Unpacking Alaska’s Medicaid reform bill SB 74

Senate Bill 74 is the largest, most comprehensive and most ambitious Medicaid reform bill to ever pass a chamber of the Alaska state legislature. It includes tele-health, payment reform strategies, and fraud reduction.

Last week, it passed the Senate unanimously – a notable accomplishment for Sen. Pete Kelly who originally introduced the bill last session. He spent the interim working with DHSS and stakeholders to craft a bill that clearly works to get a series of different perspectives to the table around reform.

The Senate vote represents a significant win for Sen. Kelly for a number of reasons, but in particular for the consensus he built on a complex issue.

State of Reform has unpacked the 41-page bill, reading each section in detail. This included reading multiple sections of existing Alaska statute to best understand the full impacts of the legislation.

Based on its current form (3/16), there are four buckets of interest:

• Payment reform, managed care, and coordinated care pilots
• Reducing waste and fraud
• Tele-health services
• Feasibility studies for privatization

Payment reform and managed care
Becky Hultberg, CEO of ASHNHA, recently shared with State of Reform that language signifying the move to new payment models written into this bill represents a “significant shift” in the legislature’s desires.

Perhaps the most interesting section of the bill requires the Department of Health and Social Services (DHSS) adopt new fee agreements with Medicaid providers. The bill requires the Department to implement one or more of the following:

• premium payments for centers of excellence;
• penalties for hospital-acquired infections, readmissions, and outcome failures;
• bundled payments for specific episodes of care; or
• global payments for contracted payers, primary care managers, and case managers for a recipient or for care related to a specific diagnosis

The Commissioner of DHSS will be tasked with certifying that any provisions added have been approved by the U.S. Department of Health and Human Services on or before Oct. 1, 2017.

In multiple sections, the bill requires DHSS to either establish a primary care case management system or contract with a managed care organization to coordinate patient care. Whichever organization receives the contract will oversee services for the Medicaid population with an eye on lowering the rate of unnecessary emergency department (ED) utilization and specialty care.

The bill names the following eligible organizations to implement coordinated care demonstration projects:

• managed care organization
• primary care case manager
• accountable care organization
• prepaid ambulatory health plan
• provider-led entity

The fee structure for a contract under this subsection could include “global payments, bundled payments, capitated payments, shared savings and risk, or other payment structures.”

Section 28 of the bill directs DHSS to create the “optional services” of either a “primary care case management system or a managed care organization contract.” In a section deeper in the bill, the language appears to become a requirement that high cost patients be entered into a managed care model of some sort.

“…the department shall require recipients with multiple hospitalizations to enroll in a primary care case management system or with a managed care organization under this subsection.”

There are some exceptions to this for chronic disease, however.

Changes of this nature to Alaska Medicaid would likely require a state plan amendment to the Medicaid contract, or perhaps a waiver. The most likely waivers would likely be under section 1115 or 1332 of the Social Security Act.

Section 41 of the bill specifically authorizes DHSS to submit such amendments or waiver applications as necessary.

Reduction of Waste and Fraud
More than 20 percent of the bill’s total pages are devoted to outlining the reduction of waste and fraud and establishment of the Alaska Medical Assistance False Claim and Reporting Act.

At the 2015 Alaska State of Reform Health Policy Conference, Republican legislators were clear they wanted to see waste, fraud and abuse addressed in any Medicaid reform bill. SB 74 has extensive provisions to address this topic. The power and importance of including this language was demonstrated, in part, by the strong unanimous vote last week.

Civil penalties outlined by the Act include a fine of up to $11,000, attorney fees, and three times the amount of actual damages sustained by the state for any provider who makes a fraudulent claim.

Interestingly, the Act also incentivizes whistleblowers by entitling the person bringing the claim to 15-25 percent of the settlement if the attorney general proceeds with an action and between 25-30 percent of the settlement if the attorney general does not have to proceed with action.

There are a series of self-reporting requirements and audits that are also included for providers to implement under this bill.

Telehealth services

Tele-health is clearly a winner in the bill. It outlines a set of conditions under which providers could provide services via tele-health without concern for disciplinary action by the licensing board. It calls for the development of new “standards of care” to support tele-health, and calls for the creation of a provider directory.

Under the section which includes the directory, any provider or organization that seeks to provide tele-health services in Alaska must register with the directory. The directory will be available for public review.

Feasibility studies
Section 28 of the bill calls for an interesting and ambitious program to help integrate social services into mental health care.

“The department shall, in coordination with the Alaska Mental Health Trust Authority, efficiently manage a comprehensive and integrated behavioral health program that uses evidence-based, data-driven practices to achieve positive outcomes for people with mental health or substance abuse disorders and children with severe emotional disturbances. The goal of the program is to assist recipients of services under the program to recover by achieving the highest level of autonomy with the least dependence on state-funded services possible for each person.”

This is a broad subject area as it includes references to mental health, substance abuse, housing and the child welfare system.
Section 40 calls for studies of some very consequential questions. The Alaska Mental Health Trust Authority and DHSS are authorized to conduct a study on the privatization of the Alaska Psychiatric Institute. In another part of the section, a study is called for regarding the feasibility of privatizing Pioneer Homes in the state.

“The Department of Administration shall, in collaboration with the house and senate finance committees, procure a study to be completed on or before June 30, 2017, to determine the feasibility of creating a health care authority to coordinate health care plans and consolidate purchasing effectiveness for all state employees, retired state employees, retired teachers, medical assistance recipients, University of Alaska employees, employees of state corporations, and school district employees and to develop appropriate benefit sets, rules, cost-sharing, and payment structures for all employees and individuals whose health care benefits are funded directly or indirectly by the state, with the goal of achieving the greatest possible savings to the state through a coordinated approach administered by a single entity.”

Building an agency tasked with the purchasing of health care for both Medicaid and the public employees is a model used in a number of other states, including Washington and Oregon.

Washington employs a similar agency model which contracts with MCOs for managed care of Medicaid. Since the 2005-2007 budget, the state share of Medicaid in Washington State has increased modestly from $3.5 billion to $3.9 billion in the 2015-2017 budget. That increase represents an annual inflation in the state spend of Medicaid of less than 1%.