HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE January 27, 1993 3:00 p.m. MEMBERS PRESENT Rep. Cynthia Toohey, Co-Chair Rep. Con Bunde, Co-Chair Rep. Gary Davis, Vice Chair Rep. Tom Brice Rep. Bettye Davis Rep. Pete Kott Rep. Irene Nicholia Rep. Harley Olberg Rep. Al Vezey MEMBERS ABSENT None COMMITTEE CALENDAR Overviews of the Health Resources and Access Task Force and the proposed Comprehensive Health Insurance and Payment Reform Act of 1993. WITNESS REGISTER Karen Perdue P.O. Box 73209 Fairbanks, Alaska 99707 (907) 456-5780 Position Statement: Public member of the Health Resources and Access Task Force representing health care consumers Mano Frey President Alaska AFL-CIO 2501 Commercial Drive Anchorage, Alaska 99501 (907) 258-6284 Position Statement: Public member of the Health Resources and Access Task Force representing organized labor Dr. David T. Mather 1569 Northfield Road Fairbanks, Alaska 99709 (907) 455-6942 Position Statement: Public member of the Health Resources and Access Task Force representing nonprofit organizations Jerome Near Field Underwriter New York Life Insurance Co. Drawer 448 Soldotna, Alaska 99669 (907) 262-4461 Position Statement: Public member of the Health Resources and Access Task Force representing health insurers Janet P. Oates Director, Marketing and Community Relations Providence Hospital 3200 Providence Drive P.O. Box 196604 Anchorage, Alaska 99519-6604 (907) 261-3145 Position Statement: Discussed CHIPRA Dr. Rodman Wilson, M.D. Fellow of American College of Physicians, Internal Medicine 6234 Tanaina Drive Anchorage, Alaska 99502 (907) 243-5583 Position Statement: Public member of the Health Resources and Access Task Force representing providers Raymond Schalow Executive Director Alaska State Medical Association 4107 Laurel St. Anchorage, Alaska 99508-5334 (907) 562-2662 Position Statement: Presentation on CHIPRA ACTION NARRATIVE TAPE 93-6, SIDE A Number 000 CHAIR CON BUNDE called the meeting to order at 3:02 p.m. and noted members present. He noted that the meeting was being teleconferenced on a listen-only basis to Anchorage, Fairbanks, Homer, the Matanuska-Susitna Borough, Sitka and Soldotna. He said the first order of business would be an overview presentation on the Health Resources and Access Task Force, followed by a report on the Comprehensive Health Insurance and Payment Reform Act of 1993. Chair Bunde said each presentation would be followed by questions from the committee. Number 098 KAREN PERDUE, a public member of the Health Resources and Access Task Force representing consumers, said the members would present the results of their two-year effort studying health care resources and access, then discuss their proposed solutions. She had earlier presented two documents. The first was an 83-page document entitled, "The State of Alaska Health Resources and Access Task Force Final report to the Governor and Legislature, January 1993," herein incorporated as Attachment 1. A second document was a 25-page, condensed version of the report, herein incorporated as Attachment 2. MS. PERDUE began by discussing the issues the task force examined over the past two years. She referred to Attachment 2, page two, showing projected rises in total state health care costs to $5.6 billion and per capita costs to $7,341 by the year 2003. MS. PERDUE said health care spending has outstripped other elements of the state and has cut business profits. The nation's health care crisis is reflected in Alaska, she said. The state paid about $318 million on health care in 1991, about 20 percent of the total amount spent on health care. She predicted the 11 percent to 13 percent increase in health care spending for the next several years would take a bigger bite from the state budget. MS. PERDUE presented several demographic statistics about health care in Alaska. She said about 76,000 Alaskans lack health insurance, not including the underinsured or those receiving other forms of government health care. As costs rise, this number will rise. Almost 90 percent of the uninsured do have jobs, though they work in industries or small businesses that do not offer health insurance. She said the uninsured represent a wide range of economic levels. Up to 30 percent of those uninsured are children, as many insurance policies do not include children or dependents without additional costs. Number 224 MANO FREY, president of the Alaska AFL-CIO and a public member of the Health Resources and Access Task Force representing organized labor, said the health care crisis affects all Alaskans. He described the task force's extensive work. He warned the legislature not to wait for President Bill Clinton's administration to take action first on health care. He argued that Alaska's special geographical and transportation conditions warrant swift and independent action. If necessary, state legislation could be later molded to fit national legislation, or challenged by lawsuit. He encouraged the committee to give favorable consideration to the task force's recommendations and to use them as a basis for health care reform. MS. PERDUE said public input to the task force indicated some major needs: the need for fundamental reform of the health care system; the need to address rising health care costs; the need for universal access to health care; and the need to address basic public health services such as public water and sewer systems. Number 360 DR. DAVID MATHER, a task force member representing Alaska Native nonprofit health corporations, said the task force met for 30 days and produced recommendations he offered as a basis for public discussion on the issue. DR. MATHER indicated his intention to speak on the interconnected issues of health care access and cost control. The task force believes that neither workers, state government, nor business will be able to afford the projected annual $29,000 cost of health care for a family of four, he said. Either the state must control the cost, or it will be forced to pay more of it as fewer middle class people can afford health care. DR. MATHER said cost control efforts have focussed on specific cost areas like hospitals or doctors' costs, but such piecemeal efforts force up prices elsewhere in the system. To counter this problem, most health care reform ideas include comprehensive cost containment mechanisms. Number 417 DR. MATHER stated the task force supports a global budgeting approach, which would cap total spending in each general area of health care, with the amounts set through a political process. Both the Comprehensive Health Insurance and Payment Reform Act (CHIPRA) and the task force support limiting price increases to the Consumer Price Index in Alaska, which would save $1.5 billion each year until the year 2003. This approach allows politicians to set the overall funding levels, but would involve health care providers in deciding how to set rates and how to allocate funding. The task force proposed creating a well-funded public health authority to set global budgets and to negotiate contracts. Number 458 DR. MATHER discussed the task force's second recommendation: to allow universal access to health care. He described different access plans. The "pay or play" plan, such as the one in effect in Massachusetts, requires all employers to provide insurance or pay an insurance tax. An approach used in Hawaii requires employers to provide insurance, but such a plan requires some waivers of federal law. The approach that Alaska should pursue, he recommended, is a program similar to Canada's in which the government is the single payer for health care, but in which such care is provided by independent doctors, hospitals, nurses and others. Number 487 DR. MATHER said such a system is best suited to Alaska, since many people move from job to job and work in seasonal industries, and since government pays nearly two-thirds of medical costs already. There are difficulties in implementing a single-payer system, but it would bring savings in administrative services that would permit extension of care to uninsured Alaskans. He said those proposing CHIPRA agree with that assessment. Number 538 CHAIR BUNDE called an at-ease. He recalled the meeting to order, and Mr. Mather proceeded. MR. MATHER stated that Alaska faces a crossroads between taking no action and seeing health care become more expensive and unavailable, or attempting a comprehensive solution to control costs and provide decent universal health care at less total cost. Number 551 JERRY NEAR, a field underwriter for New York Life Insurance Co. and a Health Resources and Access Task Force member representing the insurance industry, said the sate health care system faces meltdown as people leave the system, raising costs for those remaining in the system. He said the task force tried to allow access to health insurance to small businesses, which employ most people in the state. He referred to page 19 of Attachment 2, the start of recommendations to improve health care access. He warned that delaying action on the issue would only exacerbate the problems and he encouraged prompt action. Number 580 CHAIR BUNDE reminded the task force members to submit any written testimony they might have and opened the floor to questions. REP. CYNTHIA TOOHEY asked whether the task force's fourth recommendation, to pass legislation to reform small group health insurance markets, did not represent the kind of piecemeal approach the task force members had warned against. DR. MATHER answered that the task force had wrestled with such questions, but decided problems with small group health insurance could be addressed expeditiously with relatively quick and simple action, independent of a comprehensive overhaul of the health care system, which might take several years. Number 619 DR. MATHER, in response to a question from Chair Bunde, said that the 76,000 uninsured residents in the state excluded 15,000 people eligible for health care through the Alaska Native Health Service (ANS). CHAIR BUNDE asked how the task force recommendations related to the ANS program and other existing systems. DR. MATHER said the state should push the federal government to continue operating the Alaska Native health care system, and any new health care system should be coordinated with the ANS system, as it would with any existing insurance program. Number 639 CHAIR BUNDE asked how the task force's recommendations would mesh with or conflict with the reforms proposed in the CHIPRA proposal. DR. RODMAN WILSON, a physician and member of the Health Resources and Access Task Force representing health care providers, and who has also sat in on the CHIPRA meetings, said the proposals had several similarities and differences. Among the differences, he said, are that CHIPRA relies on employers as the main source of health insurance, whereas, the task force would stop private employers from offering such insurance. Also, CHIPRA would create a privately operated health authority and claims clearinghouse, while the task force envisions operating such functions through public processes. The CHIPRA recommendations also contain more tort reform, he added. Number 661 REP. GARY DAVIS asked whether the task force wished they had a trial attorney on the team, and was answered with laughter from the audience, which Chair Bunde interpreted as a negative answer. REP. TOOHEY encouraged consideration of small business' limitations in providing health care insurance. She also asked who would control the pool of money that would come in from taxes, insurance premiums and other sources, and which would go out in compensation to health care providers. She also asked who would set rates. DR. WILSON answered that the government might hire a contractor to manage one large pool of health care money, and the government would negotiate how much of that pool they would spend for each general area of health care. He said the task force doubted that federal health care providers would pay into such a pool at first, but might eventually. REP. TOOHEY said the federal health care providers would have to be included in such a pool for the system to work. TAPE 93-6, SIDE B Number 000 DR. WILSON encouraged committee members to study Table 4-3 on page 23 of Attachment 2 and on page 64 of Attachment 1, which he described as the heart of the issue: that a future single payer system would provide health care at less cost than the current system would if it does not change. CHAIR BUNDE observed that the 76,000 uninsured Alaskans had their health care insurance costs paid by others. He asked members of the task force what initial legislation they would introduce to address the health care system if they themselves were legislators. MS. PERDUE said all members believe that the most important element of their plan is the health care authority that is separate from government, but which has the professional staff to begin building a database and (unintelligible). Number 047 DR. WILSON agreed with Ms. Perdue and added that some small group market reform bills, and possibly some tort reform bills, might be introduced soon. He mentioned possibly lowering the prejudgment interest rate of 10.5 percent added onto awards for successful malpractice suits, retroactive to the date the lawsuit was filed. MS. PERDUE also said bills already in the state legislature could achieve many of the task force's recommendations for short-term action, such as for small market reform. She mentioned the Healthy Start Bill, which would allow parents to buy inexpensive health insurance for their children. Number 090 DR. WILSON encouraged the committee to keep up on national efforts at health insurance and health care reform and to remain ready to pass their own bills in case federal efforts are unsuccessful. CHAIR BUNDE called a short at-ease at 3:52 p.m. He called the meeting back to order at 3:59 p.m. Number 119 MS. JANET OATES, director of marketing and community relations at Providence Hospital in Anchorage, introduced herself and announced her intent to describe the hows and whys of the Comprehensive Health Insurance and Payment Reform Act. MS. OATES said that two years ago physicians and doctors were concerned with the direction of possible legislation that focussed only on containing health care costs. She decried such an approach, saying such an approach would lead to increased costs elsewhere. Rather than simply criticize the legislature, they decided to see what areas of the health care system they would be willing to change. MS. OATES stated that they followed the Health Reform Task Force's efforts closely and tried to work out the nuts and bolts of health care reform, focussing on how to control costs and what they would need to get in return for doing so. They also addressed the criticism they heard for wanting the public to have increased access to health care merely because it would increase their business. She said Raymond Schalow, executive director of the Alaska State Medical Association, would address that issue in a meaningful way in his presentation. MS. OATES said they kept focussed on finding an answer, not bewailing the problem. She noted that both the health care task force and those who prepared the CHIPRA proposal were trapped by actuarial constrictions. She mentioned Hawaii, which passed its own health care plan 18 years ago in anticipation of a federal plan, and has since been the sole state to successfully address problems in health care access. She credited that state for trying to see what kind of health care they could provide at a given cost. She then introduced Mr. Schalow. Number 190 RAYMOND SCHALOW, executive director of the Alaska State Medical Association, began his presentation by saying that nine physicians and seven administrators have been working for 27 months on the project. He indicated their ideas are not unrealistically optimistic, but are a detailed set of draft legislation that he hoped would serve as a basis for discussion. He began displaying a set of overhead projections, copies of which are herein incorporated as Attachment 3. (All attachments are on file in the House HESS Committee room during session; thereafter, they may be found in the Legislative Reference Library.) MR. SCHALOW said the group developed a set of principles for a successful health care system. As outlined on pages one and two of Attachment 3, they are: affordable quality universal health care; patient responsibility; preventative care; adequate capitalization; choice of provider; market environment; and scientific basis for care. MR. SCHALOW stated their proposal attempts to fairly share the sacrifices necessary in health insurance reform among the insurance industry, the trial attorneys, physicians, hospitals and the public. They even require that Medicaid recipients pay some small amount, to encourage a sense of responsibility. Number 232 MR. SCHALOW referred to page three of Attachment 3, listing the features of CHIPRA's health system reform, some of which, he said, complement those of the task force's efforts. The features are: everyone gives up something; insurance reform; administrative simplification; cost controls; medical liability reform; funding; and the Alaska Health Insurance Corporation. MR. SCHALOW referred to page four of Attachment 3, which outlines the components of CHIPRA. He indicated that there is a need for reliable data on health insurance, saying that there is little data available on health insurance in Alaska, and even the data presented by the task force is suspect. MR. SCHALOW stated, "The cost control agency obviously, with the program that we are presenting, the government CPHI (consumer price household index?) will hold back cost control, but the cost control agency is created to control volume. That in the pool would be state and municipal employees, the uninsured, and employer plans, and self- insures that data would also go into the corporation. So this is just a quick glance -- glimpse -- of what we're trying to do." Number 261 MR. SCHALOW referred to page seven of Attachment 3, which outlines the elements of CHIPRA insurance reform. 1) Universal Coverage. He said those proposing CHIPRA decided early in their development process to include a requirement that those receiving a permanent fund dividend must show proof of health insurance. He believes many uninsured people can afford to buy it but choose not to. 2) Eligibility. He said anyone would be eligible for CHIPRA benefits if they qualified for a permanent fund dividend. 3) Insurance Pool. He said CHIPRA would create an insurance pool of about 200,000 people, including all employees of local and state governments, universities, school districts, and retirees from such employers and their dependents. He said the insurance industry, seeking more profit, has eliminated coverage for many high-cost policy holders, thus subverting his conception of insurance as a pool in which people share the risk of financial risk. 4) Employee Contribution to Health Insurance. According to Mr. Schalow, employers must provide insurance or switch to CHIPRA, and must pay taxes to make up any difference in coverage levels between their plan and CHIPRA. Number 296 MR. SCHALOW described the CHIPRA policy as a $1,000 catastrophic policy. He said the big problem with health care insurance is with uninsured people who suffer costly catastrophic illnesses or accidents. 5) Community Rating. They backed off of immediately rating communities because it would increase individual premiums to $2,000 per month. Instead, they proposeD phasing it in over five years. 6) Guaranteed Renewability and Portability. 7) Stabilize Health Insurance Premiums. Health insurance companies would have to prove the need for raising premiums higher than the Consumer Price Index. He said companies should not balance out financial losses in other states by rasing premiums in Alaska. MR. SCHALOW discussed CHIPRA's efforts at simplifying administration of health insurance. Such elements include establishing a single claim form for all users, a single clearinghouse that would pay claims, and a 15-day limit on claims processing and payment, which would save money and reduce complications. MR. SCHALOW referred to page 10 of Attachment 3, which outlines CHIPRA's cost controls. They include: 1) linking price increases to the General Consumer Price Index to limit spiraling costs; 2) requiring physicians and hospitals to give up 5 percent of their fees to the CHIPRA pool; 3) publishing provider fee schedules to allow market forces to operate; 4) establishing a separate corporation to limit the volume of medical services offered, so as to encourage health care providers to self-police those who collect unusually high fees; 5) eliminating the practice of shifting the costs of providing care for the uninsured to the insured, which can add up to 15 percent to the insurance bills; 6) reducing defensive medicine, the practice of performing costly and superfluous tests in order to forestall later patient accusations of neglect; and 7) requiring patients to share some of the costs of medical service, even when insured. Number 460 MR. SCHALOW referred to page 14 of Attachment 3, which shows proposed medical liability reform. He said many physicians have told him they would be willing to give up a lot if the insurance industry would change to relieve them of the complications and hassles involved in dealing with it. The reform measures, as outlined on page 17, include: 1) a $250,000 cap on non-economic damages; 2) periodic payments of court awarded judgments; 3) collateral income sources; 4) statute of limitations on claims for injury; 5) protection of hospitals from liability for actions by non-employees; 6) court-ordered non-binding arbitration; and 7) prejudgment interest rates set lower than the current 10.5 percent. Number 506 MR. SCHALOW referred to page 18 of Attachment 3, which describes the function of an Alaska Health Insurance Corporation that would establish a health benefits package, establish uniform utilization review standards, and perform analyses of the health system. It would also negotiate with providers for discounts, monitor the solvency of the CHIPRA pool, control costs, publish provider fees for usual and customary procedures, and propose target budgets. MR. SCHALOW briefly described the sources for funding for the CHIPRA pool, as outlined on page 20 of Attachment 3. (Rep. Nicholia left at 4:25 p.m., and Rep. Bettye Davis followed at 4:26 p.m.) CHAIR BUNDE opened the floor to questions. Number 542 REP. TOOHEY commented that the CHIPRA and health care access task force reports seemed to indicate the imminent demise of the insurance companies as middlemen in the provision of health care, and asked whether that was not a good idea. MS. OATES responded that members of the insurance industry have expressed fear that they are being rendered obsolete. She said the CHIPRA plan would set up a clearinghouse that would allow the insurance companies to sell insurance. She also suggested the CHIPRA proposals could be an opportunity for all those involved to streamline their operations. MR. SCHALOW said the insurance industry expressed a dislike of the idea of giving up the claims processing to an outside clearinghouse. Number 568 CHAIR BUNDE asked what the basic monthly premium would be for CHIPRA health insurance. MS. OATES said she did not know, she would need more actuarial information. She said they would like to start with a low premium and see what kind of coverage they could afford. MR. SCHALOW repeated the need for better data, saying he has been unable to ascertain the current cost of providing health care to Alaskans now, and estimates have ranged from $2,000 to $3,500 per person per month. CHAIR BUNDE asked about the portability of CHIPRA benefits. MR. SCHALOW answered that CHIPRA benefits would be good only in Alaska, and employers would be required to provide their workers insurance or pay a state insurance tax. CHAIR BUNDE expressed concern at potential overuse of a universal health care plan for minor complaints and asked whether CHIPRA tries to control demand. DR. WILSON said CHIPRA's cost-control mechanism controls volume of services provided, not fees. Under the system, any unusual or unexplained increase in costs would be investigated and possibly corrected by having a health care provider's peers question such overruns. CHAIR BUNDE asked the witnesses to give him written opinions of the Oregon health care plan. MR. SCHALOW answered briefly that he believed that Oregon should attempt such a system. Number 634 CHAIR BUNDE thanked those attending the meeting at the remote teleconference sites, and ADJOURNED the meeting at 4:30 p.m.