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Senate | August 6, 2015 | Committee Room | Health Care Committee

Full MP3 Audio File

Committee will come in order. Thank you, members of the committee, members of the public I apologized this morning for all the movements of this committee that have come forward our finance committee ran over and heard the process, I was going to go ahead in the nail, I have been told but as I resolved it is the intend that somebody was going in the session and recess and come back in the session at 11:30, so we would be beginning session at 11:30 for sure, so if you have another term you need you can adjust to the changes we recorded this morning I begin by announcing our pages and I'll try to get through some of these readings there was coming in, but Parker Casobery senator Tilman Mr. Parker here. Checking again okay. So at some point coca cola Senator Berringer, thank you. Andrew Hertzford, Senator Newton, Ruth Woods, Senator Brian, [xx] Senator Bryant, anybody? Senator Jackson, and I have two pages today kb session and Recho is taken I'll try that again. Stake Sholty[sp?] Thank you very much. Thanks for coming in. Our Sergeant at arms today Hall Rouch, Gall Jefreys. Dale Half, Matt Urbern and [xx]. Thank you all members. Thank you Sergeant at Arms for coming in today. Members we're to begin, I going to begin by letting staff do a presentation of the budget with focuses on what's changed between before the recommendation from the senate position as well, for that being a focus but first I need a motion to except the PCS, Senator Wade moves to have the PCS force for considerations all those in favor please signify by saying aye, Aye! Opposed, the Ayes have it I thank you members, we have staff who are going to explain the Bill, I'll actually step down for questions on the Bill and I'll let Senator Pate manage the meeting, well doing sir Thank you Mr. Chairman members of the committee, members my name is Jennifer Hillman with the Research Division in all of [xx], the PCS to third edition of House Bill 372. The bill the PTS has three substance sub-section, the first section relates to Medicaid transformation and reorganization, the second section routines to the statewide health information exchange, and the third section pertains to medicaid for primary care case management. Section one regarding medicaid transformation and reorganisation. I'll go through the key subsection of that section, subsection A sets out the intent and goals with the basic goal being to transform the state's current medicaid program to a system that provides budget predictability for the tax payers of the state, while ensuring quality care to those in need. Sub- section B, outlines the key features of transformation including the creation of a new department of medicaid specifying contracts with medicaid managed care organizations, which is to find as commercial insurers end provider led entities. It provides for three state wide contracts with either commercial insurers or provider led entities and rights for up to 12 regional contracts who provide led entities in five to eight regions, dividing up the state which will be set by the new Department of Medicaid. Sub- section C provides a timeline for the transition to these contracted payments and provides for the submission of all necessary waivers and state, medicaid state amendments by May 1st 2016. Sub- section D, contains the details of the contracts, provides for full risk capitated payments to commercial insurers and some provider led entities. The payments would be for all beneficiaries, all medicaid and health choice beneficiaries except for

the dual aligables and would cover all services except that behavioral health services would be sub- contracted through the LME during the purity of the initial capitation contract. Sub- section D further out some of the other details that must be contained in the contract as well. Subsection E requires the department department of Medicaid to make monthly progress reports to the general assembly on implementation progress and implementation of that Medicaid transformation. Subsection C sets out the role of the current department of health and human services directs the department to stabilize and operate the Medicaid program during the period of transition to full competition. And then subsections H through U create the new department of Medicaid which will become the Medicaid single state agency effective January 1, 2016. the new department of Medicaid will oversee the Medicaid transformation process and will have broad authority to administer and operate the programs including the ability to our program components except that studying eligibility categories and eligibility threshold will remain set by the general assembly. The new department of the Medicaid will have increased responsibility to keep both programs within their budget. Sub section L establishes the new legislative oversight committee on medicaid, and subsection v appropriates $5 million in recurring state bonds to fund the Medicaid transformation and reorganization which will be matched by $ 5 million in federal funds. Moving on to section two, this section pertains statewide health Information network. The Health Information Exchange Network, the HIE Network. That section begins in page 16 of the PCS sub-section a that has been done with the general assembly, sub-section b direct DHSS to enter into a memorandum of understanding with the state chief information officer so that the state CIO will have sole authority to direct the expenditure of funds appropriated to DHHS for the state wide health information exchange, until such time as, number one, a director is appointed to the HIE Authority, the HIE Authority will be the new state entity responsible for overseeing and administering a successor state wide HIE Network, and also the funds will be appropriated when members are pointed to the new HIE Advisory Board, which will be responsible for providing advise in consultation to the HIE Authority. Subsection C directs that once the HIE Authority Director has been hired and Advisory Board Members have when appointed, the HIE Authority will assume responsibility for the funds appropriated to DHHS and spend the funds for specified tasks including the facilitating the termination of or assignment to the authority of all contracts pertaining to the state Listing HIE Network by December 31 2015. Sub-Section D establishes a new chapter in general statute, that mirrors the current North Carolina Health Information Exchange Act, but expands mandatory participation in the successor HIE Network. Beyond just hospitals with electronic health record systems to also include Medicaid providers and all I receive state funds for the provision of health services. They receive a state funds including medicaid fund is a condition upon the entity prevailing the mandatory participation requirements. This sub-section also creates the MC HIE Authority from the NC HIE Advisory Board and exempts employees of the HIE Authority from the State Health Act. And finally Section three of the PCS, addresses the current Medicaid and health swiss primary care. management program. Sub-section eight direct the discontinuation of the family care keys management program affected May, 1st 2016 and prohibits renewal of the current contract for primary care case management with the North Carolina community care networks also known as N3CN, beyond April 30, 2016. Section 3B, drag CHSS to submit state plan, a state plan amendment

the settle government narrated that on 31st July 2016 that continues the primary care case managed program under Act to the health and human services to just continue payment related to program effective May 1st, 2016 and rest until this plan Amendment is denied. Section 3C clarifies that the department of health and human services may develop or utilize contract for manage care other than Primary care case management after May 1st, 2016. Section 3D makes the confirming change to the LC health statute, so section 3E pieces is a Medicaid rate page a primary care physicians to an 100% of Medicare rates effective May 1st, 2015 until section 3C next findings regarding saving to the Medicare program related to this discontinuing primary care case Amendment program and end 3C in contract, inappropriate funds to be used to increase rates paid to primary care physicians into directly funds will go help departments continue services related to that care coordination for children program and CC for C which is previously funded through the contract with N3CN. That conclude the highlight of the PCS Thanks Miss [xx], Senator Hise is recognized for further explanation of the Bill, Thank you Mr. Chairman, I just want to say that what do you say to save all the House Members that have got come together in this Medicare portion of this Bill that you're seeing the system the operations of Medicaid and others there's been a lot of agreements and back and forth with the House members and others and I feel we're at a very good place with that. We've added two-thirds some other provisions, we pulled out some other provisions of the bill which include the HIE and others that were part of the budget that I think we all feel are essential for the operations. You've seen an expanded timeline to get us there, you've seen some changes to the regions that we've agreed to and other operations and I feel like we're really in a good place to move forward with this bill. I feel very strongly that it is time for Medicaid to move off the fever service options that we currently have, and move to capitated systems. I feel like we have provided solid opportunities for providers to be able to form regional networks in the state, and be able to provide for Medicaid patients yet we have a safety net of multiple managed cares that fuction is a statewide level to make sure that this system is redone we can continue moving forward in every single stalk back and service method allowance to focus much more on pension help and pension outcome and with that I will be more than happy if I answered any questions committee may have If there is any questions Robinson?   Thank you Mr. Chair and thank you senator Hise for that and of course  am just seeing all of these questions as the summary was given Canival rose couple of pieces I did not get as it was going through I think staff of that you mentioned a couple of questions one is you mentioned we'd move the timeline from what was earlier proposed, so I see January 1 in terms of the single state agency, but I don't see what is the time period for this to be implemented? What we've changed in the time line to be implemented submitted in a previous senate version we had a two year term period to be implemented we've now changed it to 12 months following CMS approval the CMS approval we've got about six month period now in there to draft this to submit by February to CMS we expect that process to be 18 months and so 12 months after that so this is more representative of a three year time period that is becoming forward although supposedly if the CMS process were to move much more quickly than it ever has, or anyone expects it to, it could be shorter or longer but I think we're looking at approves that we will allow all the entities 12 months before we begin operations.  Follow-up Mr. Chair?  Follow-up. And what do you expect in a timeline for CMS approval?  From the time submission anticipation is 18 months? 18 months OK. That would be average on. Okay, another question? One more follow up please? And this is just technical, I didn't follow up quickly it says, this amends chapter 90 of the general statute and adds a new article, 29B. Is that new article in this be perspective is

the new article just refrencing this new agency and that maybe for Jennifer, 29B yeah I've looked at the summary and I'm trying and figure out where it is in here, I want to make sure. We'll come back to you Senator Robinson. Okay, and she can look for it. Senator McIssick. Thank you Mr. Chair. I have a couple of questions for senator [xx] and I fully appreciate it's going to fully capitate the system I think it makes a lot of sense but in terms of structure that is know proposed the post can be substitute, exactly how would this department of Medicare function and operate, I see it as a free standing entity and I see why there's an advisory board, but to what extend will the advisory board be into acting with the agency? And how many members will be a part of that advisory board. At one point we spoke of hiring people, compensating them, it was barely substantial salaries, so how does that structure now look compared to what it was previously? I'm going to look at the operations of the board. What we have eliminated, the compensated board that was in here, the individuals are not, this would now be under the secretary and the operations and management of an apartment that is not subject to the state personnel act so they would have the freedom to hire individuals at the salaries that the market would demand for time periods, the market would demand to be able to make changes and staff and salaries as is necessary to run the Medicare program. So any operations we have for advisory, and I'll specifically do that to the HIE advisory committee. Their roles as I said are strictly advisory to the department. Follow up Mr. Currie. Follow up. So we will have that system setup in a way that would function as an independent agency, with the secretary appointed by the government When are being confirmed by the General Assembly, is that correct? That is correct.  And the other follow-up, in terms of provider entities operating within the state, I know what we've discussed previously in terms of the proposed bill, how are you seeing in functioning today under this hybrid sysytem if you could. What you see is compared to others we've increased the number of regions and rather than have caps for the number that function in a region we have a cap number and I think it's 12 that could function state wide, now you have to take an entire region the region now are inclusive of the entire state. This is coming in vs the having reach MOB defined regions vs what we previously had regions that could be negotiated and put together and may not have been inclusive of the entire state, what you'll sees is that from a recipient standpoint at enrolment and potentially a future enrolment period they will have a choice between multi plants depending on which region they are in, whether that's three or four or five or six plants. coming on the region that they are in, they would be able to choose from plans that may exists statewide, and would either be managed care entities or provider led entities. And so many of these insurance companies are statewide provider led entities, or some that are just function in their region, that was coming and each year simply here we'd have the opportunity to make those chances to switch plan they would enroll in. Last follow up Mr. Chair. Last follow up senator. I'm sure others have questions as well. So in terms of provider led entities we're going to have, I guess it will be a total number of entities statewide of 12. Maximum of 12. And I read somewhere about minimum number of patients that could be signed up. Do you recall what that data is or maybe that was in the earlier version in terms of how many patients one entity would need that's no longer there? There is no minimum patient number what you will find from other state experience is individuals who might gain erection in the medicaid system tend to be less than 30% of your population so the others would be randomly assigned based on the family units or other potential operations that were out there and she would expect that if they are four in a region they will get a forth of 70% frankly without any selection going on in the process. And this report needs some clarification will you say 12 that's including manage care That would be 12 PLA. 12PLA. That can function within then state there is no requirement to get

12 but as to regions covered some regions may have multiple entities. I've looked at regions drawn for six and other potentially the Charlotte Mecklenburg region maybe one where the patient numbers are significant enough, that multiple would try to enter that market because it could be divided in large far that they would be sustainable. So the number of did you have another follow up Senator?  For purposes of clarification yes sir. So managed care entities that would be involved as well I'm trying to get some idea how that is interfacing and how the department of Medicaid will establish that structure maybe it's too early to to know those details. Managed care entities will only be limited to only functioning on a statewide level. There could be a maximum of three years, but their is no requirement that there would be managed care entities. If Provider led entities bid for the three state wide operations, and their bids were awarded those contracts unlikely did insurance requirements, but that is potential, but I think you may see a situation where provider lead entity would feel one those slots for state led entities. So of those three slots the only one here with managed care will be in the state system Thank and thank you to the coach yes we'll continue to work trying to get through this details Senator Robertson we're going to circle back to you to get your question answered, and Ms Willing[sp?] Senator McKissick, members of the committee I'm sorry, Senator Robertson, you had asked about the creation of the article 29b. That is that appears on page 17 and the PCS and it does create a new article 29b that will replace the current article 29 and a, which you will see is repealed on near the top of page 25, the PCS. The new article 29b does mirror the current article 29A with the major change being that the mandatory participation and the successor HIE network will include more than just hospitals with electronic health record systems and will go on to include Medicare providers that open providers that receive the funds for the provision of health services. Senator Davis from Green? thanks Mr Chair I too would echo the sentiments that it's been there's perhaps a lot of discussion to get us here and I do appreciate the commitment that all the members have put into this, my question is been time over time shared with each as a child that's longitudinal projection that shows how of increase as well as how they are projected to increase how this does has been an announces done over this that was further, I'm sure any projection in terms of how cost will be impacted Mr. Chairman, I think the best we'd look at, there's some experience in other states in their transition to manage care, I would say that this peer we model but we have set up and the balance of the two is unique, in the United State, you can drop some conclusion to other transition as you wish The actual answers on those, truly won't be known until we can observe, we go through a competitive contract process they're thinking on what rate, I'll agree to and can set rate on the basis to that.  Follow up.    Follow up.  Okay and others are continuation where they reserve account and actually putting in place on targets with that account, my question would be moving forward here, could you address how monitoring would be improved as well as budget predictability?  I'll speak first on the reserve the count that are coming in, right now as of the auditors report of last year, as of July of last year when the ended the fiscal year, there were over $1 Billion, $50 Million in unpaid claims in the system as July 1st. That we're encouraged in the previous years but we still have standing for whatever reason, we've not yet got the next started so you have that number is changed over a year. That would represent about 350 Million of state funds and pay those claims, so if we had transitioned on July 1st from a fee-for-service to a capitated model and began paying a per member per month. That indicates that we would

still have outstanding in that year and state $350 million of payments we would have to make on claims previous year. That is going to occur at any point we transition in the payment model, federal regulations and others, allow providers up to a year to file claims and be paid for for services that are rendered. So if they in June offer a service they can potentially not even submit the bill until June of the next year, and that would not be covered out. We have allocated for that in our budget, and for the changes to do but there is manners in which it's going to have to be found in that time. that process in order to make the transition where for a time period we're really having to pay for two programs and that's what we're talking about with the senate reserves and others and to get to that point and then moving forward making sure we have adequate funds and reserves outside to be able to cover the expenses of the department. It may be some balance against these insane importuations that we've seen over years Follow up? Follow up, Senator Davis. Okay, thank you. This is actually leading me somewhat to a new question, what would be a projected cost of transition? Just trying to look at two secretaries it seems, bonus pay, new structures. What's the cost of this? And [xx] I believe in our budget we allocated that was for the transition but for the operation of the two departments was it? Could someone or staff answer the question? The PCS appropriates $5 million in state funds which is anticipated to draw down a federal match in the same amount so a total of $10 million in recurring funds beginning during the 2015/16 fiscal year. Follow up. One follow up. Is that the actual cost in terms of transition because what I'm understanding too the new secretary would have some discretion of creating a list and I guess determine who, which employees would serve on the stabilization team. I'm just trying to see the actual cost of the stabilization and the transition itself. It is recurring funds so I would assume that in the first years you would see those funds be used for the bonus payment and others to stabilize the current system for individuals leaving, but The rest of the funds will be set aside for giving up an operating, as you become the single state agency as you do other operations for medicaid, as we get the new agency up to prepare for the transition that we're funding those in that direction. And one question for that.   One final question. If I understand correctly within the reserve accounts there are now targets that established. Those targets are not binding, if I understand correctly but it  would permit the secretary in the event that they need to tap into those funds. The mechanism of doing so, my question would be or is how if the secretary, if I understand correctly, has takes the bill even if the draw down take us now outside of the max, the target. How is the max that those targets are replenished?  Those would be as always if we dropped below them, they would be punished from either end of the year operations at the department or from direct. appropriations with the general assembly. Sorry. Were you finished? Yeah. Senator Bingham Thank you, Mr. Chairman, Mr. Chairman, I had a question or two but I'm going to move for a favorable report. I've got a signing of a bill, and I just want to thank Ralph and Tommy and yourself for the work y'all have done on this is very rewarding to see that you've finally convinced the House to move in some direction and I thank all of you We'll see if there are any other questions before we hear your motion. I think Senator Tucker is already on line because there are some technical provisions that we need to include in our motions. Senator Woodard. Thank you, Mr. Chairman, I guess it's a question for Senator Hise

on page four of the bill section four at the top talks about the requirements of each contract I'm curious about 4f starting on line 22. The ability of the insure PLE to exclude providers from the network based on economic quality standards. Could you explain those standards what do you mean by economical quality standards and who sets those standards and process in school providers based on? So guys you are capable There I would say that by the nature of the section this is a the standards will be set by the contracts so  this saying it has the ability to  into contract that must be provide for the building of commotional to or PLE to school providers from networks based on economic recording standards so if economic standards like can make prices can be economic in those other rations as well we call the standards I provide has the re visit at the report we had standards support from our operations. Foolow up. Follow up. Just clarifications so the intent here is that the department, I guess with ultimate approval by the board would... Sport secretary... It sectors that would ride this into the contract the standards are outlined there so essence is going to be staff secretary as a signal sign off before the contracts written and let. Well I would also say it is contract driven so it would have to be something that the providers and the department would have agree to. Contract would have agree, right? Yes. Okay, I'm sorry. Follow up. Just clarifying. Yes, go ahead, sir. So anyway it originates there then and then when provider ensure agrees to the PLE agrees to the contract and they accept those [xx]. Thank you Mr. Chairman. further questions from members of the committee? Senator Van Duyn. Thank you. Senator Hise, is there any provision in this bill for patient advocacy in the event that a Medicaid recipient doesn't feel they're getting the care that they need? It would be under the, we have a current appeal process that exists that applies to managed care entities as we have with the LME/MCO's and the appeals to those indecisions, it's my understanding would be made in the same manner that they currently are. It's the Office of the Administrative Hearings that the appeals currently go through for those services and charges. Follow-up? Follow-up. Obviously this is a much bigger group of people, have we budgeted for that process the current medicaid recipients have the same options to them as well, so the appeal process that currently provides for all medicaid appeals so if you were denied pre-exist on not pre-existing conditions if you were denied a prior authorization or anything that exist under medic aid, or you were improperly denied services on medic aid there is an appeal they're currently exist in a process through the office of administrative hearings for the nearly too many individuals on medic aid now and there would be the same process. Further questions from members of the committee, Senator Wade? Thank you Mr. Chairman and senator Hise, senator Payton and Senator Tucker, I want to thank you again for all your hard work because I know it's been hard and I know you've stuck it out we really appreciate it. Senator Hise, if I may I have a question. The states surrounding us and how do we compare with this new plan compared to how other states close to us are handling medicaid and what do you foresee as the positives about our plan versus others?  I would begin that by saying I think that if you've seen one state's Medicaid plan, I guess the statement is you've seen one state's Medicaid plan that was coming in. Medicaid  plays various roles in all the states around us in the operations. We would be unique in having all services and all patients under a type of managed care environments, whether that be PLE or MCO that was with coming forward, Tincare has

similarities to that in Tennessee in operations but the overall structure of this I would say is unique to North Carolina but the elements that exist in and exists in many states.  Senator Wade, to the accolades that you made, I'd also like to congratulate the staff for the work that they have done in getting us to this place and I thank them as well Senator Robinson, you have the final question?  Yes, one other, Mr. Chair. Senator Hise I've kind of kept up with what was going on between you and Senator Tucker and Pate, and I do appreciate the information that has being shared and coming into some resolution. I'd like to know what do you anticipate, if any, the impact on recipients during this transitional period as it moves from the current system into a totally new department and we know that things could happen. Do you anticipate impact? And what is that impact? And who would be able? Is you're moving from one to another and I understand the office of the administrative appeals but this is a different kind of issue, so what you anticipate this impact and how would that be handled if there's a negative impact. I suspect that as this transitions, what you are see his patients in more appropriate levels of care than what they are currently receiving in a fee for service model. I think you see a lot of individuals who were pushed into excessive procedures and excessive Medicaid and that's how providers quite frankly get paid in this process. Over the transition, I've heard conversations with many entities that run it should sell across the state, most believe that for the first few years that providers provide valid entities or manage is we'll lose money operating in this state, their calls will exceed their revenues the state pays them until they can develop their system and others to be prepared to control patient costs and get patients into appropriate level of care that they need to begin to word out excessive cost. I think you also have anytime you're dealing with the preventative model, that most of these  have, you don't see yours turn on saving immediately so if they can pursue programmes to get individuals to stop smoking, to manage there diabetes and others in the first years of doing that, you'll see increased costs. More doctors visits that were coming in but they will see the savings in years out, and I perceive that's how it will occur. I'm not projecting difficulties in the transition from the departmental side that is why we kind of ramped one up as we build the other and have made the transition possible. We're transitioning how we're delivering care, I see a lot of differences in the new department than what we currently have. Their requirements are different, they have to be able to monitor the data we received from HIE and others what is over utilizations, under utilizations, the financial health of these entities that are being created as well as the level of which services being provided are consistent with the care requirement of a patient and be able to monitor how that occurs. That's a very different role from individuals knowing what ICD code a particular procedure falls under and whether or not they can get to make the payment in the system from being able to do so. I'd like to let members know that this bill has a sequential re-referral to Appropriations Base Budget so that the financial part of the Appropriations part of it can be discussed further. Senator Davis Thanks Mr. Chair. Just had one final question, and it was kind of a follow up from we were discussing before, funds that are unencumbered and use basically would rollover into the reserve account. My question would be do we have any other departments in which we're rolling funds into? These are back to themselves. Anyone from the staff? [xx] Are there any other departments where reserves roll over? Yes they do. Fiscal I think has its service fund that might... Would physical staff call out.. Yes gentleman fiscal research the only thing that I can speak to is Innformation Technology, and

the I. T fund, money can be carried forward one year to the next. Just one last follow up One last follow up. Okay. Is, in my understanding then that this would be permanent with the way this is crafted. It is my understanding that there would be a permanent fund set up outside the general fund appropriation. Further discussion for questions on committee substitute to house bill 372 about members of the committee. Seeing none I recognize co-chairman Turker for a motion. Mr. Chair just make a motion for favorable report on the PCS unfavorable as to the original bill and also to allow staff to give them permission to make technical changes to the PCS as they see necessary, also as you stated earlier sequential referral to the appropriation based budget. You've heard the motion, further discussion, seeing none all those in favor of the motion please say aye, Aye! All opposed may say no the motion carries thank you very much for your considering this bill. Members I do think the intent is to have this appropriation on Monday.