentations, but she would add it to the list. Commissioner Davidson addressed Health Care Services on slide 4. The division administrative portion accounted for $22 million of the total DHSS operating budget including $8.6 million in UGF. She noted that the figures did not include Medicaid payments. The Division of Juvenile Justice accounted for $60.3 million ($56.2 million UGF) or 2.2 percent of the department's total operating budget. Representative Gara asked about slide 4 related to the Office of Children's Services (OCS). He believed the division's mission should be [to ensure] safe and successful children. He felt that sometimes after a response to a crisis there was not the necessary follow through to help a child succeed. He noted that OCS did work on many things, but he observed that a goal for successful children was left out of the mission. 3:03:23 PM Commissioner Davidson thanked Representative Gara for his comments. She addressed slide 4 and relayed that the Office of Children's Services accounted for $151.4 million ($87.4 million UGF) or 5.5 percent of the department's total operating budget. She moved to slide 5 and addressed the Division of Public Assistance budget of $313.7 million ($147 million UGF) or 11.4 percent of the DHSS operating budget. She noted that many of the programs were federal pass through programs. She moved to the Division of Public Health, which represented $134.7 million ($49.6 million UGF) or 5 percent of the department's operating budget (slide 6). Senior and Disabilities Services represented about 2.7 percent of the budget or $73.5 million ($48.6 million UGF). Commissioner Davidson turned to slide 7 and addressed the department's service population. The chart listed the department's three primary priorities including health and wellness across the lifespan; health care access delivery and value; and safe and responsible individuals, family, and communities. She pointed to the bottom of the chart indicating that the department served Alaskans from prenatal to death (including burial assistance). 3:06:11 PM SANA EFIRD, ASSISTANT COMMISSIONER, FINANCE and MANAGEMENT SERVICES, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, addressed slide 8 that illustrated the process the department had undergone to examine the activities under the divisions to determine how the programs fit within the department's identified mission. The chart broke the department into priority, core services, divisions and funding sources for each. She explained that each tear drop illustrated on the chart represented the divisions and how their budget aligned to each of the core services. Slide 9 included a comparison between total budgets for FY 15 and FY 16; in total the department's budget had decreased $75.3 million. She noted that the slide also illustrated how the total funds were allocated between the department's three priorities. Ms. Efird turned to slide 10, which illustrated the journey the department had been on in the past year. She discussed that DHSS originally focused on ensuring that all of the pieces of the division's programs and activities aligned to help achieve the department's mission, priorities, and core services. The next piece was related to establishing the department measurements that would roll up into its objectives, core services, and priorities in order to provide a snapshot of the department's performance. The chart was the first step towards identifying the information. She explained that the illustrations had been created by utilizing inexpensive software to collect information to visually show where the department stood on its performance measures toward its priorities and core services. The left hand side of the chart included three dashboards representing the department's three priorities (health and wellness across the lifespan; health care access delivery and value; and safe and responsible individuals, family, and communities). Each dashboard included red, yellow, and green with a level marker indicating the department's performance in each priority. The core service fed into the dashboards, which also showed objectives. Other charts on the slide showed which measurements fed into each of the dashboards to determine what was shown on the priority dashboard. 3:10:55 PM Co-Chair Neuman asked for verification that the department was judging itself based on the priorities. Ms. Efird replied in the affirmative. She clarified that the information shown on slide 10 pertained to the department as a whole. She explained that each of the divisions would extract some of their key measurements and performance to show the committee. She furthered that the dashboards represented another tool to measure the department's success in working towards aligning its budget and spending funds on items to achieve its priorities. The department was still working to determine where it could pull information from that showed outcomes instead of only focusing on the number of people coming through the door. Vice-Chair Saddler asked where the results-based budgeting had helped the department better manage its priorities and budget. He referred to the dashboard illustrations (slides 10 and 11) and asked for verification that green was good, yellow indicated that improvement was needed, and red was unacceptable. Ms. Efird replied in the affirmative. She elaborated that it was the department's first attempt without spending significant money on a software program that would help DHSS have a point of collection for department measures. She furthered that the information was not as sophisticated as they would like because it did not necessarily measure the balance of efficiencies and funds; however, it was a starting place. She addressed what the performance-based model had done for the department. She stated that the model had given DHSS a platform to speak from in one voice. She discussed that they were working to illustrate to each of the divisions how their work contributed to achieving the department's priorities. She furthered that the model had created a cross-divisional conversation to determine any duplications and to look at ways to support and leverage programs. The department was also starting to collect information on how all of the various pieces fit together to achieve the department goals. 3:14:15 PM Commissioner Davidson addressed FY 16 highlights of budget changes on slide 13. She began with updated information on the status of Medicaid expansion. Through the end of December [2015], 7,957 Alaskans had been enrolled through expansion. As predicted, more men than women had enrolled (approximately 4,267 men and 3,690 women). Total claims paid through December were about $21.6 million (100 percent federal receipts). She relayed that the department did expect the number to increase. She explained that under federal Medicaid rules there was a one year timely filing limit. She expounded that providers offering services to Medicaid beneficiaries had up one year to bill for services provided. She shared that the information would be posted on the DHSS website in order to provide transparency and better information to the public about Medicaid beneficiaries including where they lived, services accessed, and other. Commissioner Davidson discussed that the way Medicaid beneficiaries were counted could be difficult to manage. She explained that people went on and off of Medicaid constantly throughout the year. For example, a person may get a job and may no longer qualify for Medicaid or a person may lose a job and suddenly qualify for Medicaid. She furthered that at the end of the year the department could look at how many unduplicated Alaskans had been covered by Medicaid; it would typically be a higher number (e.g. around 148,000 Alaskans). Whereas, at a point in time the number may be lower. For example, in December there had been 129,366 Alaskans enrolled in Medicaid including the expansion population. The largest Medicaid population was in Anchorage and Mat-Su, followed by the Interior, Southwest, Gulf Coast, Southeast, and Northern Alaska. She reiterated that the information would be posted on the DHSS website. Children accounted for the majority of the Medicaid beneficiary population at 54 percent, with an additional 2 percent experiencing disabling conditions. Currently (under expansion) seniors accounted for 6 percent of the Medicaid population, 21 percent were parent caretakers, and 11 percent were adults with disabling conditions. She added that the information would be updated monthly on the department's website. 3:17:45 PM Commissioner Davidson continued to address points on slide 13. She addressed the Alaska Pioneer Homes rate increase to 8.5 percent scheduled to take effect February 1, 2016. She detailed that it was the first time the rate had been increased in many years. Additionally, there was a request for letters of interest to the public inquiring whether any organizations or companies were interested in taking over the management and operations of Pioneer Homes. The department would report back to the legislature about what kind of interest it received. She addressed the third bullet point on slide 13 related to the reprogramming of the Ketchikan Youth Facility. The department recognized that the state did not have sufficient treatment facilities, especially for adolescents. She expounded that DHSS was currently pursuing an opportunity with the Centers for Medicare and Medicaid Services (CMS) to redesign and reprogram the Ketchikan facility in order to provide more intensive services to youth throughout the state. She explained that the youths requiring detention would be transferred to the facility in Juneau. Co-Chair Neuman thanked the department for looking into the privatization of Pioneer Homes. He remarked that he and Commissioner Davidson had discussed juvenile justice centers in the past and where there had been a movement to try to move more civil cases over to tribal entities. He asked for an update. Commissioner Davidson replied that the conversations with tribal organizations continued, but were in very preliminary stages. She referred to legislation offered by Senator Pete Kelly (SB 74) that included a directive to DHSS to explore privatizations of the Division of Juvenile Justice facilities. She relayed that the Norton Sound Health Corporation had expressed interest in the operation of the facility in Nome. The department had the opportunity to realize the savings for 100 percent federal match. She explained that when an Indian Health Services beneficiary who was also eligible for Medicaid received their care through an IHS facility, the services were considered 100 percent federal match. She shared that the previous year stated that the preceding year Governor Bill Walker had sent a letter to Secretary Sylvia Burwell [Secretary to the U.S. Department of Health and Human Services] inquiring about 1115 waiver opportunities in order to position Alaska to better partner with tribal health organizations to take advantage of 100 percent federal match. The real challenge had been to determine what was considered through an IHS facility. Historically, CMS had specified that travel and accommodation services were only covered at 50 percent and services referred beyond the tribal health system's capacity to provide the care were also not through an IHS facility and were therefore only covered at 50 percent federal match (slightly higher for children). The administration had communicated that it would like to do an 1115 waiver that would allow 100 percent reimbursement for travel and accommodation services because they felt it was a critical access to care issue (the beneficiaries did not have the access without the travel and accommodation service). The administration had also said that if it was beyond the tribal health system's capacity to provide a service, which would require a patient to go to a non- tribal hospital or facility, the patient should be considered 100 percent federal match because they started in a tribal health facility. She furthered that Secretary Burwell had sent a letter to Governor Walker answering that an 1115 waiver would not be the solution because it required budget neutrality for the federal government. Alternatively, Secretary Burwell had communicated that the federal government would change national policy to be able to accommodate the request, which would impact Alaska and 34 other states with a significant tribal presence. She stressed that it was probably Alaska's biggest opportunity for saving. Consequently, DHSS was continuing to negotiate with CMS about the specifics. She relayed that DHSS would do its best to determine if there was any opportunity to retroactively apply the policy. She emphasized that it was a tremendous opportunity for Alaska. She noted that South Dakota was also aggressively pursuing the opportunity. The state was fortunate that it had a great working relationship with CMS. She shared that she had previously worked for tribal health for 15 years and they had tried to get the federal match the entire time she had been there. 3:25:02 PM Ms. Efird addressed the reduction to the Senior Benefits Program in FY 16 of approximately $2.6 million (slide 13). She detailed that the program had three payment levels (based on income levels): $125, $175, and $250. The reduction would be taken to the highest income level (lowest payment level) and would affect about 5,348 seniors. Co-Chair Neuman asked for the cost per year. Ms. Efird replied that the current Senior Benefits Program had about $20 million for FY 17. There had been approximately $22.6 million prior to the reductions. She noted that the governor had proposed the same number for FY 17. Representative Guttenberg asked about the Pioneer Home rate increase. He hoped it meant the Pioneer Homes could charge more and get reimbursed more. He asked if there was any impact on the residents. Commissioner Davidson answered that DHSS would bill Pioneer Home residents for the rate increase; it could be billed to insurance, Medicaid, or self-pay. The Pioneer Homes had a sliding fee scale for self-pay residents. She communicated that residents would not be thrown out on the street. Representative Gara asked for verification that people using self-pay would pay the 8.5 percent increase. Commissioner Davidson replied in the affirmative. Commissioner Davidson thanked the committee for providing funds for the additional positions for the Office of Children's Services to address its increased utilization for children needing out of home services. She detailed that 13 of the positions had been filled and an additional 10 would be filled within the next 30 days. The remaining 3 positions would be filled within 60 days. Additionally, the department had been able to transfer 2 other positions interdepartmentally. Co-Chair Neuman asked for verification that the department had the funds in hand for the needs (e.g. office space, computers, and other). Ms. Efird replied in the affirmative. Representative Wilson asked the department to follow up with the number of positions filled with case workers versus social workers. She asked where the positions were located. She wondered how many families each case worker was assigned to; she stated that many families had more than one child that may be assigned to one caseworker. She spoke to the reunification rate of children going back to their parents. She had observed that most reunification had been to parents or a family member, but she did not believe placing a child with a family member qualified as reunification. 3:29:34 PM Co-Chair Thompson noted that the 26 positions had been funded with federal money. He remarked that there had been an indication that the money may not continue in the future. He asked for an update. Ms. Efird replied that there had been a number of different changes throughout the budget process. She detailed that in conversations with OCS and the Division of Public Assistance, some Temporary Assistance for Needy Family (TANF) funds had been identified, that could be used to cover the child advocacy centers' funding from the department. She furthered that General Funds to the department had been cut, but had subsequently been added back. There was a small amount of federal funding associated with the positions that the department could collect. The federal dollars that had been identified were TANF funds that could now be used for the child advocacy centers. The department did not anticipate that the funding would be reduced in the next few years. Representative Gara asked about the current number of foster children in Alaska. He noted that the number had risen to 2,500 from 1,700, but he believed the figure was presently over 2,800. Commissioner Davidson replied that there were currently over 2,800 foster children. Co-Chair Thompson addressed the agenda for the following day. ADJOURNMENT 3:33:02 PM The meeting was adjourned at 3:32 p.m.