Thesecond meeting of the Interim Joint Committee on State Government was held on Wednesday, July 27, 2005, at 1:00 p.m. in Room 149 of the Capitol Annex. Representative Mike Cherry, Chair, called the meeting to order, and the secretary called the roll.
Members:Senator Damon Thayer, Co-Chair; Representative Mike Cherry,
Co-Chair; Senators Walter Blevins,
Julian Carroll, Carroll Gibson, Ernie Harris, Alice Kerr, Elizabeth Tori, and
Johnny Ray Turner; Representatives Adrian Arnold, Eddie Ballard, Joe Barrows,
Sheldon Baugh, Carolyn Belcher, James Bruce, Dwight Butler, Tim Couch, David
Floyd, Derrick Graham, J. R. Gray, Mike Harmon, Melvin Henley, Jimmie Lee,
Gerry Lynn, Paul Marcotte, Mary Lou Marzian, Stephen Nunn, Tanya Pullin, Tom
Riner, John Will Stacy, Kathy Stein, Tommy Thompson, Jim Wayne, and Brent
Guests: Senators Tom Buford, Julie Denton, and Daniel
Mongiardo; Representative Bob DeWeese; Erwin Roberts, Personnel Cabinet; Arlet
Kennedy; John Cubine and Alice Wilson, Auditor's Office; and
Ed Ross and Gerald Hoppman, Finance and Administration Cabinet.
LRC Staff: Joyce Crofts, Alisha Miller, Karen Powell, Stewart Willis, Clint Newman, and Peggy Sciantarelli.
The minutes of the June 8, 2005, meeting were approved without objection, upon motion by Representative Lee.
First on the agenda was discussion of the final
recommendations of the Blue Ribbon Panel on Public Employee Health Benefits. (A
list of the recommendations
numbered 1-48, was included the
meeting folders.) The recommendations were proposed by the Panel's five
subcommittees and were adopted at the final meeting of the Panel on July 19,
2005. Panel members participating in the discussion were Senator Tom Buford,
Co-Chair of the full panel;
Representative Jimmie Lee, Chair of the Benefits Subcommittee; Representative
Bob DeWeese, Chair of the Wellness Subcommittee; Erwin Roberts and Arletta
Kennedy, Co-chairs of the Group Makeup Subcommittee; Senator Daniel Mongiardo,
Chair of the Technology Subcommittee; and Senator Julie Denton, Chair of the
Governance Subcommittee. It was noted that Representative Harry Moberly, who
Co-chaired the Panel with Senator Buford, could
not attend today because he was
out of state. After introductory remarks by Senator Buford, the
subcommittee chairs addressed the Committee.
Representative Lee said that the Benefits Subcommittee
looked at all aspects of
health insurance benefits ,
the benefits that may be offered in the future under the
self-insured plan ,
and whether the plan year should be changed from a calendar year to a fiscal
year. He said the Subcommittee proposed 23 recommendations ,
but he noted that some of the recommendations that
overlapped between subcommittee s.
Representative DeWeese said the
Wellness Subcommittee had the responsibility to look at wellness, disease
management, and the aging (50-plus) population. He said that wellness programs
are definitely advantageous and would appear to be the next big movement toward
controlling health care costs. He went on to say that
management has to do with the comprehensive management and treatment of a
disease and includes the best practices for a particular disease, as well as
education of the patient. The
goal of wellness and disease management programs is to achieve the best quality
care by keeping people out of the hospital and treating diseases early when it
is least expensive. A key part of wellness is the health risk assessment. For a
wellness program to be successful, there should be incentives, and the
Subcommittee has recommended that the General Assembly consider budgeting for
incentives in order to promote participation.
Personnel Cabinet Secretary Roberts
said that one of the great benefits of the Blue Ribbon Panel was that a lot of
good information was shared and has been made available to everyone. He noted
that many of the presentations to the Panel can be accessed on the Personnel
Cabinet web site. He went on to say that the Group Makeup Subcommittee's
primary purpose was to look at the makeup of the health insurance group and what changes, if any,
be made to improve the group and make it more
cost effective for the state. They focused much
attention on adverse selection, which includes the "unescorted
retiree" issue and flexible spending accounts for individuals who waive
coverage—issues which are addressed in recommendations #6, #27, and #28. Ms.
Kennedy said that the biggest issue before the Subcommittee is probably
the "unescorted retiree s ,"
which is addressed in
She also expressed appreciation that KEA
was allowed to participate directly in the work of the Blue Ribbon Panel.
Secretary Roberts said they are in the process of obtaining the necessary
information from the retirement systems in order to pursue the study directed
in that recommendation.
Senator Mongiardo said that the cost of health care is the
number one domestic problem facing the nation and that there will not be a dent
in the cost until it can be determined how to overhaul the health care delivery
system. He went on to say that the only way to set up a health care delivery
system to incorporate wellness and prevention—for everyone—is through the use
of information technology, so that doctors have at their fingertips the latest
research on how to treat disease. The Technology Subcommittee has recommended
that the state should be the leader in driving the change necessary to
implement information technology in order to improve the quality of health care
and significantly reduce cost. The Southeast Kentucky Community Access Program
(SKYCAP) of the University of Kentucky Center for Rural Health, using
information technology and lay health care navigators, in one year reduced
in the top five diseases by 60 percent in 10,000 uninsured
r educed emergency
room visits by 92 percent and hospitalizations by 87 percent ;
over a period of five years, the cost reductions were approximately 40 percent. The state needs
to develop incentives and determine new ways to speed the implementation of
Senator Mongiardo also spoke about Senate Bill 2 (2005),
which created a board to develop a statewide e-health network and establishe
a research collaborative between the University of Kentucky and the University
of Louisville to figure out
ways to change the health care delivery system. He said the Subcommittee
has also recommended establishment of a "Sorry Works!" pilot project
to reduce the cost of malpractice ,
modeled after successful programs implemented at the Lexington VA Medical
Center, the University of Michigan, and two hospitals in Illinois.
Senator Buford said that
David Wille, has identified six recommendations w
have a potential for increasing costs. He also spoke about the
advantages of a wellness program that
has continuity, which will be one
of the benefit s
self-insured plan. Representative Lee noted that
the Panel has recommended that
and co-insurance structures similar to those currently in place be retained
after June 30, 2006.
Representative Yonts asked whether any recommendations
relate to coverage for out-of-state retirees or creation of a prescription
registry. Secretary Roberts
th at #19
recommends that there be a provider
retirees who live outside of Kentucky.
Senator Mongiardo said that a prescription s
registry would fall under the auspices of Senate Bill 2.
In addition to information sharing, it would allow for tracking of narcotics.
He added that incentivizing hospitals and doctors to implement information
technology as quickly as possible will help not only state workers but
will also help
Medicaid, private health insurers, and
small businesses. Representative Yonts suggested checking with King County in
Washington state where there is
a four-county e-health pilot project underway which
is a collaborate effort between government and employers.
Senator Harris asked about the 2006 RFP and the expected completion date for the study on "unescorted retirees." Secretary Roberts said the recommendation specifies that the study be ready by January 2006. He said that the RFP has been released and that the goal is to have a contract by the middle of August. There was additional discussion of the "unescorted retiree" issue and its political and fiscal implications.
Representative Cherry asked about the recommendation to
change the current employer contribution to flexible spending accounts, for
those waiving coverage, to an HRA and to reduce the employer contribution
incrementally over five years.
He asked for an
explanation of "reduce incrementally." Representative
Lee said the minimum and maximum conributions
and the amount of the incremental reductions would have to be decided by the
General Assembly. He noted that a study supplied to the Blue Ribbon Panel
indicated that the average state employee uses about $200 per month of the $234
employer contribution to the flexible spending account. Secretary Roberts said
that a study of other states showed that the average contribution to flexible
spending accounts was only $50-$100.
Representative Cherry asked whether legislation will be forthcoming relating to the Panel's recommendations. Senator Buford said that he and Representative Moberly had not specifically discussed legislation but that some of the Panel's recommendations will require legislative action.
Senator Blevins mentioned the University of Kentucky
wellness program model
, which is referred to in
recommendation #42. He said that the most prevalent disease
in the population is gum disease
and tooth decay, w hich
are also among the top 10 reasons for emergency room visits. He said that research shows that heart
disease and strokes can be caused by infections in the oral cavity. He said
he believes—not just because he is a dentist—that any wellness
program should assess dental health and that the state would be "missing
the boat" if the
health plan does not include a component for providing oral
health care. He noted that
Kentucky Kare included provisions for preventative dental care.
Senator Buford agreed with Senator Blevins
and said that staff would need to find out how this issue is treated in the
University of Kentucky model.
Representative Thompson asked whether the Panel had analyzed
what other states are doing relative to the employer contribution
single coverage. Representative Lee said that they had look
at other states. He noted that
some states contribute more toward dependent coverage and also pay higher
salaries than Kentucky. He said that providing fully paid individual coverage
for employees is one of the cost drivers in the health insurance plan that will
have to be considered in determining what approach to take relative
to the employer contribution. Representative Thompson asked
two regions of the state in the 2005
plan year has been successful in reducing administrative
costs. Representative Lee said there is only limited information currently
available from those regions but that thus far it indicates a cost
savings in pharmaceuticals. Senator Buford said that
Mr. Wille has observed
that preliminary numbers indicate that the TPA administrative
cost per member in th ose
regions ranges from $29-$31, compared to about
$55 per member average for plans that are not self-insured.
Representative Henley said that when he was mayor of the
city of Murray in 1978 he set up a self-insurance plan
and a few years later ,
serving on the Board of Regents of Murray State
University, they implemented a self-insurance plan. He said that
both plans have been very successful and include incentives for wellness and
that he believes self-insurance is a very good way for the state to begin
holding down costs. He went on to say that both groups would include
"unescorted retirees" and that he thinks the state will eventually
have to require everyone who participates in the retirement system to also join
the state group during active employment. Representative Henley also commended
Senator Mongiardo and stated that he thinks information technology is the key
to the future of medical care.
Representative Marcotte commended the entire Panel for their efforts and thanked Representative Wayne, in particular, for suggesting creation of the Blue Ribbon Panel.
added his congratulations to the Panel. He spoke of an Internet program
inaugurated in the Health and Family Services Cabinet that would allow doctors
to see which drugs have been prescribed to
patient s. He said he has learned, however,
that there is no requirement that doctors use the system in order to be
Medicaid eligible. He asked
whether the Panel had looked at that program to require that physicians use the system.
Senator Mongiardo said that one of the barriers to the implementation of Senate
Bill 2 was that some doctors resist changing from the old style system . He said that
overcoming the human barrier will be a n issue. Also,
software implementation is expensive —probably
an average of $100,000-$150,000 for a doctor's office —and in the 10 Appalachian regional
cost will cost about
$50 million over a period of three to five years.