Commissioner Becky Hultberg Commissioner Bill Streur

1. Health Careand Fiscal • Sustainability Commissioner Becky Hultberg Commissioner Bill Streur

2. State budget: 2001 - 2010 Total state spending (operating and capital, PFD excluded) has doubled from $4 billion to $8 billion in 10 years. Spending per capita has increased from $6,639/person in 2001 to $11,234/person in 2010. The rate of spending growth over the last decade averaged 7.5% per year, but inflation (Anchorage CPI) over the last decade averaged only 2.6% per year. Health Care and Fiscal Sustainability

3. State revenue • TAPS subsidizes much of modern life in Alaska • Schools - about 66% of K-12 spending • State - about 90% of state general purpose unrestricted revenue • PFDs - over $900 million in payouts each year • State capital projects Health Care and Fiscal Sustainability

4. State oil production: 2001- 2010 Oil production has steadily declined by just over 5% per year. Health Care and Fiscal Sustainability

5. Health care spend: 2001-2010 Medicaid, AlaskaCare active, AlaskaCare PERS/TRS, State Workers Compensation, Department of Corrections, union trusts 2001: $856 million 2010: $1.9 billion This includes the federal portion of Medicaid. The rate of growth of state health care costs, 2001-2010: 9.4% per year. Health Care and Fiscal Sustainability

6. Health care spend by component (Chart in millions of dollars) Health Care and Fiscal Sustainability

7. Where does our current path lead? If state paid health costs continue to increase at 9.4% per year, in FY 2020 they will exceed $4 billion (before Medicaid reimbursement). State health care expenditures, 2020

8. Challenge Projected Medicaid Cost Growth Millions $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 2011 2024 2014 2031 2027 2021 2017 2012 2030 2025 2020 2015 2022 2028 2018 2023 2013 2026 2016 2029 2019 Health Care and Fiscal Sustainability

9. AK DHSS 10-Year PlanOperating Budget FY2013: $2.6 Billion Projected: FY2022 $6.6 Billion Unknowns • Impact of the U.S. National health care initiative • Tighter federal and state budgets • Broad economic problems – e.g. financial markets, energy costs, mortgage defaults, medical inflation Medicaid • Population • Medical Inflation Public Assistance • Inflation • Population Growth in • Population 20-34 years • Population growth 65+ years of age – Adult Public Assistance Millions $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 2011 2024 2014 2031 2027 2021 2017 2012 2030 2025 2020 2015 2022 2028 2018 2023 2013 2026 2016 2029 2019 Health Care and Fiscal Sustainability

10. Medicaid Direct ServicesBeneficiaries and Expenditures Health Care and Fiscal Sustainability

11. Medicaid Direct ServicesBeneficiaries and Expenditures FY 2011 Medicaid Direct Services Expenditures by Division(thousands) Senior and Disabilities Medicaid $401,911.9 29% Behavioral Health Medicaid - $203.628.1 15% Office of Children’s Services Medicaid $7,900.7 - 1% Health Care Services Medicaid $740,619.9 54% Adult Preventative Dental Medicaid $9,249.1 - 1%

12. Controlled Growth in Medicaid Health Care and Fiscal Sustainability

13. State Policy Actions Implemented in FY 2011 and Adopted for FY 2012 States with Expansions / Enhancements 35 33 32 33 28 22 13 13 Provider Payments Eligibility Benefits Long Term Care 2 4 11 14 18 18 FY 2011 39 46 States with Program Restrictions Adopted FY 2012 NOTE: Past survey results indicate not all adopted actions are implemented. Provider payment restrictions include rate cuts for any provider or freezes for nursing facilities or hospitals.SOURCE: KCMU survey of Medicaid officials in 50 states and DC conducted by Health Management Associates, September 2011. Health Care and Fiscal Sustainability

14. Medicaid Services Mandatory Optional • Inpatient hospital • Outpatient hospital • Physicians • Nurse midwives • Lab and X-ray • Advanced Nurse Practitioners • Early Periodic Screening, Diagnosis, and Treatment • Family planning services • Pregnancy-related services • Nursing facility (NF) services • Home Health (NF qualified) • Medical/surgical dental services • MH Rehab/Stabilization • Diagnostic/Screening/Preventive • Therapies (OP, PT, SLP) • Inpatient psychiatry <21 years • Drugs • Intermediate Care Facility for the Intellectually Disabled • Personal care • Dental • Other home health • Other licensed practitioners • Transportation • Targeted Case Management Health Care and Fiscal Sustainability

15. Payment Comparisons Milliman Client Report: Physician Payment Rates in Alaska and Comparison States prepared for Alaska Health Care Commission 2011 Health Care and Fiscal Sustainability

16. AlaskaCare health plan Includes the active plan (non-unionized employees and some bargaining units) and retiree plan Plan statistics: Health Care and Fiscal Sustainability

17. Retiree vs. Active EmployeeChronic Diseases in our Populations Employee Member Count Retiree Member Count per 1,000 per 1,000 Source: Sightlines Medical Intelligence – Disease Registry (January 2010 to December 2011) Health Care and Fiscal Stability

18. Projected Retirement System Growth Health Care and Fiscal Sustainability

19. Active Employee Medical Expense Growth Change in Unit Pricing +4% Change in Medical Per Member Per Month Dollars/event +1% Change in Utilization -3% Events/member month Source: Sightlines Medical Intelligence – Claims (January 2010 to December 2011) Health Care and Fiscal Stability

20. Retiree Medical Expense Growth Change in Unit Pricing +9% Change in Medical Per Member Per Month dollars/event +5% Change in Utilization -4% Events/member month Source: Sightlines Medical Intelligence Health Care and Fiscal Sustainability

21. AlaskaCare claims data: physician fees Health Care and Fiscal Sustainability

22. The hidden cost of health care Opportunity cost of dollars spent on health care: roads, public safety, schools and other public services Health Care and Fiscal Sustainability

23. The State’s approach Our challenge: We must lower the rate of growth of our health care spend. Our current path is not sustainable. Our approach: • Work together with the hospital and physician community • Support high-quality, cost-effective health care delivery in Alaska • Develop and support innovative solutions to our health care challenges Health Care and Fiscal Sustainability

24. Specific strategies: AlaskaCare • Better leverage our purchasing power • Consider expanded travel benefits or Centers of Excellence for certain services • Develop a robust employee wellness program • Continue to aggressively pursue contractual discounts • Align contracting strategies around innovative care delivery models • Develop a comprehensive health management strategy Health Care and Fiscal Sustainability

25. Innovations in Service Delivery/Payment • Medical Home • Tribal Health – exemplar of alternative provider types • Bundled services • Integrated BH/Primary care services • Pay for performance • Utilization review and management (radiology, Rx) • Community based long-term care • Disease/Case Management • Managed Care • Dual eligibles Health Care and Fiscal Sustainability

26. Maximize Match/Collections/Refinancing Opportunities • Replace state funding with federal funding where allowable • Tribal Partner opportunities • Co-Pays • 6 states increased and 4 states decreased co-pay amounts Health Care and Fiscal Sustainability

27. Thank you! For more information: www.DOA.alaska.gov and www.HSS.alaska.gov Questions?