MINUTES OF THE meeting
of the
ASSEMBLY Committee on Health and Human Services
Seventy-Second Session
April 7, 2003
The Committee on Health and Human Serviceswas called to order at 1:08 p.m., on Monday, April 7, 2003. Chairwoman Ellen Koivisto presided in Room 3138 of the Legislative Building, Carson City, Nevada, and, via simultaneous videoconference, in Room 4406 of the Grant Sawyer State Office Building, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
Note: These minutes are compiled in the modified verbatim style. Bracketed material indicates language used to clarify and further describe testimony. Actions of the Committee are presented in the traditional legislative style.
COMMITTEE MEMBERS PRESENT:
Mrs. Ellen Koivisto, Chairwoman
Ms. Kathy McClain, Vice Chairwoman
Mrs. Sharron Angle
Mr. Joe Hardy
Mr. William Horne
Ms. Sheila Leslie
Mr. Garn Mabey
Ms. Peggy Pierce
Ms. Valerie Weber
Mr. Wendell P. Williams
COMMITTEE MEMBERS ABSENT:
None
GUEST LEGISLATORS PRESENT:
Assemblywoman Barbara Buckley, Clark County District No. 8
STAFF MEMBERS PRESENT:
Marla McDade Williams, Committee Policy Analyst
Terry Horgan, Committee Secretary
OTHERS PRESENT:
Liz MacMenamin, Retail Association of Nevada
Phil Burgess, National Director, Pharmacy Affairs, Walgreen Company
Debbie Veale, Regional Manager, Managed Care Operations, Albertson’s, Licensed Nevada Pharmacist
Mary Staples, National Association of Chain Drug Stores
Charles Duarte, Administrator, Division of Health Care Financing and Policy
Jay Parmer, Barr Laboratories
Tom Wood, Pharmaceutical Research and Manufacturers of America
Scott Watts, President, Nevada Alliance for Retired Americans
Jon Sasser, Washoe County Senior Law Project
Paul Gowens, Center for Independent Living, Disability Forum
Patricia van Betten, Nevada Nurses Association
Ruth Mills, President, Board of Nevada Health Care Reform Project
Larry Spitler, Associate State Director, American Association of Retired Persons
John Ellerton, M.D., Member, Task Force for the Fund for a Healthy Nevada
Danny Coyle, Nevada Alliance of Retired Americans, Retired State of Nevada Employees
Mike Willden, Director, Department of Human Resources
Mike Alastuey, University Medical Center
Debbra King, Chief Financial Officer, Division of Health Care Financing and Policy
Anne Lynch, Sunrise Hospital and Medical Center
Robin Keith, President, Nevada Rural Hospital Partners
Vice Chairwoman McClain:
We’ll open the hearing on A.B. 384.
Assembly Bill 384: Makes various changes concerning provision of prescription drugs by Department of Human Resources. (BDR 38-775)
Assemblywoman Ellen Koivisto, Clark County Assembly District No. 14:
A.B. 384 requires that the Department of Human Resources [DHR] implement a preferred drug list that includes a prior authorization component for drugs that are not on the list. The bill is in skeleton form, so we’re going to try to flesh it out today.
Section 1 establishes the requirements of the bill in Title 38 of the NRS [Nevada Revised Statutes]. Section 2 specifies words and terms defined in Sections 3 and 4. Section 3 specifies the provisions that apply to the DHR. The bill requires the creation of a Pharmacy and Therapeutics Committee [P and T Committee], and the Committee is defined in Section 4. Section 5 requires DHR to include in each program that it administers and that provides prescription drugs, a requirement that any prescription drug provided must, unless exempted by the Pharmacy and Therapeutics Committee, be on the preferred drug list [PDL] or require prior authorization.
Section 6 is where amendments start. The membership of the Pharmacy and Therapeutics Committee, instead of six physicians and four pharmacists, should be four physicians, and amend subsection 2(c) by increasing the number of lay members from one to three. Those [lay members] will be appointed by the Governor and selected from a list of names provided to the DHR by AARP [American Association of Retired Persons], the Alliance for the Mentally Ill of Nevada, and the state Council for Independent Living. There will be a new section added establishing a “cooling off period” by prohibiting members from serving on the Pharmacy and Therapeutics Committee if they had a business relationship with the DHR, a personal relationship with the director or any of the administrators, bureau chiefs, or other administrative personnel of the DHR, or other administrative personnel that may have a relationship with the business conducted by the Pharmacy and Therapeutics Committee, or were former employees of the DHR or any of its divisions, if such relationship occurred within the preceding year.
Section 9 establishes the responsibilities of the Committee. The Committee is primarily charged with reviewing the efficacy of prescription drugs, identifying those drugs that should be on the preferred drug list, those that are subject to prior authorization, and determining the drugs that’ll be exempt from the PDL and exempt from prior authorization. The Committee also provides advice to the DHR concerning supplemental rebates from manufacturers. Further, the section requires the Committee to permit manufacturers to present evidence supporting the inclusion of their drugs on the PDL if the manufacturer agrees to provide a supplemental rebate or other program benefit to the DHR.
[Assemblywoman Koivisto, continued] Section 10 identifies other powers of the Pharmacy and Therapeutics Committee, and this section needs an amendment. Subsection 1 of Section 10 should be deleted because this section may allow manufacturers to influence the Pharmacy and Therapeutics Committee by providing financial assistance to the Committee.
Section 11 sets forth the responsibilities of the DHR as it relates to the PDL and prior authorization requirements. The DHR must develop a list of preferred drugs for each of its programs and the list must include:
1. Drugs that were identified by the Pharmacy and Therapeutics Committee.
2. Drugs that are less expensive than the drugs identified by the Committee but are prescribed for the treatment of the same condition or disease as a drug identified by the Committee.
3. Drugs that are included in the supplemental rebate program.
Section 12 establishes other duties of the DHR as it relates to negotiating for supplemental rebates, negotiating for other program benefits, and considering the placement of drugs on the preferred drug list.
Section 13 requires the Governor to make the appointments to the Pharmacy and Therapeutics Committee as soon as practicable after July 1, 2003.
There are other components that should be added if the Committee supports [A.B. 384]. Those components are to specify that rebates received from manufacturers must be used to expand or offset prescription drug costs of programs administered by the DHR in accordance with federal law and specify that provisions of the PDL and prior authorization requirements apply to new patients, only after those items are established for any particular class of drug. The intent is to ensure that no patient who is already on a specific drug regimen is subject to a new drug regimen. It further allows a transition to the preferred drug list and the prior authorization requirements for physicians, pharmacists, patients, and the DHR.
It establishes minimum standards for prior authorization, if such standards are permissible pursuant to federal law. Such standards require the DHR to develop a process for responding within 24 hours to physician authorization requests and to provide a 72-hour emergency supply of any drug on the prior authorization list when such situations warrant emergency approval. It requires the DHR to conduct yearly evaluations concerning the efficacy and efficiency of the prior authorization process. It requires the DHR to submit a Medicaid state plan amendment seeking approval of the PDL and the prior authorization requirements by July 1, 2004; and further, the DHR is required to make regular reports to the Legislative Committee on Health Care concerning its progress with developing the state plan amendment.
[Assemblywoman Koivisto, continued] Another component that I think should be added is to require Nevada’s Department of Administration to conduct a study to determine the feasibility of using the PDL and prior authorization requirements for all state programs that provide prescription drug benefits. The study should consider prescription drug purchases for Nevada’s Department of Corrections for inmates, the prescription drug benefits of the Public Employees Benefits Plan, and any other state programs that provide prescription drugs. This study should be completed by June 1, 2004, and the results of the study should be reported to the Legislative Committee on Health Care and to the Legislative Commission.
Thank you, Committee. I have some folks here with backup information.
Vice Chairwoman McClain:
We’ll call up your presenters.
Liz MacMenamin, Retail Association of Nevada:
Good afternoon, Ms. Vice Chairwoman and members of the Committee. Thank you for this opportunity. We come in support of Assemblywoman Koivisto’s bill [A.B. 384]. We look for this to be a great savings to the state of Nevada. I am going to save your time and turn the testimony over to the expert people I have here with me today.
Phil Burgess, National Director, Pharmacy Affairs, Walgreen Company:
It’s a pleasure to be here this afternoon and speak in favor of A.B. 384. Walgreens operates in 43 states, so I’ve had a lot of experience working with different states and [seeing] how they’ve handled their preferred drug lists. I want to quickly give you an overview of exactly what we’re talking about (Exhibit C).
This first [page] gives a recap of exactly how your drug spending is being separated out by drug class. These are [year] 2000 numbers, but 2002 should be very similar. The antipsychotic is by far the highest category of drug spending. As you look at how you’re going to control your costs, obviously you look at these categories and what differences you can make in order to limit the expense that you have.
Each state is struggling with what they’re going to do with Medicaid costs. On the next [page] I gave you some ideas of what other states are doing [such as] looking at a preferred drug list, doing some sort of prior authorization, looking at how they can actively improve generic substitution. Some states are looking at “step therapy,” whereby people would first be started on OTC [over the counter] drugs before they’d be moved into more expensive prescription drugs; enhanced rebates; increased use of OTC medications; enhanced management of high-cost patients; and disease management programs. This afternoon I’m just going to be talking about the preferred drug list.
[Mr. Burgess, continued] On the next [page], this whole prior authorization procedure is approved by federal law. It’s used to control utilization. In 1990 the federal law passed a regulation that would require that, for state Medicaid programs, state Medicaids could not have a formulary, per se, the way that non-Medicaid, third-party programs could have. They’re required to cover any drug as long as the manufacturer is willing to give rebates back to the state.
The only way that you can control your drug costs is by setting some type of a prior authorization preferred drug list, so that at least you set up a process whereby you’re able to control utilization. This is totally within federal guidelines.
Formularies are used for non-Medicaid programs whereby they can selectively cover drugs and not cover other drugs. You can’t do that within the Medicaid environment, by federal law.
The process is that providers would have to seek approval to use particular products that were not on the preferred drug list. The administrator would then give authorization when, in fact, there need to be variances, and when [they did want to cover] drugs that wouldn’t be on the preferred drug list.
Just in this last fiscal year, 19 states have implemented some type of a prior authorization program or have expanded their existing prior authorization program. What Nevada is considering is right in step with what most states are beginning to do to try and control their cost.
The next [page] gives an explanation of what a PDL is. It’s a list of drugs that may be dispensed or prescribed, without requiring any additional prior authorization. It’s a set list of drugs that have been established, and these would be established by your Pharmacy and Therapeutics Committee. This list would not be set up purely based on cost. These are pharmacists and physicians who the Governor would be selecting, that would determine what drugs would effectively meet the various conditions and, by class, would be set up so that no prior authorization would be required.
[Mr. Burgess, continued] If additional steps were necessary, if the doctor wanted the drug covered, the physician could initiate a request for a prior authorization. We would propose, and most states have [agreed, that] there are selected classes of drugs that you would not want to put on this list. An example would be anti-retroviral [HIV/AIDS] drugs because there aren’t any drugs that are similar to those drugs. People develop [a resistance] to the drug and they have to move to different therapy. Also, when you’re talking about antipsychotic drugs, those are drugs that Florida and many states have looked at and said, “No, those are unique categories of drugs that you need to be careful of.”
The vast majority of drugs can be looked at and can be analyzed and that’s what your Pharmacy and Therapeutics Committee would do. They would look at the drugs and make sure they’re selecting drugs based on good clinical sense.
There have been some lawsuits with regard to this whole concept. Most recently, the manufacturers’ association brought suit against the state of Michigan. That [lawsuit] was recently decided in district court and upheld the state’s right to do this.
There are two programs that I think are the premier programs. They are programs in Florida and Michigan and are compared on [pages 6-10]. Florida has 110 therapeutic classes and 1,300 drugs. Their preferred drug list includes generics, and they allow manufacturers to have value-added programs. Michigan’s program is newer. They only have 40 classes of drugs so far covered, but that covers 75 percent of their expenditures. They allow supplemental rebates to help supplement the difference between the manufacturer’s price and the lower of two drugs that would be approved in that category.
Florida had specific authorizing legislation. Their program applies only to their Medicaid population and they set up this pharmacy and therapeutics committee. If you look at Michigan, their language was done in the state budget, similar to what is now being proposed in Nevada. They go beyond just the Medicaid population and they look at all of the different state-funded programs that are impacted. They also have a P and T Committee.
[Looking at page 10], in Florida the physician initiates the authorization, identical to what is being proposed here in Nevada, and it gives you the response times they’re experiencing in Florida. On the right [side of the page] in Michigan, physicians initiate the authorization. It really is not causing a significant negative impact on physicians’ productivity.
[Mr. Burgess, continued] [Page 9] shows the savings in Florida—$68 million a year in supplemental rebates and $36 million in prior authorizations. Michigan [has saved] $70 million a year in supplemental rebates. Now they’re experiencing an $850,000 a week savings and their average claim cost has dropped from $49.30 to $46.05.
[On the last page] we took Florida’s program and projected, based upon Nevada’s numbers, and of course Nevada’s program is a much smaller program than either Florida’s or Michigan’s, but just based upon the preferred drug list, we estimate that the annual savings would be $3.8 million, just looking at the supplemental rebates and the prior authorization.
Debbie Veale, Regional Manager, Managed Care Operations, Albertson’s; Licensed Nevada Pharmacist:
[Introduced herself.] Thank you for giving me the opportunity to speak here today. I have provided you with a handout with a blue “Albertson’s” at the top (Exhibit D). I’m regional manager for Managed Care Operations for Albertson’s and a licensed pharmacist in the state of Nevada.
Albertson’s currently operates 69 Save-on/Albertson’s Pharmacies in the state of Nevada. We believe that Nevada is a great state and a state in which we hope to add stores. Additional stores are good for Nevada since they contribute tax revenues to the state, employment opportunities, and growth in our community partnership programs with organizations throughout the state.
As a health care provider, I’m here to let you know that we at Albertson’s support the preferred drug list as a way to effectively control costs for the Medicaid patients in Nevada. Over the past 20 years, I have seen the release of new prescription drugs go from a few a year to literally hundreds. Many new medications are variations of products already on the market and are known as “me too” drugs. The therapeutic classes can become a long list of medications which are very similar, have similar side effects, and similar outcomes. These similar products do not have similar costs to the state. That’s really the root of the preferred drug list, to make sure that the cost to the state within each therapeutic class is monitored and kept at a reasonable level.
In 2002 the Department tried to control costs of pharmaceuticals by decreasing the reimbursement to pharmacies. The problem with this method is that 85 percent of the money paid to the pharmacy goes to the pharmaceutical companies in order for us to purchase medications. If you’ll look on the fourth page [of the handout] there is a pie chart that demonstrates that the majority of the dollars that we collect from the states in reimbursement does not go to the bottom line of the Albertson’s, the Walgreens, the various providers in the state. The majority of the money we collect in reimbursement from the state is to pay for the cost of the drugs.
[Ms. Veale, continued] In addition, if you’ll look at the chart prior to that which [is titled] “Community Pharmacy Profits” you’ll see community pharmacies are not getting rich dispensing medications. It is the business we are in, we understand the cost of doing business, but please, don’t believe that we have change falling out of our pockets.
The preferred drug list is a way to slow or stop the rising cost of medication without punishing the providers. The preferred drug list may actually improve patient care by encouraging the doctors to prescribe only the best medications and those are the medications that the P and T Committee has reviewed and suggested to the doctors are the most efficacious medications.
The preferred drug list does not limit access to medications. Medications not on the list are accessible through an authorization process initiated by the prescribing doctor. Currently, the turnaround time for prior authorizations [in the state of Nevada] is very good, always less than 24 hours and quite often within minutes. We would not expect with the preferred drug list and prior authorization process that those times would increase at all.
Preferred drug programs are effective for all therapeutic classes. A committee would be formed to decide which drugs should be part of the program for each therapeutic class. These drugs are judged on their clinical efficacy and safety and the “best-in-the-class” drugs are put on the PDL list. Some drug classes, such as HIV, oncology, and mental health, may have more drugs allowed or, as suggested by Mr. Burgess, be carved out.
In conclusion, we feel that the implementation of the preferred drug list program will help control costs to the Nevada Medicaid program and provide better care to Nevada Medicaid recipients. Thank you.
Mary Staples, National Association of Chain Drug Stores (NACDS):
[Introduced herself.] I appreciate the opportunity to appear before you today to speak in favor of the concepts in A.B. 384. In the state of Nevada, NACDS partners with the Retail Association representing our community pharmacies throughout the state. In the interest of time, I’ve submitted a statement for the record (Exhibit E), and I will bypass that. We want to offer a few amendments (Exhibit F) to A.B. 384 modeled after the successful Michigan and Florida programs that Phil Burgess outlined a few moments ago.
[Ms. Staples, continued] The first one refers to Section 5, subsection 2, page 2, line 7, dealing with prior authorization. We are asking that new language be included to say the “prior authorization is done by the prescriber, not the pharmacy.” Our rationale, of course, is that it’s the prescriber who is determining what should be on the prescription and it would save time and allow the pharmacist to spend more time interacting with the patient at the pharmacy if it is the responsibility of the prescriber to look at that prior authorization list.
Our second suggested amendment is in Section 6, subsection 2, (a) and (b). The Chairman already addressed changing the ratio of doctors and pharmacists on the Committee. Our point in making the suggestion for this amendment is just to have a quality number of doctors and pharmacists. Most preferred drug lists across the country have parity on that [committee], so we would support the Chairman’s suggestion.
Assemblywoman McClain:
So you want to change to five positions, five pharmacists, but not change the at large people?
Mary Staples:
We had no opinion on the at large people. We would support her suggestion. If [the makeup of the P and T Committee were] four pharmacists and four physicians, that would be fine. We think that [members of the Committee] should predominantly be [professionals] and should be doctors and pharmacists equally. If she feels that other groups need to be involved in that group, we support that.
The next suggested amendment is to Section 7, subsection 4, on page 2, line 39. We’re suggesting that the P and T Committee meet quarterly or more, as determined by the Committee, rather than every six months, just to keep the list as current as possible.
Our next suggested amendment is at Section 9, subsection 5, on page 3, lines 30-33. We’re suggesting that this language be deleted in its entirety. The focus, we believe, of the P and T Committee should be on selecting the best drug per class, as both Debbie and Phil have alluded to. It’s not the responsibility of the P and T Committee to negotiate the prices. That should be left up to the Department and/or third party administrator [if they have one] involved in that. The professionals should focus on the drug classes.
The next suggested amendment is to Section 9, subsection 6, on page 3, lines 30 to 33. Again, we suggest that entire section be deleted in order to make the P and T Committee successful and the preferred drug list up and operational, we need to keep the integrity of the process intact. There’s plenty of information, we believe, out there to have that Committee make decisions based on sound clinical judgment, peer review articles, and published studies rather than hold public hearings where people [could potentially] come through and rehash carve outs.
Vice Chairwoman McClain:
By taking these two out, it would be the Department that would do the negotiation and follow-up and all that stuff, right?
Mary Staples:
Right, and the Committee would focus on the best drug in the class.
The next amendment is in Section 9, subsection 7, page 3, lines 44 and 45. We’re suggesting striking the language “equipment and supplies for the treatment of diabetes” because this section applies to the drug budget and we don’t believe that equipment and supplies would be covered under the drug budget. We are also suggesting in this same section and subsection on pages 3 and 4, lines 44 and 45 and lines 2 to 4, that you strike the language on some of the carve outs. We think that the P and T Committee should be able to meet and determine what drugs need to be included on the list. To provide too many carve outs beyond the traditional ones the different states [have opted for, such as] HIV drugs and atypical antipsychotics, really lessens the chance that you’re going to achieve any significant savings for this program. It also takes away the [Committee’s power to act] based on their professional judgment. We would suggest that you add a phrase to Section 9, subsection 7, on page 4, line 4, adding “and atypical antipsychotic drugs,” not all mental health drugs.
The next amendment is to Section 10, subsection 1 on page 4, lines 6-8. We’re suggesting, as the Chairwoman already recommended, that that section be stricken in its entirety.
The last amendment we’re suggesting is to [delete] Section 10, subsection 4, on page 4, lines 13 and 14, in its entirety. We believe that P and T Committees should debate in an open forum amongst Committee members, but there’s no need to have witnesses appear before the Committee and provide testimony. There’s so much clinical data available on these top drug-spend classes already out there that they can use in order to make their determinations. Thank you.
Vice Chairwoman McClain:
Does any Committee member have a question on the amendments or on the other two presentations? [There was no response.]
Charles Duarte, Administrator, Division of Health Care Financing and Policy:
I’d like to thank Mrs. Koivisto for putting this bill [A.B. 384] forward. It supports a lot of the efforts that we have in The Executive Budget for managing pharmacy costs.
I’m going to summarize my testimony (Exhibit G). As mentioned, we have a proposal in The Executive Budget, which I’ve discussed with a number of the Committee members, for implementation of a preferred drug list in the Medicaid program. I have provided a letter to Senator Rawson that explains in detail what our efforts will entail through regulation in order to develop a preferred drug list program (Exhibit H).
A lot of the testimony that has been given today is consistent with our policies, as put forth in that letter. To summarize them, we do intend to implement a P and T Committee, established under the guidelines which are already in place in Section 1927 of the Social Security Act, where it defines a number of pharmacists and physicians who have experience in dealing with the Medicaid population and their prescribing needs. Excluding anybody who has experience and is a provider to that population may be detrimental to the functioning of a P and T Committee.
Our intent is the same in terms of focusing the P and T Committee on reviewing the efficacy and safety of drugs, as opposed to dealing with anything that has to do with price negotiations or negotiations for supplemental rebates. That would be left to the state and the vendor we select to help us administer this program.
As explained in the letter, the P and T Committee we also agree, should have the responsibility for making decisions as to which drugs to exempt from the PDL program, and which drugs or diagnoses need to be included, based on clinical information.
We disagree with the fact that they should not take testimony, because we believe this Committee should work under the open meeting laws of the state of Nevada and should take testimony from the public, albeit the chairman of the Committee will need to manage that process so it doesn’t become overly burdensome. We do have an obligation, I believe, to take public comment.
This letter explains some of our recommendations. We have already proposed the elimination of certain drugs from consideration in the PDL. These include drugs that are used for the treatment of AIDS, drugs that are used for the treatment of hemophilia, for the prevention of transplant rejection, atypical and typical antipsychotic medications that really are not a significant portion of our drug-spend dollars, antidiabetic medications, and antiseizure medications. We threw a caveat in there which left to the P and T Committee, the clinicians, any other classes of drugs that the P and T recommends for exclusion from the PDL.
[Mr. Duarte continued.] We would like to limit the P and T Committee to evaluating preferred drugs for the PDL. We currently have a Drug Utilization Review Board [DUR] that has already assisted us and will continue to assist us in the development of step therapy protocols and prior authorization protocols as established in the Social Security Act. We’re required to have a drug utilization board, but we don’t want to extend this process of selecting preferred drugs to the DUR Board. We have a very good DUR Board and want to limit their function to what’s already described in our regulations and in federal law.
We have a proposal in The Executive Budget. In this letter to Senator Rawson we’ve outlined some of the recommendations that we have for the operation of this program as well as the functioning of the P and T Committee. I’d be more than happy to answer any questions you might have at this time.
Vice Chairwoman McClain:
I’m not familiar with S.B. 321 and S.B. 374. Are those two bills on the other side just like this one?
Charles Duarte:
No, they’re not. Those bills have been pulled. They were quite descriptive as to how the Department was to develop a PDL or even not develop a PDL. We’ve worked through those discussions with the pharmaceutical manufacturers and, I believe, arrived at an agreement which allows us to proceed with the PDL and implement the savings that we represented in The Executive Budget once the program’s fully implemented.
Assemblyman Mabey:
Just so I understand, you support this bill with the amendments except for the part about the Open Meeting Law?
Charles Duarte:
Actually, what we’re suggesting is that The Executive Budget already has this, and we’re committed to developing it consistent with many of the recommendations in this bill, but developing it through regulations instead of through statute.
Assemblyman Mabey:
So you’re opposed.
Charles Duarte:
We’re not opposed; we’re neutral. We appreciate the effort that Mrs. Koivisto put into this. It’s a very well thought out bill.
Assemblywoman Leslie:
Let me try that question a different way. Can you at least point out to us what the key differences in the bill are? I think we’re all resigned to having a PDL, at least I am, but without doing a lot of work, how is the Committee going to decide between Mrs. Koivisto’s version [A.B. 384] and your version?
Charles Duarte:
I haven’t had an opportunity to review the proposed amendments and certainly would like to look at those first before I commit to the differences between our proposal and [A.B. 384].
The exclusion of all mental health drugs would be an issue for us, particularly for the area of antidepressants and antianxiety medications. We believe [that decision] should be left to the P and T Committee. I think there are some nuances as to how the P and T Committee functions that we probably would need to work through. If we had an opportunity to sit down and review the amendments . . .
Assemblywoman Leslie:
Could you do that by Wednesday?
Charles Duarte:
I believe we can.
Assemblywoman Leslie:
It would be very helpful to me. I feel that I can’t make a good decision about which way to go.
Jay Parmer, Barr Laboratories:
[Introduced himself.] I represent Barr Laboratories, which is a producer of both generic and proprietary drugs. As one of the leading developers, manufacturers, and marketers of high quality, lower cost, generic pharmaceuticals in the United States, Barr Laboratories is committed to helping states implement programs to more effectively manage escalating health care expenditures.
We are here today in support of Chairwoman Koivisto’s bill [A.B. 384]. I have submitted, for the record, about eight pages of written testimony (Exhibit I) and I won’t take your time to go through that, but I would note a couple of highlights.
[Mr. Parmer, continued] We feel that in implementing the PDL we encourage you to focus on two critical issues: Number one would be the establishment of an independent and objective P and T Committee, number two would be to focus on the recognition that the exclusion of any prescription drug product should be based solely on conclusive, sound, scientific, and clinical data. All products excluded from a state’s PDL are always available to a Medicaid beneficiary through prior authorization. Medicaid prior authorization is based on medical need, not product cost, and we support that position.
If you implement the PDL effectively, the preferred drug list can become the physician’s guide to prescribing the best and most cost-effective treatment for patients enrolled in state funded programs. Clinically sound, cost-efficient preferred drug lists have been proven to effectively reduce costs without sacrificing care for beneficiaries.
The use of preferred drug lists allows state agencies to preserve coverage of pharmaceuticals without drastic cuts in payments to physicians, pharmacies, and other health care providers. Even more importantly, these programs have allowed the states to make progress in solving the prescription drug crisis for senior citizens and the working poor.
We’re here in support of A.B. 384 and we appreciate your consideration of this important legislation.
Tom Wood, Pharmaceutical Research and Manufacturers of America:
I want to congratulate Chairwoman Koivisto and her authors on what’s a very thoughtful and well-crafted piece of legislation obviously designed to make sure patients get access to medications [while] at the same time taking a look at the costs.
We have been working with the Medicaid department and with the Governor’s office in terms of reviewing their parallel issues. We’re in agreement with several things in terms of advancing with a preferred drug list.
I must register our opposition to this bill on the basis of supplemental rebates. We feel that supplemental rebates are another form of price control. You already get the best prices we offer anybody in America as a rebate back on Medicaid, and for us to make another choice and not choose to do it means that patients aren’t going to have access, perhaps, to those medications unless the P and T Committee, or somebody else, decides it.
I do think that the discussions here are very positive in terms of what you’re trying to accomplish here in Nevada. We’re willing to work with anybody and everybody in order to come out with a good outcome. But we have to stand firm [on the issue of supplemental rebates]. We also did not agree with the Department [of Human Resources].
Vice Chairwoman McClain:
Are the supplemental rebates holding up in court in other states?
Tom Wood:
Yes, they are.
Vice Chairwoman McClain:
That’s all [the testimony] we have. Mrs. Koivisto, did you have any follow up?
Assemblywoman Koivisto:
It sounds to me like what the Governor has in his budget and what is in A.B. 384 are very close to the same thing. The major difference is that A.B. 384 would put it in statute as opposed to regulation, so the Division couldn’t decide, a few years from now, that they wanted to try something different. One other suggestion for the Pharmacy and Therapeutics Committee would be to have a psychiatrist as one of the physicians on the Committee.
Vice Chairwoman McClain:
That’s probably a good idea. How did you feel about all the amendments? Do you have any particular heartburn with any of them?
Assemblywoman Koivisto:
No, I don’t. I spoke with Mary [Staples] and Liz [MacMenamin] earlier about some of these amendments and I think they’re fine.
Vice Chairwoman McClain:
Thank you. Any questions from the Committee? [There was no response.] O.K., we’ll close the hearing on A.B. 384 and we’ll turn the gavel back over to the Chair.
Chairwoman Koivisto:
Ms. Buckley is here to present A.B. 504.
Assembly Bill 504: Requires Department of Human Resources to establish program to extend coverage for prescription drugs and pharmaceutical services to certain persons. (BDR 38-1207)
Assemblywoman Barbara Buckley, Clark County Assembly District No. 8:
[Introduced herself.] Assembly Bill 504 is a measure that builds on our efforts to provide prescription drug coverage to certain Nevada citizens. The measure takes advantage of a federal Medicaid waiver that allows states to extend pharmacy coverage to certain low-income elderly and disabled persons who are not otherwise eligible for Medicaid. The Pharmacy Plus program is a federal research and demonstration project that may offer assistance to eligible persons by providing pharmaceutical products, assisting individuals who have private pharmacy coverage with high premiums and cost sharing, or providing wrap around pharmaceutical coverage to bring private sources of pharmacy coverage up to an appropriate level of coverage.
The basic premise of this waiver program, like that of all Medicaid waiver programs, is that providing this benefit will reduce the state’s overall Medicaid costs for hospitalization and long-term institutional care. This concept is called “cost neutrality.”
This program is available to people who have incomes that are below 200 percent of the federal poverty level. As of January 2003, approximately 80 percent of the people who are enrolled in Nevada’s senior prescription drug program, Senior Rx, have incomes under 200 percent of poverty. For those people, we could match our state funds with federal funds and expand the number of people for whom we’re able to provide prescription drug coverage.
Senior Rx reached its funding capacity in July 2002. Since that time we have been placing people on a waiting list. Of those people on the waiting list as of January, more than half of them had incomes under 200 percent of poverty. According to David Gross, a researcher with AARP [American Association of Retired Persons], persons on Medicare who have purchased separate drug coverage incur among the highest annual out-of-pocket drug costs, about $570 on average. This spending level is attributed to the cost sharing requirements of their various plans. A statistic like that is probably one of the reasons why the federal government is offering this demonstration project, because it recognizes the need to provide affordable drug coverage.
The Pharmacy Plus waiver allows states to provide coverage to persons who are disabled and who are not eligible for Medicare. I need to make it clear that what I’m proposing in [A.B. 504] is that we would enable, or authorize, the state Department of Human Resources, if they can make the numbers work, to expand this program to individuals with disabilities. Right now, individuals with disabilities are not eligible for our state pharmaceutical program.
[Assemblywoman Buckley, continued] We, the members of this Committee who were serving at the time, wanted to allow individuals with disabilities to also be eligible for this program. This will allow it and allow the state Department of Human Resources to try to find some ways to make the numbers work. In other words, right now the door is shut to individuals with disabilities. We want to open it and come up with a way to establish a program to also serve these Medicare beneficiaries.
According to a representative in South Carolina, which has a Pharmacy Plus waiver, South Carolina pursued its waiver to try to cover the disabled population, but abandoned it because it was too expensive. We hope that with some time and some effort, ours could be successful. We don’t want to add individuals with disabilities [to the program] to hurt the seniors; we want to find a way to make both work. That would be the goal in setting up the enabling language in [A.B. 504].
Section 1 establishes a program to allow the “1115 Waiver” to be sought. Section 1 authorizes the Director of the Department to administer the program and authorizes the hiring of a pharmacy benefit manager. This section also limits the admin expenses to 8 percent. This issue may be a little contentious, but I think I’ve worked it out sufficiently with the Department of Human Resources. One of the reasons I’m seeking this is, as of the last budget committee report, we were paying 29 percent in admin fees to the for-profit administrator for Senior Rx. That’s money that could be going to serve people with prescription drug coverage. That much admin is unacceptable, in my opinion.
As I understand it, we’re approaching our two-year anniversary with this company [so] enough data [has been] collected [to make] the administration very hopeful [that the admin costs can be brought] down to a reasonable level. In discussing the 8 percent level with them, they thought that was do-able if it did not include the amount that was paid for the pharmacy fill fee, [which is] paid to the pharmacist to fill the prescription. If that works out, that would go a long way towards getting more seniors and, hopefully, more individuals with disabilities served as opposed to paying admin [fees] to an out-of-state corporation.
Sections 2, 3, 4, and 5 are technical changes that authorize DHR to use the money to fund the Pharmacy Plus waiver. Section 6 grants flexibility to DHR concerning the administration and allows flexibility in its delivery. I’ve also provided a technical guidance and fact sheet which describes the Pharmacy Plus research and demonstration, plus waiver background material from NCSL [National Conference of State Legislatures] identifying the states that have approved this, and South Carolina’s waiver application (Exhibit J), and that is the bill. It will allow us, in tough financial times, to increase this program by taking advantage of matching funds. It’ll allow us to open the door for more experimentation with helping individuals with disabilities. It will lower admin costs to make the program more cost efficient and to be able to serve more [people]. I know that the state has been researching the feasibility of such a program. Having it be a law requiring the state to apply [for the waiver] will ensure that it gets the top priority that it deserves. [Assemblywoman Buckley presented Committee members with a proposed amendment (Exhibit K) but it was not discussed.]
Chairwoman Koivisto:
Thank you, Ms. Buckley, and thanks for bringing this bill. I don’t know about other folks, but I do know that while I was walking precincts last summer, one of the big issues I heard about from middle and low income seniors who were not able to access Senior Rx [was that they] had no help for [their prescription needs]. This looks good.
Assemblywoman Leslie:
Ms. Buckley, let me make sure I understand this. [A.B. 504] would require DHR to file an application for the waiver. If the feds say “no” then obviously we can’t do it. We’re not going to be taking money away from Senior Rx and putting it into this program. It’s just mandating that they actually complete the application?
Assemblywoman Buckley:
That’s correct. If we wanted to make it clear, we could put in that first sentence, “shall apply.” We can’t do anything to make the feds approve the application.
Assemblywoman Leslie:
Then, with the disabled, who I would really like to see us be able to cover, that would allow the Department to consider it but, with the amendment, not mandate that they do that.
Assemblywoman Buckley:
That’s correct. What I’d like to work with the Department on is whether we could do a small pilot program. Whether we could work with the PBM [pharmacy benefit manager] and pick a number, maybe 100 or 200 people, and get some data on what the utilization rate is. For many of the seniors who are using Senior Rx, the average usage is $40. For individuals with disabilities, it’s probably not going to be $40. We don’t want to hurt the seniors; we want to maintain that integrity. Perhaps by accruing so much more money into the program from the feds, with some of that new money, we could do a trial to see if we could get some actual experience. Medicare beneficiaries are seniors and people with disabilities.
[Assemblywoman Buckley, continued] My own sister became disabled about five years ago, and what an education that was. One day she’s a 20-year prison guard and the next day she’s diagnosed with spinal cord cancer and is a paraplegic and can’t walk. You find out she gets Medicare but there’s a two year, five month waiting period. Once you get Medicare, there’s no prescription drug coverage. Our health care system is filled with holes and anything we can do to help patch those holes by being smarter is a good thing.
Assemblyman Hardy:
If we put that 8 percent [admin fee] in statute and we end up trying to negotiate with the single person who’s been willing to negotiate with us so far, are we endangering that Senior Rx program? I’m not sure how you bargain with one person without putting the whole program at risk.
Assemblywoman Buckley:
There’s a couple of different options. The state could run a program itself or the state could contract with the pharmacy benefit manager, as is being done in numerous states. We have those options, in addition to fully insured products. Speaking with Mike Willden from DHR prior to this hearing, he thinks an 8 percent [admin fee] and a prescription fill exclusion gives them the right range to work at, and perhaps some leverage with our insurance company that made out too well the first year at the expense of some of our seniors.
Scott Watts, President, Nevada Alliance for Retired Americans (NARA):
[Introduced himself.] I’m here today to advise you that NARA strongly supports Assemblywoman Buckley’s bill A.B. 504. NARA represents over 5,000 retirees in the state of Nevada. Health issues, medication, and prescription drugs are the main issues that face our members. Most seniors today make difficult choices about their medication. In many cases, they are choosing whether to eat or buy medication. This continually gets worse.
In the 2001 Legislative Session, NARA and the AFL-CIO approached another legislator to sponsor similar legislation. Unfortunately, it did not get out of Committee.
We feel this type of legislation can provide needed prescription services and savings to thousands of seniors, disabled persons, and low-income residents of Nevada. Additionally, it could assist with other health related needs that this population needs. Although this program relies on the funds from tobacco settlements with the state of Nevada, we feel confident that those funds will continue to flow into the state for many years, regardless of pending lawsuits with the tobacco industry.
[Mr. Watts, continued] Nevada’s Senior Rx program helps many in our state, but this additional program could provide another level of assistance, and help in making the lives of many seniors easier. The disabled, the working poor, and the seniors struggle daily just to find the funds they need to pay for their medication and health care. This is a compassionate bill [A.B. 504] and we hope that you can assist those that need your help the most. NARA has always supported prescription programs that reduce the price of drugs for low-income persons, state employees, seniors, and persons with disabilities. They will continue to support those groups in need of assistance from the state. Thank you for your attention.
Jon Sasser, Washoe County Senior Law Project:
I also had the privilege during the last two years to serve on the Governor’s Task Force for Persons With Disabilities. Including people with disabilities into a prescription drug program was one of the strong recommendations and messages we heard in the testimony and discussions we had over the last two years. Also the ability to pick up the federal match is supported by the Washoe County Senior Law Project and I just want to urge your support for [A.B. 504].
Paul Gowens, Center for Independent Living, Member, Disability Forum:
I have a bit of background with this topic of disability and drugs as you might imagine, probably 25 years of experience. I would urge this Committee to move forward with this concept. In 1997 when the Rx program was developed, the disability community was there, and we asked to be included in that and were told [the state] wasn’t really sure what it would cost. Last session this opportunity came again, and again [the disabled] asked for drug coverage. Again they were told [the state] was not exactly sure what [coverage] would cost.
When I talk with my friends in the drug industry, they seem to have a fairly good feel for what it’s going to cost for the drugs. I encourage you to move [forward on A.B. 504] because it puts some fire behind providing more individuals with coverage. It does a pretty good job of setting the need at 200 percent of poverty, so we’re not giving people who can afford to buy drugs the benefit. I think it will stretch our dollars. I know that Medicaid has some guidelines that they’ll need to follow for cost neutrality and some of those issues, so I think they’ll bring some good cost controls into it.
[Mr. Gowens, continued] When I hear “it will hurt the seniors,” I’m going to get my AARP card in November so I’m going to be one of those seniors, and I don’t think my opinion is going to change when I become a senior, nor my voting habits. I would hope that we could try and do something for the folks with disabilities in this state.
Assemblywoman Leslie:
Paul, what do you think of Ms. Buckley’s idea of a pilot project? Is that feasible and how would we do that?
Paul Gowens:
The whole concept of a waiver is a pilot project. When you apply for a waiver, I do believe you can set your target population, the number of people you want to serve, and the activities that will be served under that waiver, whether it’s drugs or other types of waiver services. It basically allows a state to do a pilot project with some guidance from the federal government. I think it’s one of the better ways to do it because there are controls, both in-state and out-of-state.
Assemblywoman Leslie:
I’m sure the state’s going to get up here and say that we don’t need a law to tell us to apply for a waiver. I know you’ve had some experience in the past with getting the state to apply for waivers. What do you think of the argument that this is an unusual way of getting the Department to apply for a waiver?
Paul Gowens:
I think our Legislative bodies encourage us in lots of ways and laws are the most specific way we can do it. [When] we’ve had a law passed, it seems to get done. It may not get done in [a certain] timeframe, but it gets done. I guess that after following it for three sessions and having some small things get in the way, I think it would be a benefit. As an old state employee, I think it gives the Departments some reason to actually pay attention to certain issues even though some panicky thing may come up in the interim. We’ve used it in the past; I think it’s a great method to get something done.
Patricia van Betten, Nevada Nurses Association:
The Nevada Nurses Association supports the proposed changes to A.B. 504. The proposal to use the Fund for a Healthy Nevada to expand prescription drug coverage, as outlined in this bill, is appropriate and necessary. We support this revision to existing law.
Senior citizens whose restricted incomes make it impossible to pay for prescription drugs need and deserve help. It is wrong to have a program where those who need assistance can get it and others cannot. Aging seniors, many who need medications on a regular basis to manage chronic health conditions, need you to be their advocates as they struggle to meet their basic needs.
[Ms. van Betten, continued] We are very pleased to see that this bill will also assist certain persons with disabilities with prescription drug coverage. If we are to have a healthy Nevada we need to invest in programs like this one that will remove a serious obstacle to health care. The Nevada Nurses Association asks you to support A.B. 504.
Ruth Mills, President of the Board, Nevada Health Care Reform Project:
[Introduced herself.] We’re a coalition of 98 organizations whose mission is quality, affordable health care. We represent over a half million Nevadans, and of our membership 26 of our groups are disability groups and 2 of them are senior groups. We definitely have an interest in this particular issue.
We commend the state on the success of the Senior Rx program; however, we understand that eligible seniors are now put on a waiting list. In addition, persons on Medicare with disabilities are not eligible for the Senior Rx program. They may financially qualify, but are too young.
Many Social Security recipients live on very low incomes and they don’t have the financial cushion to pay for their medications. This bill [A.B. 504] would extend prescription drug coverage and pharmaceutical services to those not currently eligible, but whose incomes are not more than 200 percent of the federal poverty level, as we understand it.
In addition, it seems prudent to implement a Medicaid waiver that matches state expenditures with federal dollars. This would double the amount of money that we currently spend to provide these needed benefits. We most heartily urge passage of A.B. 504 and again, thank you.
Larry Spitler, Associate State Director, AARP Nevada:
[Identified himself.] We’re here today to support Assembly Bill 504. We think that the Senior Rx program is meeting a very valuable need in the communities throughout Nevada and we think that the way A.B. 504 works toward leveraging the money that we have to increase what’s available to expand that service is very positive.
We also think it is a very, very good idea that we have the ability to begin to serve the needs of the disabled community also. We urge the passage [of A.B. 504].
John Ellerton, Physician, Member, Task Force for the Fund for a Healthy Nevada:
I support this bill vigorously. The Senior Rx program has been successful in its current incarnation. Having worked very hard with a number of the legislators, especially Assemblywoman Buckley, to get this particular program, it’s important that we try to expand it. There is a waiting list. On the Task Force, we’ve talked endlessly about trying to expand [Senior Rx] to those with disabilities and so the effort to provide the waiver and be able to expand the number of patients, including the disabled and other patients who can’t afford the medications, is extremely important. I would give my wholehearted support and would work as a member of the Task Force to make it successful. Thank you.
Danny Coyle, NARA, Retired State of Nevada Employees Association:
We are an affiliate of NARA and support affordable prescription drugs for all people who are retired. Legislation on prescription drugs for senior citizens is coming out of the woodwork, especially when I understand that there’s some federal legislation to make it a felony for seniors to go across the border to Canada and Mexico to pick up their prescription drugs.
I hope that [A.B. 504] passes. I hope the Department of Human Resources does apply for the waiver. If you mandate it, they won’t have any choice. I’ll be happy to answer any questions.
Mike Willden, Director, Department of Human Resources:
We just wanted to provide a little information about A.B. 504. We’ve testified two or three times before the Committee. We have, and are working with, the Center for Medicaid Services (CMS), on the waiver application process. We’ve had [people from] South Carolina out here, as many of you know. We’re deep into the waiver application process and do intend to move forward with that application.
I would also like to remind the Committee what’s included in The Executive Budget. There are about 7,500 seniors now on Senior Rx, about 1,500 on the waiting list, and we would like to expand that to at least 12,000 seniors being served. Some of the legislation related to that is being heard in the Senate as we speak. The other portion of The Executive Budget not only expands the services but expands the income limits from about $21,000 now for seniors, whether they’re single or a couple, to about $28,000 a year.
Also, we have legislation to expand [eligibility] by adding a cost of living increase each year so we don’t have seniors whose [incomes] are right at $21,000, [receiving] a cost of living increase in their Social Security or whatever retirement benefits they have, and [no longer being eligible for] the program. We want to have a cost of living “bracket creep” protection.
[Mr. Willden, continued] Specifically regarding A.B. 504, I just have four comments to make. The first is in Section 1, subsection 1, which is “shall apply” for the waiver. I understand the Committee’s concern about whether the Department would or wouldn’t apply for a waiver. My concern is not so much about being directed or not [being] directed, because we’re going to move forward and apply for the waiver, but we would feel much more comfortable with Ms. Buckley’s or Ms. Leslie’s suggested amendment of “apply for” rather than the word “establish.” We’ve had legislation in the past, for instance the “senior nest egg protection” legislation that was passed some years ago. It said, “establish a program” but we never could because the feds wouldn’t allow us to establish one, so then we had a law on the books and people looking at the law asking where the program was.
The second issue is subsection 3 in Section 1, which is the 8 percent admin fee and how it relates to the 29 percent admin Ms. Buckley referenced. I want to be very clear about our comments. I did have a discussion with Ms. Buckley prior to her testimony, and the real concern is what is defined as an “admin” cost. Clearly, outreach, eligibility determination, enrollment, and things like that are admin costs. Some of the other costs of operating a program could be defined as more programmatic than admin; for example, if a senior or a disabled person goes to the pharmacy and there’s a “fill fee,” which Ms. Buckley specifically talked about, is that an admin cost [to] be counted under the 8 percent cap or is that a program implementation cost that should be counted as a program cost? We want to be really clear about what the “admin costs” are.
The current admin costs, that 29 percent [figure] being thrown around, I wouldn’t even describe as a 29 percent admin [cost]. It’s made up of several components such as fill fees, the costs of the PBM, [as well as] true admin costs, for instance for enrolling people into the insurance program, outreach, reinsurance costs, and the taxes the insurer has to pay to the state for being an insurance company in the state. We haven’t run the numbers yet, but with the exemption that Ms. Buckley talked about, we probably would be in the ballpark with the 8 percent [figure].
The last comment I would like to make about [A.B. 504] is concerned with persons with disabilities where it is adding in language to “assist seniors and persons with disabilities”. Everybody clearly testified that this was discussed in the strategic planning process. We are certainly supportive of finding a way to help people with disabilities find prescription drug coverage and other health care needs that they need to have covered, but we do want to be clear that it is not at the expense of the Senior Rx program. I hope that doesn’t sound negative, but all we’re trying to say is that we don’t want to harm the 7,500 seniors, plus what we’re trying to grow [the program] to, by adding additional benefits or new coverage groups so we would have to take those 7,500 or 12,000 and only be able to serve 5,000 or 6,000 or fewer.
[Mr. Willden, continued] If we can get the waiver going the way we think we can and find new money, there may be options all the way around. That’s yet to be determined until we get that waiver in, have the feds go through the process with us [and determine] whether we have cost neutrality, and then start implementing [the program]. We are currently not looking at the viability date to operate the waiver until probably the first of the calendar year.
This bill doesn’t have an effective date, so if there is any expectation that the waiver could be implemented prior to the calendar year, I just would want to be clear on the record that it is unlikely that we could do it any sooner than that just because of the Medicaid approval and evaluation processes we’ll need to go through.
Chairwoman Koivisto:
You’re saying an effective date of January 1, 2004?
Mike Willden:
No sooner than that. In our discussions with South Carolina and other states we’ve been talking to, [because of] the steps we have to go through to get the waiver process approved, if it’s approved, we couldn’t implement [it] any sooner than that.
Also, we will be in the throes, this late summer and fall, of the final implementation of the MMIS, our Medicaid Management Information System, so adding a new program into that mix is really going to complicate that situation. Probably the earliest opportunity would be the first of the year.
Assemblywoman Leslie:
Mike, it’s good to see that we’re pretty close actually on this. Do you have some specific language on administrative expenses that you would like to suggest to the Committee?
Mike Willden:
Clearly, we would not see fill fees in there. That is something that should be excluded. Probably of the most concern to me is whether the PBM cost, the cost for hiring a pharmacy benefit manager, was in the admin calculation or not. I could argue both sides [of that issue].
Assemblywoman Leslie:
From what you said before, it sounds like we’re excluding it. Do you think we’re going to get pretty close to the 8 percent right now?
Mike Willden:
Yes, I think we’d be in the ball park. Now we have an insured product. We wouldn’t be having to pay the taxes to the state. We may or may not, depending on how the negotiations go, have reinsurance costs if we wanted to have a portion of this product insured in case we had growing pharmacy costs. Finally, we wouldn’t be paying ourselves a profit, so we would exclude those things and would be just down to [expenses such as] applications, eligibility, enrollment, outreach, fill fees, and a pharmacy benefit manager.
Assemblywoman Leslie:
That would be great, if you could get back to us. On your second-to-the-last comment about adding persons with disabilities, to me the intent of the bill is to at least do a pilot project for people with disabilities. I would be arguing later to the Committee that we keep that in [A.B. 504]. That’s how I read it. Do you read it differently?
Mike Willden:
Yes, I do. I read it differently. It is mandatory language that we would have to serve seniors and persons with disabilities who have modest incomes. I don’t know whether you can size that down with this legislation [A.B. 504] and run a pilot [program]. Our concern would be, [until] we get the waiver and see how much money there is, we won’t know if we could move into a pilot [program] or anything for the disabled community.
Assemblywoman Leslie:
Right, but we don’t serve all seniors with modest incomes now.
Mike Willden:
That’s correct. There’s a waiting list.
Assemblywoman Leslie:
I think there’s a way to do that.
Assemblyman Hardy:
It sounds as though we’re both going the same direction; the bill and the practice that you’re describing. I’m trying to figure out how to make this more enabling than mandatory because it sounds like you’re going in that direction. It almost sounds like we’re trying to predict the future economically, without having anything more than a crystal ball. I’m a little leery of putting into statute something that may put at risk one program over another. I’m wondering if there is a way to put in triggers so that if you discover that there are savings and waivers that can be obtained at those triggers, then the implementation of the disability pilot is done or contingent upon the Senior Rx program enrollment rising to 12,000.
[Assemblyman Hardy, continued] There ought to be something that is a standard by which we can [add the pilot program for the disabled] without putting the Senior Rx program in jeopardy. That would probably be at the pleasure of the bill’s sponsor to make those suggestions.
Mike Willden:
I’d be happy to work with Ms. Buckley to see if there could be some language. There could be some triggers. In previous Senior Rx legislation there were some triggers so that when you met certain caseloads, certain things happened.
Chairwoman Koivisto:
I’ve just been told that Ms. Buckley’s amendment may take care of your concerns, “the Director ‘may’ include in the program persons with disabilities who are eligible for Medicare who are not eligible for Medicaid and whose incomes are not more than 200 percent . . . “
Assemblyman Horne:
I think that the amendment does address that. I would have concerns on having the triggers tied to the other program. Ms. Buckley made it very clear that we didn’t want this to affect Senior Rx in any way. I think it also works the other way. We want to help a certain group so we don’t want to have to rely on the numbers of that other group increasing or decreasing and affecting this program as well.
I have a question about the PBMs. You said that you could define it either way, whether or not [the expense] was administrative. What are the functions of the PBM that they would cause you to believe they could be defined either way?
Mike Willden:
We have a 3 percent admin cap in Senior Rx now and the PBM costs are defined outside of the 3 percent admin costs and are part of what we pay to the insurer to give us the insured product. They pay the PBM; they subcontract with a pharmacy benefit manager.
The specific costs of the PBM include setting up a network of pharmacists that are willing to take the Senior Rx card, they work to teach and educate the seniors about where to go to get their pharmacy benefits, then they actually pay the bills for the prescriptions issued. They also collect our rebates from the manufacturers.
Assemblywoman McClain:
Where do the rebates go?
Mike Willden:
I believe they are retained by Fidelity Security Life, the insurer that we contract with.
Assemblywoman McClain:
Do we have any idea what their profit margin is on the Senior Rx program?
Mike Willden:
The individuals that we contract with? We provided a letter to Mr. Atkinson, fiscal analyst for the money committees, dated March 26. I can get you a copy of that. We attempted to break down each of the costs I identified earlier; how much goes to the PBM, how much goes to reinsurance, and how much goes for admin. I’ve outlined that in this letter.
Assemblywoman McClain:
I probably have [the letter] somewhere but maybe the rest of the Committee would like a copy. My other concern with this bill [A.B. 504] and Senior Rx is that Senior Rx is at age 62 but this bill refers to age “65 or eligible for Medicare.” In a few years, you’re going to have to be 66 to be on Medicare, but Senior Rx is at age 62 at the moment.
Mike Willden:
You’re correct. With the waiver we will have a dual eligibility process for the Senior Rx program because when you get the waiver, you’ll have to follow the Medicaid rules for everybody under 200 percent of poverty, that’s the group you can get the waiver for, people from roughly no income up to $18,000 per year. Seniors who are eligible with incomes above $18,000 and up to $21,500 now, or if the legislation the Governor has pending [passes], up to $28,000, are not going to be eligible for any matching Medicaid dollars and we’ll be paying for them straight up out of tobacco dollars or General Fund dollars. We’ll be having dual eligibility processes as to what rules apply to what group.
Chairwoman Koivisto:
Do we have anyone else speaking in favor of A.B. 504? Neutral? Anyone speaking against A.B. 504? [There was no response.]
I’ll bring A.B. 504 back to Committee. Discussion? Pleasure of the Committee. Do you still have questions?
Assemblywoman Leslie:
I just wrote down changing, in Section 1, “obtaining a Medicaid waiver” to “applying for” it. I thought Mr. Willden made a good argument there. The only other question I had at this point was defining “administrative expenses,” but we can do that in Ways and Means.
ASSEMBLYWOMAN LESLIE MOVED TO AMEND AND DO PASS A.B. 504 WITH THE AMENDMENT TO SECTION ONE AND ASSEMBLYWOMAN BUCKLEY’S AMENDMENT AND REREFER TO THE ASSEMBLY WAYS AND MEANS COMMITTEE.
ASSEMBLYMAN HORNE SECONDED THE MOTION.
Assemblywoman Weber:
If we’re going to take a vote on this today, I would abstain from the vote so I could fully inform myself about the total bill.
Assemblyman Hardy:
I like the concept of the bill, but I like the concept of what we’re doing and moving forward and I would not want to put in statute at this time [the fiscal responsibility which is] something that I’m unsettled about, even though I understand the policy that we’re making. It seems like we’re going in the right direction in this state, so I would probably be opposed to the bill, but in favor of the concept.
Chairwoman Koivisto:
I think the fiscal part of [A.B. 504] will have to be hashed out in the Ways and Means Committee. That’s why it has to be re-referred there.
Assemblyman Hardy:
I understand that, Madam Chair. I’m looking at where administration is going now with this, and it seems like they’re doing it without statute. That’s how I would prefer to be at this point.
Assemblywoman McClain:
I think this is the kind of legislation you need [because] this is the intent of the Legislature. What happens if all of a sudden we don’t have a budget and we don’t have anybody to do this so it gets laid aside and we lose a very important piece of legislation that we could have really done something progressive with.
[Assemblywoman McClain, continued] Regarding Ms. Leslie’s amendment; I don’t know if you want to say “applying” or maybe “pursue,” which would indicate you try more than once.
I think it’s great and we need to go ahead with it. The money part, that’s all going to get hashed out in Ways and Means. I have some ideas about the money end of this thing anyhow. I fully support this.
Assemblyman Hardy:
I reserve the right to change my vote when it comes to the floor, if it does.
Chairwoman Koivisto:
Further discussion?
THE MOTION PASSED. ASSEMBLYWOMAN WEBER ABSTAINED. ASSEMBLYMAN HARDY VOTED NO.
Assembly Bill 297: Revises provisions governing payment of hospitals for treating disproportionate share of Medicaid patients, indigent patients or other low-income patients. (BDR 38-885)
A.B. 297 is totally rewritten.
Mike Alastuey, Representing University Medical Center (UMC):
Assembly Bill 297 was introduced for other purposes initially, but sufficiently addresses the disproportionate share hospital (DSH) subject matter leaving it available to the Committee for amendment. There’ll be more than one set of amendments proposed this afternoon.
Because A.B. 297 took the direction it did in its form as introduced, one direction the dialogue may take, and that’s where we want to head this afternoon, would be to start with Senate Bill 235, which contains a number of the elements that were the outcome of a legislative interim study by the Legislative Committee on Health Care. In that study, it was determined that the predicate for distribution of disproportionate share hospital funds should be net uncompensated care. That principle was applied throughout. We have to take that recommendation and turn that into some form of actuality. There were some features of S.B. 235 , as introduced, that would have the effect in some minds of unbalancing the distribution so that sufficient state benefit would not be achieved.
[Mr. Alastuey, continued] What we’ve done is look at S.B. 235 and worked over the weekend with the consultant who assisted the Legislative Committee on Health Care and we have some proposed amendments (Exhibit L).
First of all, there would be one modification, removing reference to “$24 million” as something subtracted from another sum and inserting “33 percent of such payments.” The intent of this would be to, in effect, make the intergovernmental transfer payable by University Medical Center, or Clark County on behalf of University Medical Center, flexible with the amount of total federal benefit. In view of the fact that we have a diminished pot of federal money, there are other features of this that are intended to keep Washoe County approximately whole, and on line 12 of the proposed amendment to S.B. 235, discretionary authority [would be removed] from the Medicaid administrator. Instead [there would be] a requirement that if the amounts come in differently from those that are estimated in the state plan or in this bill, that the adjustment shall be made proportionately among all the participants.
Finally, there’s additional language that is intended to clarify the reduction among all participants if the amount comes in less than anticipated. As a policy matter, in addition to the effect that this has as far as allocation among hospitals of disproportionate share hospital funding, there are a couple of policy determinations that’ll come before you as well. First, whether or not to carve out, or set aside, portions of any of the amounts that are set aside for private hospitals directed to specific private hospitals. The amendment before you does not do that.
Second, one thing that we would strongly recommend and heartily request of you is that whatever comes out of this Legislature be codified so that it need not be revisited each and every session. I don’t believe that the language you have before you does that. The consultant did not have that in mind when he drafted this, and when I discussed this with him, he said that would require more work. Should the Committee have a desire to actually codify this going forward, I would [direct] your attention to page 6, Section 6 of S.B. 235 where [there] is language referring to specific fiscal years 2004 and 2005. Other amendments coming before you this afternoon will probably have similar references as well. We would suggest that you consider striking reference to specific fiscal years and try to put something in place that works for the future and provides for a fair distribution in the proportions that you set forth.
You have a number of policy considerations, not only how much each hospital gets, but how much is retained by the state for its intergovernmental transfer account. You have a policy consideration of when amounts are set aside in specific counties for private hospitals, and whether or not to make allocations for those or let the parameter of net uncompensated care be the driver or the predicate for that distribution.
Assemblywoman McClain:
During an interim committee they came up with formulas for distribution, right? [Mr. Alastuey agreed.] Why did that not make it into any of the legislation?
Mike Alastuey:
I believe portions of S.B. 235 accurately reflect the outcome of the study. For example, if certain funding levels are achieved beyond the estimated amounts, there is a distribution that is proposed in S.B. 235 that allocates the greatest share to the largest county, and provides for other allocations to other groups of hospitals, regionally mentioned or described by county, in different paragraphs of the bill. If there are additional funds beyond the base grant that drives S.B. 235, it’s provided that the funds first go to that hospital, in the paragraph or the regional reference, having the greatest net uncompensated care until that dollar amount sufficiently buys down the uncompensated care to the next highest uncompensated care hospital. In effect, it provides for base grants and, hopefully, allocates those accurately, and then provides also for excess funds and the distribution of excess funds should those come in. The direction to the consultant was to start at a point where, within a certain range of reason, hospitals were held harmless. From that hold harmless position, funds received or realized beyond that, would be allocated according to the new formula.
Assemblywoman McClain:
That’s the problem. Now we have to start holding people harmless because this formula has been toyed with every session for the last 10, 12, 20 years. [Mr. Alastuey answered, “Yes.”] People want to play with the money instead of coming up with a formula that says, “O.K., you have X amount of uncompensated care cases, so you get this much money from the DSH money.” It’s been messed with too much. Somewhere down the road we need to make it simple again and all the hospitals should turn in the actual figures and get reimbursed for the actual figures.
If everybody’s going to participate in it, then everybody needs to contribute to that matching fund pot, too.
Mike Alastuey:
Ms. McClain, it’s my understanding that there are restrictions as to whether and how certain hospitals could contribute. I believe there are parameters under which contributions could be received. There are other parameters, however, that are not permissible and other technical staff could [discuss those] more accurately. They have been termed “provider contributions” and have been found not permissible in the past. I believe there may be some permissible mechanisms you can explore.
[Mr. Alastuey, continued] To further address your question, S.B. 235 does have elements of the study. The current statute, which will probably be discussed with you as one option for continuation, is essentially a continuation of recent history, except applied to the next biennium, 2004-2005. I believe you’ll be receiving testimony on that as an alternative for you today.
Our desire was to try to bring S.B. 235 to your attention as something that includes language that was an outcome of the [interim] study. [This] could assist the legislature as a whole in codifying something rather than [having] something that just melts down every other year. The discussions among the participants that we’ve been involved in [indicated that] most of the participants would really find attractive the concept of putting into place a formula, or some allocation mechanism, that serves for a number of biennia rather than revisiting this effort.
Assemblywoman Leslie:
I share Ms. McClain’s frustration. I don’t know why we did that big study if we’re not going to follow it. Is this plan going to reduce the state’s net benefit, because that’s something I certainly would not be in favor of.
Mike Alastuey:
It could, depending upon the nature of the bill and the percentage parameters in the bill that you eventually approve.
This is a situation, and everyone here at the table will agree, that is tough because it’s allocating a sum of money that is actually shrinking, from our experience in recent history. At the same time, there’s every reason to look at how the state retention is actually calculated because, even currently with a shrinking pot of money, if the current statute stays in place without amendment, it’s our understanding that the state’s share actually rises while the benefit to the hospitals actually falls.
Assemblywoman Leslie:
That’s fine with me, because [the state] doesn’t have any money. Maybe Mr. Duarte can give us those numbers, but I don’t want to see a plan where the state’s share decreases.
Chairwoman Koivisto:
Clarify for the Committee where the matching dollars come from and how much each county contributes to the state pot in comparison to how much each county gets back from the state pot.
Mike Alastuey:
That varies from county to county. Under the current statute, the general requirement is 75 percent of the amount received by designated hospitals in that county. In certain rural areas, there’s a reduction from that 75 percent that makes the effective rate approximately 66 percent. In Washoe County, the historical intergovernmental transfer, vis-à-vis the historical benefit, makes that match somewhere in the 31-32 percent range, if indeed it were expressed in percentage terms, but it’s expressed in absolute dollar amounts. The state retains its amount from the intergovernmental transfer mechanism without a match requirement at all.
Under S.B. 235, or some variation of it, virtually all of the intergovernmental transfer would come out of Clark County, with either a fixed amount or a floating amount, depending on how you approve the bill, coming from out of Washoe County.
Assemblyman Hardy:
Do we have anything in writing, Madam Chair, that helps me through this? I’ve got one [bill] that’s totally amended and then an amendment. Is this the one you’re talking about?
Mike Alastuey:
I believe what you’re holding up is probably S.B. 235, which would be the basis of what we’re discussing. Then there would be amendments to S.B. 235 if it were the Committee’s appetite to adopt that language as a start. The amendments that we’re discussing are a result of our discussions with the consultant and I’m sure Mr. Duarte will be discussing other possible amendments.
Chairwoman Koivisto:
All the money for the match comes from Clark County, is that right?
Mike Alastuey:
Under the current statute, the great preponderance does. Under the proposed S.B. 235, even if you choose to amend it, even more comes from Clark County. Clark County’s required intergovernmental transfer would be a percentage, however that’s stated, 70 percent, subject to certain limiters in an amended S.B. 235, of the entire benefit that is distributed throughout the state. The only exception would be, depending upon how much [money] actually comes in, approximately a million and a half [dollars] coming from Washoe County. The great preponderance of those funds would be coming from Clark County and would probably be somewhere in the range of $46-47 million.
Charles Duarte, Administrator, Division of Health Care Financing and Policy:
[Reintroduced himself.] Mr. Alastuey has described some of the provisions of S.B. 235 but, with respect to this bill [A.B. 297] we have proposed an amendment, which I will get to in a minute.
In terms of the statute itself, this is one provision in Medicaid where the legislature took it upon itself to codify in great detail the requirements of the disproportionate share hospital program in statute. We’re more than happy to have you keep it there. This is one of the complications you get into when you have Medicaid policy developed in statute.
Mr. Alastuey’s right with respect to the amount of match that becomes available for us to bring in the federal dollars, and where that comes from. The predominant amount has come from, and will continue to come from, Clark County. However, it’s very important to keep in mind that those funds are not used to build roads in northern Nevada, schools in northern Nevada, or schools elsewhere. Those funds are used to support Medicaid and Nevada Check Up services statewide, the preponderance of which occur in Clark County. It’s not as if Clark County is providing these funds and then losing them. These funds go to support the Medicaid program, most of whose recipients reside in Clark County.
The only way we use the intergovernmental transfer is to fund Medicaid services in our program. The state’s share that is retained goes to fund Medicaid. That money, to a great degree, goes back to Clark County.
That aside, there are some significant policy issues and although we haven’t had an opportunity to view Mr. Alastuey’s proposal, we are concerned with any proposal that reduces the state net benefit from this program, because, again, that goes to support the Medicaid program as a whole. To do that would require adjustments to The Executive Budget that we could not support.
I’m here today to propose an amendment (Exhibit M) which we do support. [It provides] protection of the state net benefit so that we can continue to support the Medicaid budget as we have provided for in The Executive Budget.
If a bill does not pass and the program were to “sunset,” the program would discontinue. We also want to maintain the benefit for Nevada’s rural hospitals and try to provide some minimum levels of protection for rural hospitals. What we have provided for in our proposed amendment is basically a continuation of the current program. It’s called “DHCFP Proposed Amendment to A.B. 297,” and it modifies the dates and extends the program. Our intent is not to say which hospital should get disproportionate share payment and which should not, that’s a discussion that needs to occur with those parties, the hospitals both public and private. We’re here to say that we need to protect the General Fund that we have in The Executive Budget and we believe this amendment does that.
Assemblyman Hardy:
When you say, “DHCFP Proposed Amendment to A.B. 297” and I look at the original A.B. 297, I get a totally different bill. Are we talking about S.B. 235?
Charles Duarte:
What we’re suggesting is deleting the existing provisions of A.B. 297 in their entirety and replacing them with the language we have here amending the existing NRS [Nevada Revised Statutes] chapters to reflect the continuation of the program.
Assemblyman Hardy:
[Looking at Mr. Duarte] You’re dealing with A.B. 297. [Looking at Mr. Alastuey] You’re dealing with S.B. 235. They’re joined at the hip some way?
Charles Duarte:
They deal with the disproportionate share hospital program.
Assemblyman Hardy:
But they’re in two different sections or statutes?
Charles Duarte:
No, Assemblyman Hardy. They’re in the same statute, but there are two different approaches that were recommended under the original bills A.B. 297 and S.B. 235.
Assemblyman Hardy:
If we have Medicaid funds that come into the state from the federal government have we run the numbers so that if I have a [patient on] Medicaid, the federal government pays us $50 for every how many dollars that the state puts in?
Charles Duarte:
Let’s say $50.00.
Assemblyman Hardy:
So, Clark County gets how much money in Medicaid, or uses so much state money and in so doing, they share that need and therefore that reimbursement from the federal government to the point where, if we did not [pass a bill] we would get even less money for the rural areas. Clark County, no matter how we do it, still has an advantage by keeping the system because the preponderance of money comes from Clark County.
Charles Duarte:
I don’t believe Clark County has an advantage under the current statute. The intent of the current statute is basically to provide funding to the extent it’s needed in Clark County, Washoe County, and in the rural communities. Not to say it doesn’t need modification, but for the state’s intents and purposes, what we’re here to say is that we just need to protect the General Fund.
A little history is important here, too, because this program has brought in over the past three or four biennia, over $100 million in state net benefit. Two sessions ago, a decision was made by the Legislature to spend that reserve of $100 million on Medicaid services. We have done that. We now are moving forward with a budget which, again, continues to use whatever modicum of reserve is left over the next biennium, maintaining just enough for us to manage cash flow in that budget account. Nothing else will be left for us to fund the program.
We have used this historically as a way of offsetting General Fund need, and now in the next biennium we’re using whatever is left to offset General Fund. If anything is taken away, we’re going to need that General Fund replaced. In the proposals presented to us under S.B. 235 there is a cost to the state General Fund. It could be between $2 million and $300,000, looking at the various proposals, and it is a cost that we would have to fill otherwise with General Fund [dollars].
Assemblyman Hardy:
Is there a way to have Administration, Clark County, and whoever else [is involved] get together and have this in one document that I could understand before I have to vote on it?
Assemblywoman McClain:
What percent of your Medicaid budget comes directly from the DSH money?
Debbra King, Chief Financial Officer, Division of Health Care Financing and Policy:
[Introduced herself.] Our budget for each year in the 2004-2005 biennium is approximately $1 billion. DSH allotments are approximately $70 million so it would be approximately 7 percent.
Assemblywoman McClain:
Explain to me again, Mr. Duarte, about the $100 million reserve. Where was that from?
Charles Duarte:
The reserve was established by keeping the state’s share as the intergovernmental transfers came in from the counties. We brought in the federal funds and paid a portion of those federal funds to the hospitals directly. We retained approximately half of those federal funds for the state reserve, which we maintained in our intergovernmental transfer account, budget account number 3157. Over the years that built up to $100 million until two sessions ago a decision was made to spend that reserve in lieu of General Fund [monies].
Assemblywoman McClain:
So whatever money is put up, and it doesn’t matter who put it up, but it’s UMC, let’s face it, that is matched and UMC gets [how much ] of their money back?
Debbra King:
Under the S.B. 235 proposal, UMC is estimated to receive $61 million of the $70 million of DSH that is available. It is anticipated that they’ll make $46 million of the $47.45 million for IGT [intergovernmental transfer] to provide the non-state share in the state benefit. Their benefit under S.B. 235 would be $15.4 million of the total statewide benefit of $37.9 million.
Assemblywoman McClain:
So it’s about 40 percent, right?
Mike Alastuey:
I believe the reference Ms. King is making is to the original S.B. 235 without any modification. With the modifications that we’re proposing, that net benefit would drop into the low to mid $14 million range. We recognize the need for some balance and we’re willing to work with the formula that came out of the [interim] study in order to try to achieve that balance.
Clark County has just over 70 percent of the population so any dollars paid to the state to the benefit of Medicaid, the preponderance goes to Clark County. If one were to compare that with the Intergovernmental Transfer payment, that’s substantially more than 70 percent. In truth, most of [those funds] do go back to Clark County. Also, Clark County provides the match that makes the whole program go.
Assemblywoman McClain:
I agree with Dr. Hardy, I would like to see one document that makes sense.
Assemblywoman Leslie:
Mr. Duarte, did you say the provisions of A.B. 297 violate federal Medicaid law? What, specifically, is the Medicaid law violation?
Debbra King:
Disproportionate share payment under the Social Security Act is defined as a payment to a hospital that provides a disproportionate share of services. The original A.B. 297 would have the state paying the money to the county and the county would make that payment to the hospital. It would violate the definition of the disproportionate share payment.
Charles Duarte:
In response to Dr. Hardy’s request for a two- or three-page document, we can sit down with Mr. Alastuey and put together a spreadsheet that would summarize the impacts of this [legislation].
Mike Alastuey:
We’re very agreeable to doing that. Some of the things we’ll want to show really [would] flesh out the answers both of us gave. I don’t think that there’s a real technical disagreement here as far as the effects of the different proposals and what they might do.
On the impact to the state, the indications to us are that the state’s benefit in each of the two fiscal years 2002 and 2003 was in the $16 million range. I believe what Mr. Duarte is referring to is, if the current statute remains in place operating much as it is, the state’s benefit would rise to the $17 million and $18 million dollar range, which is, I believe, assumed in the budget projections that you have. The current formula has what we would consider an anomaly that increases the share to the state despite the shrinking total pot so that the hospitals get less and the state gets more. Mr. Duarte is relying on that in his budget work while at the same time, if we were to go back and simply hold everybody level, the effect would be different and the state would have to rebalance its budget.
Charles Duarte:
I agree with Mr. Alastuey’s statement. We would have to go back and rebalance the budget and it would require additional General Fund [money].
Chairwoman Koivisto:
So, the hospitals would take a hit so that the state would not take a hit. Is that correct?
Charles Duarte:
Yes, that’s correct, but keep in mind it’s not the state that benefits from this. This money funds Medicaid services.
Chairwoman Koivisto:
As well as the hospitals taking care of indigent patients. There’s got to be a way to work this out.
Charles Duarte:
I wish there were a simple way. This has been an ongoing issue for ten years. I’m not going to pretend that there’s a simple solution to this. There are other parties, who aren’t here at the table right now, including the private hospitals who perform a large amount of indigent care, that really have not provided any input into this particular bill.
Yes, there is an anomaly in the current law that allows the state a larger General Fund share. That amount is going to Medicaid. [The state] pays approximately $100 million per year to hospitals. A lot of that money goes to fund hospitals. We recently implemented a provision to support University Medical Center to pay them additional money under the federal rules called “upper payment limit.” That’s provided them over $21 million in additional net benefit from that provision.
So yes, while the state benefits and it goes to support overall Medicaid services, we’ve tried to look at other ways to keep University Medical Center financially sound and support the taxpayers of Clark County. I wish I could say that there’s a simple solution, but there is not.
Chairwoman Koivisto:
I have a simple solution. We paid for a study by an outside, uninterested entity. I think the results of that study, that formula, should be put into a bill and with that we could go forward and not have to come back every two years and go through this argument over the DSH money.
Charles Duarte:
While we agree with the concept and supported the effort of the Interim Health Care Committee to bring in a consultant to do that study, at the time it was unknown to them and to us that there would be an impact on the state General Fund or on The Executive Budget. It’s only after that that this became apparent. While we support independent efforts to try and review this, I think there are other parties who aren’t at the table [and] who have concerns about that study. I hope they’ll express those concerns at the hearing for S.B. 235. At the same time, it still has an impact on the state General Fund and we’ll have to express our opinion on that.
Chairwoman Koivisto:
The whole point of that study was so that we could avoid these kinds of issues every session with the state saying, “No, I need this much money,” and the counties and the hospitals saying, “No, you can’t have that much because we need this much.” That’s going to happen. We’re going to come back here in 2005 and have the same thing.
Charles Duarte:
I don’t disagree, Madam Chair. But again, the impacts on the state General Fund occurred after the study was completed and the budget is as it’s presented and [I don’t have] the authority to change that budget.
Assemblywoman McClain:
What came out of that committee? Was there a recommendation for a BDR?
Chairwoman Koivisto:
It’s S.B. 235 with a lot of interested parties’ fingerprints all over it, so it doesn’t really match the results of the study.
Charles Duarte:
With the exception of the state, the state was not involved in that study.
Assemblyman Hardy:
Is there something being done on the other side of this house on S.B.235/ A.B. 297?
Chairwoman Koivisto:
I understand that before S.B. 235 was amended, it did follow what came out of the study, but it was amended, or they’re hearing it today [and] working on amendments.
We’re not working on S.B. 235, we’re rewriting A.B. 297.
Mike Alastuey:
Mr. Duarte and I can get together and put the alternatives together on hopefully, a single page, so you can see the approach that each takes and the outcomes of both to the hospitals and to the state.
Chairwoman Koivisto:
Okay, I think that’s what the Committee wants to see [and] by Wednesday, or sooner, so we have a little time to digest it before the hearing on Wednesday.
I have folks who signed in, but they didn’t indicate they wanted to talk and they didn’t indicate a bill number.
Anne Lynch, Sunrise Hospital and Medical Center:
We would really like to sit down with [Mr. Duarte and Mr. Alastuey] when they’re putting together their proposals because they said they would tell you what happens to the hospitals. I think that only people from those hospitals will be able to assist them and let them know.
I really want to commend Assemblywomen McClain and Leslie for something that, to me as a non-financial person, needs to be said. We’re always dazzled year after year with figures, percentages, and contributions, and it seems to me that there needs to be a simple way to remember the person we’re trying to serve, and that’s the patient.
All this about the formulas based on the cost, but cost has a tremendous variance. Some [hospital’s] costs are much less than others and so you’re rewarded if you have high charges. If you have low charges, you’re denied the state contribution.
We do pay big taxes. My hospital is taxed at over $2 million a year in order to support the intergovernmental transfer fund, so it isn’t just Clark County [that pays] and yet our distribution for caring for the indigent is almost nothing and each year our indigent load continues to climb.
The dollar needs to follow the patient. If that patient is treated at Valley Hospital, UMC, or Washoe, he should be cared for with the same dollar, unless he’s treated at a community or county hospital. It’s time we concentrated not on the percentages or on all of the spectacular razzle-dazzle, but on looking at accessing our indigent patients and being sure that they’re being treated wherever they’re taken to be treated.
We need to get back to a very simple formula where if you treat the patient, that’s where the dollar goes. We would like to sit down with the state and UMC and throw in what it’s going to do to us, so they’re not just looking at [what would happen] to the county hospital and the state of Nevada.
Robin Keith, President, Nevada Rural Hospital Partners:
I have no wish to insert the rural hospitals into the discussion that relates to how DSH money is distributed in Clark County. I want to make the following comment: It’s my intent to try to address the rural issues in each DSH bill that exists in this building so that no matter how this turns out, the rural issues get handled.
We support the amendment of A.B. 297 in its entirety. We acknowledge and thank Clark County, UMC, and Sunrise for their commitment to meeting the rural needs with respect to this issue. We believe it is appropriate to define base grant amounts for private hospitals that are the only hospitals in the counties in which they serve.
With respect to consolidating the IGT transfers for the small counties into Clark County, that is consistent with the recommendations in the study. The Interim study cites a lack of uniformity in administration when all the little counties do intergovernmental transfers, and the study cites the potential liability to the state if various counties fail to comply with federal regulations. In order to simplify the system and avoid state liability, the study recommends that Clark do the intergovernmental transfer for all of the counties in the state that are affected except Washoe.
I think it’s important that the Committee understand that this is not at a cost to Clark County. The fact that Clark puts up the intergovernmental transfer is a cash flow kind of issue. It’s like I pay the bill for you and you pay me back. That’s what’s happening here with respect to the little counties and Clark. I wouldn’t want the Committee to feel that [doing the IGT for the small counties] was a net loss to Clark County.
A great deal of effort and money has been invested by a lot of people over the interim to try to come to some conclusions. We believe that we have to make every effort to reach a long-term solution this Session.
Chairwoman Koivisto:
Anyone else in support of A.B. 297, opposed, or neutral? [There were no responses.]
What we’re waiting for is something from the interested parties explaining and laying out [the options]. Disproportionate share [concerns] hospitals treating uninsured, indigent patients. The hospitals, particularly in Clark County, and probably Washoe as well, are set with a base amount. They have to treat a certain amount of indigent patients. If they don’t treat that amount, they pay into the [disproportionate share] fund up to that amount. Hospitals that treat more than that amount are supposed to get reimbursed from the DSH money, but it’s never quite enough to completely reimburse the hospitals.
[Chairwoman Koivisto, continued] You should all have a copy of the Legislative Committee on Health Care Legislative Counsel Bulletin Number 03-19. The consultant’s study is at page 113.
Assemblywoman McClain:
This is for the Committee’s benefit, don’t get confused between DSH money and the UPL money, which is something new this year. They’re totally different subjects, totally separate issues.
Chairwoman Koivisto:
Committee, we have one more meeting after today, so we’re going to have to try to get through amendments on bills we heard today, plus the three bills on our agenda. Plan on a long night Wednesday.
Thank you, Committee. We’re adjourned [at 3:42 p.m.].
RESPECTFULLY SUBMITTED:
Terry Horgan
Committee Secretary
APPROVED BY:
Assemblywoman Ellen Koivisto, Chairwoman
DATE: