MINUTES OF THE ASSEMBLY COMMITTEE ON WAYS AND MEANS Sixty-eighth Session June 14, 1995 The Committee on Ways and Means was called to order at 7:45 a.m., on Wednesday, June 14, 1995, Chairman Arberry presiding, in Room 352 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Morse Arberry, Jr., Chairman Mr. John W. Marvel, Chairman Mrs. Jan Evans, Vice Chairman Ms. Sandra Tiffany, Vice Chairman Mr. Dennis L. Allard Mrs. Maureen E. Brower Mrs. Vonne Chowning Mr. Jack D. Close Mr. Joseph E. Dini, Jr. Mr. Thomas A. Fettic Ms. Chris Giunchigliani Mr. Lynn Hettrick Mr. Bob Price Mr. Larry L. Spitler COMMITTEE MEMBERS ABSENT: None STAFF MEMBERS PRESENT: Mr. Mark Stevens, Fiscal Analyst Mr. Gary Ghiggeri, Deputy Fiscal Analyst ASSEMBLY BILL 697 Makes supplemental appropriation to Department of Prisons for certain costs related to medical care. Mr. Gary Little, Administrative Services Officer, Medical/Mental Health Division, Department of Prisons, testified the division was requesting a supplemental appropriation due to overexpenditures in certain areas of the budget. He explained the request had been revised from $958,845 to $1,717,568 as the result of new medical claims projections. Chairman Arberry asked how this shortfall had occurred. Mr. Little responded the division currently had no means of tracking outstanding liabilities for inmate medical claims for treatment by providers outside the prison system. Chairman Arberry asked who was responsible for not having a tracking system in place. Mr. Little assumed responsibility for the situation. He noted he was assigned to his current position in the middle of the budget process, which became his highest priority. Chairman Arberry inquired when a tracking system would be in place. Mr. Little stated the tracking system could be in place by December 31, 1995. He noted there was limited communication with staff doctors. He said a request for proposals would be issued to locate a new claims administrator. He explained the reports received from CoreSource, the claims administrator, were not in a format which facilitated tracking medical expenses. The request for proposal would require the new claims administrator to provide claim information in a more appropriate format. Chairman Arberry questioned why the division had not informed the Legislature earlier of this nearly $2 million shortfall. Mr. Little stated this situation would not happen again. Ms. Tiffany asked who the gatekeeper was for determining what outside medical services were necessary or elective. Dr. George Kaiser, Medical Director, Department of Prisons responded until September 1993 staff doctors made those determinations. In September 1993 the department was rolled into the utilization review process provided for state employees conducted by Sierra Health Options. Sierra Health Options performs utilization review for offsite medical services in excess of $200. Dr. Kaiser noted he had sent a letter to Sierra Health Options in September 1994 expressing his concern that Sierra Health Options' policies exceeded the Department of Prisons' prior level of service. There was an incremental increase in level of service following the reassignment of utilization review to Sierra Health Options. He explained there was a corresponding increase in expense but there was also a decrease in risk liability. Ms. Tiffany inquired who determined what services would be provided in cases of claims under $200. Dr. Kaiser stated those decisions were made by the health authority (i.e., the Chief Physician) at the institution. Dr. Kaiser indicated he retrospectively reviewed the determinations of the staff physicians. Ms. Tiffany asked how medical claims expenses could be tracked. Dr. Kaiser answered tracking would involve a more timely assessment of expenses as they are incurred. He pointed out there would always be inaccuracy in the ability to predict illness. Ms. Tiffany questioned what the tracking procedures would be. Mr. Little stated currently medical claims expenses were tracked after the fact. The new claims administrator would be required to provide claims expense information on a timely basis. A procedure would be implemented to track visits to outside providers from the point of transporting the inmate to the provider's office. Expenses will be reviewed monthly based on the number of outside medical care visits. Any outside medical visits which would cause medical expenses to exceed the amount budgeted monthly would be deferred until the following month. Ms. Tiffany asked when utilization review took place. Dr. Kaiser stated utilization review occurred prior to the medical procedure being performed if the expense exceeded $200. Ms. Tiffany questioned if utilization review was provided under a managed care contract. Dr. Kaiser answered affirmatively. Ms. Tiffany inquired who authorized performance of medical procedures costing over $200. Dr. Kaiser stated Sierra Health Options authorized the procedures. Mr. Marvel asked what percentage of medical treatment was performed outside the Regional Medical Facility. Dr. Kaiser stated the percentage varied depending on the area where the institution was located. Most inmates in Ely and Las Vegas were treated outside of the Regional Medical Facility, although there was a procedure for relocating inmates with chronic medical disorders to the Regional Medical Facility. He noted there had been several incidents of inmate deaths, trauma, and injuries over the past year. Cases which have incurred over $10,000 in medical expenses have doubled in the past fiscal year. Mr. Marvel inquired what types of illnesses were responsible for these medical expenses. Dr. Kaiser responded five inmates had died of AIDS, six inmates had died of cancer, and others were victims of trauma. He noted the care of chronically ill inmates in the terminal stages was very expensive. Mr. Marvel questioned whether this problem was occurring throughout the prison system. Dr. Kaiser replied it did not appear any one institution was any more affected than another although Northern Nevada Correctional Center was experiencing an increase in cases since chronically ill inmates were being relocated to that facility. Mr. Marvel asked if pending legislation governing payment of medical expenses of inmates would have an impact on medical expenses. Dr. Kaiser stated that legislation would result in the reduction in utilization and pharmacy expenses. Mr. Spitler inquired the dates of the medical claims for which the $1.7 million was being requested. Mr. Little replied the appropriation would cover estimated medical claims expenses through June 30, 1995. Mr. Spitler noted the new tracking system would not be implemented until December 1995. He asked how much additional funding would be required between June and December. Mr. Little stated any shortfalls occurring between June and December would be corrected in January to June 1996 so the division would not have to request additional supplemental funding. Mr. Spitler noted this expense was not included in the 1995-97 budget. He questioned how the division could avoid requesting another supplemental appropriation for June to December shortfalls. Mr. Little stated the tracking system would be phased in over the next six months and certain controls would be put in place immediately to alleviate the shortfall. Mr. Spitler asked if elective medical procedures were being provided to inmates. Dr. Kaiser stated elective procedures were not provided to inmates. Only medically necessary procedures were provided. He noted necessary procedures included both emergency and non-urgent care. Mr. Spitler asked if CoreSource's reporting procedure was different for the prison than it was for state employees. Mr. Little stated he was not familiar with the risk management program for state workers. He noted the prison population had a much more unhealthy lifestyle than state employees. Mr. Spitler questioned why these medical claims expenses were not included in the 1995-97 budget. He expressed concern that the budget had been closed without funding for these expenses. Mr. Little stated the division needed to examine the utilization review process and resources available for medical care. If necessary, procedures would have to be deferred until resources became available to cover medical expenses. Mr. Spitler inquired how much of the $1.7 million expense could have been deferred. Dr. Kaiser noted much of that expense was related to hospitalization. A review of hospitalization indicated there were minimal hospital days. Much of this expense was driven by morbidity and mortality. He noted the prison had no screening process to select out individuals who are bad medical risks. He cited the case of a chronically ill inmate who had cost the state over $131,000 in the past three years for medical care. Mr. Spitler suggested the department should have projected this expense and included it in the 1995-97 budget, and noted the 1995-97 budget was probably underfunded. Dr. Kaiser agreed with Mr. Spitler. He suggested involving someone with insurance industry or medical actuary experience in the budget process to project medical expense liability. Mr. Spitler asked what the policy was regarding organ transplants. Dr. Kaiser stated the issue had been referred to the ethics committee but there had been no response from them. He said the current policy was not to perform any transplant not available within the state of Nevada and only to perform the procedure on patients who were "excellent candidates" for transplants. Requests for kidney transplants have been declined in the past because inmates did not meet the criteria to be judged excellent candidates for transplant. Mr. Spitler inquired whether the state was required to provide organ transplants for inmates. Dr. Kaiser stated the federal court set standards for prison health care and generally allowed states options for choosing more conservative care. Conceivably, there could be a case where the state was required to perform a transplant. Ms. Giunchigliani asked what the turnaround time on claims payments by CoreSource was. Mr. Little responded CoreSource reported a turnaround time of eight to ten days. He explained there was an eight-week lag time from the time of the doctor visit to the time CoreSource issued the check, including time for the doctor's office to produce the billing to CoreSource. Ms. Giunchigliani inquired how much CoreSource was paid for claims administration. Mr. Little answered CoreSource was paid approximately $.70 per month per inmate. He noted Sierra Health Options performed utilization review. Sierra Health Options was paid approximately $3.70 per inmate per month. Ms. Giunchigliani asked what type of care was provided at the Regional Medical Center. Dr. Kaiser answered the Regional Medical Center provided 24-hour nursing care comprising a level of service comparable to a nursing home and sometimes as high as a hospital ward. Ms. Giunchigliani questioned what would necessitate outside medical care. Dr. Kaiser replied inmates requiring acute hospital care would be directed outside the system and returned to the Regional Medical Center for convalescent care. He explained the Regional Medical Center was not intended to be used as an acute care hospital. Ms. Giunchigliani inquired whether Sierra Health Options monitored hospital stays in order to expedite transfer to the Regional Medical Center. Dr. Kaiser answered affirmatively. He expressed the opinion the hospitalization utilization review was reasonably good. Ms. Giunchigliani asked if the prison could enter into a managed care contract separate from the contract for state employees. Mr. Little stated the prison could enter a separate contract and was looking at that possibility. Ms. Giunchigliani expressed concern about deferring medical treatment and having to pay greater costs for more serious treatment at a later time. Dr. Kaiser noted inmate care was based on ethical standards. Some disorders did not dictate immediate treatment and a number of procedures could be limited and performed on a first come, first served basis according to the level of resources available. Ms. Giunchigliani suggested the Legislature should reconsider adoption of a "compassionate leave" policy to release chronically ill inmates to receive care elsewhere. Mr. Marvel asked if security expenses associated with outside visits were charged as a medical expense. Dr. Kaiser answered generally security was considered a custodial expense. He noted the prison had adopted a strategy of having consultants come into the medical facility to provide services to preclude sending inmates offsite. Mr. Marvel questioned how much security had to be provided for hospitalized inmates. Dr. Kaiser responded the amount of security depended on whether the inmate was a maximum, medium, or minimum security inmate. Mr. Close asked how much CoreSource was paid at the time the prison was rolled into the state employee managed care plan. Mr. Little stated CoreSource was hired as a claims administrator for approximately $.50 per inmate per month. Mr. Close requested a breakdown of outpatient services versus inpatient services. Dr. Kaiser agreed to provide the information. Mrs. Brower stated she agreed with Mr. Spitler this was likely to be an ongoing expense which should be included in the budget. She questioned whether the characteristics of the risk pool would be changing. Dr. Kaiser replied the risk pool would not be changing. Mrs. Evans said she appreciated the difficulty of projecting medical costs for inclusion in the budget. She suggested there may be a need for an actuary to help project medical costs. Ms. Tiffany asked if Sierra Health Options was paid a premium. Mr. Little said Sierra Health Options was paid approximately $3.70 per inmate per month for utilization review, preauthorizations, and the subscription fee for the northern Nevada managed care network. Medical costs were over and above the fee to Sierra Health Options. It was those medical costs which were escalating. Ms. Tiffany questioned whether the possibility of using a different type of insurance policy had been reviewed. Dr. Kaiser stated the possibility of using a catastrophic policy had been explored several months ago, but it was not determined to be cost effective. Ms. Tiffany suggested that possibility be reevaluated. Chairman Arberry asked Mr. Little and Dr. Kaiser to provide to the committee as soon as possible a schedule identifying all of the problems with medical claims payments, a proposed action plan, and timeline for implementation of that plan. Mr. Little agreed to do so. ASSEMBLY BILL 698 Revises provisions governing disposition of commission for collecting vehicle privilege tax. Mr. Ray Sparks, Acting Deputy Director, Department of Motor Vehicles and Public Safety, testified A.B. 698 had resulted from discussions about the department's budget. Passage of the bill would authorize an accounting change to allow the commission received for collecting vehicle privilege tax to be deposited directly to the department's accounts rather than into the Highway Fund. He explained this action was motivated by the need to address the 22 percent cap limitation on the department's budgets. MR. DINI MOVED DO PASS A.B. 698. MR. FETTIC SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. MRS. CHOWNING AND MS. TIFFANY WERE ABSENT FOR THE VOTE. * * * * * ASSEMBLY BILL 704 Revises provisions governing authority of Drivers' Education and Safety Officer and distribution of additional fee for drivers' licenses. Mr. Sparks explained A.B. 704 was associated with the Bicycle Safety Program. Passage of A.B. 704 would reverse the current distribution of bicycle safety fee revenue to 35 percent to support the Planner position in the Department of Transportation and 65 percent to support a position in the Department of Motor Vehicles. In addition, the Department of Motor Vehicles would be allowed to make grants to local governments from the fee revenue collected. MR. MARVEL MOVED DO PASS A.B. 704. MR. PRICE SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. MRS. CHOWNING AND MS. TIFFANY WERE ABSENT FOR THE VOTE. * * * * * ASSEMBLY BILL 712 Authorizes Department of Motor Vehicles and Public Safety to provide certain services at locations other than offices of department. Mr. Sparks testified A.B. 712 would authorize the Department of Motor Vehicles and Public Safety to provide certain vehicle registration and drivers license services at locations other than established offices. It would also allow the department to assess a surcharge for those services. He noted the Drivers License Division currently utilized travel teams to provide some of these services. He requested clarification of the intent of this legislation. Mr. Price noted in some states vehicle registration could be provided at AAA insurance offices. He inquired whether A.B. 712 would allow that to be done in Nevada. Mr. Sparks stated his understanding of the bill was that the services would be provided by department employees. He indicated discussions had been held with California State Automobile Association (AAA) regarding its acting as the department's agent in Nevada to provide vehicle registration services. To date AAA has not expressed any willingness to serve in that capacity. Ms. Giunchigliani noted this legislation had been passed in 1991 but was sunsetted in 1993. The original legislation was initiated at the request of small business owners who indicated they would be willing to pay a surcharge to have someone from the department come to their office to process vehicle registrations. Mr. Sparks asked if it was the intent of the bill to charge the surcharge to locations currently being serviced by the travel teams. Ms. Giunchigliani stated that was not the intent of the bill. Mr. Bruce Glover, Drivers License Division, expressed support for the concept of A.B. 712. He noted the department had developed a pilot program at the Rio Hotel which had proven successful, and on that basis, requested funding for a travel team in the budget. That funding was not recommended by the Governor. He expressed concern, therefore, that staffing was not available to support A.B. 712 if it was passed. Ms. Giunchigliani noted there was $500,000 in a reserve account. She questioned whether this funding was available to support travel teams. Mr. Glover replied there were statutory limitations on the use of those funds. Mr. Ghiggeri stated the budget did not provide for the transfer between the Insurance Verification account and the Drivers License account to facilitate use of those funds for travel teams and it was not a statutorily approved expense from Insurance Verification funds. Statutory changes and adjustments to both budgets would be required to facilitate use of the funds for the purpose of funding travel teams. He noted any funds remaining in the Insurance Verification fund would revert to the Highway Fund. Therefore, there should be a direct appropriation from the Highway Fund to pay for travel teams. Mr. Allard asked how many travel teams were currently operating in Clark County. Mr. Glover answered one travel team was operating in Clark County and the rural areas. MR. SPITLER MOVED DO PASS A.B. 712. MRS. BROWER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. MRS. CHOWNING AND MS. TIFFANY WERE ABSENT FOR THE VOTE. * * * * * BUDGET CLOSINGS Mr. Stevens reported on the budget accounts to be closed in the joint hearing with the Senate Finance Committee following this hearing. MANSION MAINTENANCE - PAGE 5 Mr. Stevens reported the Senate Finance Committee had authorized funding for replacement equipment totaling $14,813. The committee closed this budget as recommended by the Governor. Mr. Spitler recommended concurring with the Senate Finance Committee closure. He noted the Governor's Mansion was a public building and should receive the Legislature's support. LIEUTENANT GOVERNOR - PAGE 19 Mr. Stevens stated the committee recommended adding equipment requested by the Lieutenant Governor. The Senate Finance Committee also recommended one- half of the additional in-state travel requested by the Lieutenant Governor and added funding for an education outreach program and $250 for the Department of Information Services. Chairman Arberry recommended cutting recommended funding for the education outreach program in half. Mr. Spitler said the Lieutenant Governor had not offered a convincing argument for his need for additional funding other than for in-state travel. He expressed the hope the committee would only authorize additional travel funding. Mr. Hettrick agreed with recommending one-half of the funding requested for the education outreach program. AG WORKERS COMPENSATION FRAUD - PAGE 37 Mr. Stevens reported the Senate Finance Committee added funding for vehicles and cellular telephones requested by the agency. This committee reduced positions in this budget from nine to four. Mr. Marvel suggested holding action on this budget. STATE TREASURER - PAGE 91 Mr. Stevens noted this committee eliminated vacancy savings, added funding for a Bloomberg Investment System, and made a technical adjustment to rent in this budget. The Senate Finance Committee did not eliminate vacancy savings and added funding for a surety bond and dues and registrations. Mr. Dini suggested combining the recommendations of both committees. LEGISLATIVE COUNSEL BUREAU - PAGE 157 Mr. Stevens stated the money committees closed this budget in the same manner. He noted pending legislation to establish a legislative budget office would require additional staffing in the Fiscal Analysis Division as well as additional funding in the first year of the biennium for data processing. Mrs. Evans noted the Senate Finance Committee had heard the bill, this committee had not. She suggested holding action on this account pending hearing of the bill. SCHOOL OF MEDICAL SCIENCES - PAGE 305 Mr. Stevens noted the Senate Finance Committee recommended funding of $1 million in the first year of the biennium and $2 million in the second year for the residency program. Ms. Giunchigliani commented the information provided by the School of Medicine was inaccurate and misleading. She suggested the residency program be reevaluated. Mr. Marvel stated some additional information had been received from the School of Medicine indicating the full $3 million was not needed in the coming biennium. Chairman Arberry stated if there was no current need for funding, the School of Medicine could present its request at a later time. W.I.C.H.E. LOAN & STIPEND - PAGE 385 Mr. Stevens stated he had been requested to review whether there was funding available to support the number of law slots recommended in the Executive Budget as well as additional physical therapy slots recommended by this committee. He indicated the reserve fund was sufficient to provide for that action. Mr. Marvel suggested concurring with the Senate Finance Committee's recommendation on this budget. Chairman Arberry asked Mr. Close if physical therapy slots would be utilized if they were funded. Mr. Close said the slots were needed to accommodate the applicant pool. INFORMATION SERVICES - FACILITY MANAGEMENT DIVISION - PAGE 631 Mr. Stevens noted there was an issue in this budget regarding transferring communications personnel between the Department of Transportation (NDOT), the Department of Motor Vehicles and Public Safety (DMV), and the Department of Information Services. The Governor recommended transferring NDOT and DMV communications positions to the Department of Information Services. The Senate Finance Committee recommended leaving those positions in their current locations. This committee recommended transferring the NDOT positions to the Department of Information Services and leaving the DMV positions in their current location. ADVOCATE FOR INSURANCE CUSTOMERS - PAGE 731 Mr. Stevens explained this account was not included in the Executive Budget initially. The Governor subsequently revised his recommendation to include funding for this account. The Senate Finance Committee closed this budget based on the original recommendation. This committee recommended funding this position with Insurance Verification funds. DIVISION OF INDUSTRIAL RELATIONS - PAGE 737 Mr. Stevens noted the Senate Finance Committee closed the State Industrial Insurance System accounts based on passage of the pending senate bill. This committee closed the accounts in a generic manner, not assuming passage of either the Senate or Assembly bills, with the intentions of making necessary adjustments via the Authorizations Act or through the Interim Finance Committee. ECONOMIC DEVELOPMENT - PAGE 955 Mr. Stevens reported the Senate Finance Committee recommended adding two Program Specialist positions and related costs. Mr. Marvel noted the agency had indicated at least one position was badly needed. HIGHWAY PATROL - PAGE 1755 HIGHWAY PATROL SPECIAL PAGE 1763 Mr. Stevens explained the Governor recommended combining these two accounts. This committee concurred with the Governor's recommendation. The Senate Finance Committee recommended separating the accounts. The Senate recommendation would bring the account close to the 22 percent cap in the second year of the biennium. The Assembly recommendation would eliminate the issue of the 22 percent cap. In addition, the Assembly recommended eliminating vacancy savings to allow the Highway Patrol to be fully funded. The Senate action did not. Chairman Arberry suggested holding action on this budget. BICYCLE SAFETY PROGRAM - PAGE 1809 Mr. Stevens noted the Senate and Assembly differed on whether the state should fund a coordinator position in the Bicycle Safety Programs or whether those funds should be transferred to local governments to perform the function. FORESTRY HONOR CAMPS - PAGE 1943 Mr. Stevens reported the Department of Conservation and Natural Resources proposed a potential compromise on this issue which would eliminate funding in the Executive Budget and allow them to evaluate the number of inmates in the honor camps. In the event additional positions were needed, the department would approach the Interim Finance Committee for funding. He noted $8 million would be set aside in the Interim Finance Committee budget for contingency purposes. In addition, $8 million would be set aside in the Department of Prisons budget for prison related costs. Mr. Spitler stated the department was not accepting the policy set by this committee not to fund the positions. He noted the $8 million set aside for prison costs was designated for out-of-state placement of prisoners and for Parole and Probation. That funding was not accessible to the honor camps. Ms. Giunchigliani suggested the department not be allowed to approach the Interim Finance Committee for funding. Mr. Allard stated he would not be opposed to funding crew chief positions if each crew had a maximum of 12 inmates. There being no further business, the meeting was adjourned at 9:15 a.m. RESPECTFULLY SUBMITTED: Dale Gray, Committee Secretary Assembly Committee on Ways and Means June 14, 1995 Page