Interim Commission to Study Fiscal Stability (10/14/2009)

Final
STAFF SUMMARY OF MEETING

INTERIM COMMISSION TO STUDY FISCAL STABILITY

Date:	10/14/2009	ATTENDANCE

Time:	09:00 AM to 03:48 PM	Brophy	*
		Court	X
Place:	HCR 0112	Gerou	X
		Morse	X
This Meeting was called to order by		Boigon	*
	Senator Heath	Conway	X
		Cooke	X
This Report was prepared by		Coors	E
	Josh Abram	Fagan	X
		Hume	X
		Knox	X
		Lynne	E
		Neilson	X
		White	X
		Ferrandino	X
		Heath	X
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
Call to Order - Opening Remarks Commission Discussion -- Health Care Discussion of Three Principal Questions Commission Discussion -- Medicaid Overview Commission Discussion -- Health Care (continued) Commission Discussion - Capital Construction Commission Discussion Human Services		- - - - - -

09:12 AM -- Call to Order - Opening Remarks

Senator Heath, Chairman, reviewed the day's agenda and the protocols the commission will use to make recommendations for addressing the state's fiscal issues.

Representative Court inquired about the summary table being prepared by staff and Senator Heath answered that the table will be available on Thursday, October 15.

09:18 AM -- Commission Discussion - Health Care

Joan Henneberry, Executive Director of the Department of Health Care Policy and Financing (HCPF) provided an overview of the department. Joining the director was John Bartholomew, Chief Financial Officer, and Dr. Sandeep Wadhwa, the State Medicaid Director. Representatives of the department provided the commission the following:

- Attachment A: A PowerPoint of the department's presentation;

- Attachment B: A list of mandatory and optional services provided under Medicaid;

- Attachment C: Governor Ritter's 2008 Report titled, "Leading Colorado to a Healthier Future;" and

- Attachment D: HCPF 2008 Annual Report.

Director Henneberry discussed the recent history of health reform and its importance to Governor Ritter and the department. She summarized some of the problems with the current system: costs are perceived as too high; access is too low; and too many state residents are uninsured. These conditions have both policy and financial implications for the health-care system. Director Hennebery acknowledged that there is too much inefficiency, fraud, abuse, and waste in the current system, and that there are misaligned incentives in the system. As designed, the system provides incentives for specialty services and procedures, rather than focusing on primary care. Proper incentives would front-load the system and place the emphasis on primary, preventative care. Under an ideal system, health-care providers would be paid to keep individuals healthy, rather than creating payment incentives to wait until the patient needed specialty procedures. Director Hennebery labeled our current system a "transaction based" system.

Director Hennebery testified that the leadership at HCPF wants to change the way the department and the public think of health care. This change is from a transaction based system to a "pay-for-value" system that works with health-care providers to ensure they are supplying quality and value to Medicaid recipients and to hold providers more accountable. Many of the recent changes at the department are supported by recommendations made by the Colorado Blue Ribbon Commission for Health Care Reform (the 208 commission). Some of the immediate actions the department took in 2006 include enrolling more eligible children and adults. The department has embraced a managed care model that aims to integrate health care between numerous providers, using a centralized approach. For children, this included instituting a medical home model to coordinate care between the primary provider and all other sources of health care. Further, the department increased efforts to improve the care of the program's most chronically sick and expensive clients.

The 208 commission made other recommendations that the department has implemented such as creating the Center for Improving Value in Health Care, and funding the statewide information system for sharing health care data. The department also helped pass the hospital provider fee bill that will allow additional coverage to uninsured Coloradoans without a General Fund impact.

Director Henneberry testified that, in the next phase of reforms, the department will implement and integrate federal requirements into our state system.

09:51 AM -- Discussion of Three Principal Questions

Director Henneberry addressed the consequences of the current budget cuts. These include reducing some provider fees and modifying some benefits. In order to address the minimum funding needed to maintain the department's current level of service, the director responded that the department is already at a deficit in providing needed assistance. The department's goal is to cover an estimated 300,000 additional Coloradans; however, current resources only allow coverage of 100,000 to 150,000 of these potential clients.

Senator Morse asked for a thumbnail sketch of how people qualify for Medicaid. The director answered that this is a complicated formula based on both federal and state requirements. The core criteria is family size and income. These criteria are defined at the federal level each year, and the state must cover clients based on this categorization, at a minimum, to draw down federal matching dollars. There is a policy goal at the national level to simplify these formulas and to create a national model that can be used uniformly. Senator Morse pointed out that we cover children, the disabled, and the elderly, but that working adults are frequently left out. Director Henneberry remarked that there is variation among the states as to how many working adults, or adults without dependents, can obtain eligibility. States can obtain a waiver to serve some of these populations but do so without the federal match. In Colorado, some state programs help to cover provider costs when they serve uninsured patients.

Representative Court asked if there is data from other states that insure adults in addition to children? She asked if the data demonstrates that investing in the family has better overall results? Director Henneberry answered that there is good evidence supporting this conclusion.

10:17 AM -- Medicaid Overview

John Bartholomew provided an overview of Medicaid's origins. He testified that in FY 2008-09 the total budget was approximately $3.8 billion. Of that amount, the state's General Fund provided $1.5 billion, federal funds accounted for $1.8 billion, and $0.4 billion was supplied from cash funds. There are other state revenue sources as well. In FY 2009-10 there was a 3.5 percent cut to providers in reimbursement rates.

10:24 AM

Mr. Bartholomew continued by reviewing caseloads for Medicaid, Child Health Plan Plus, and Medicaid.

10:26 AM

Dr. Sandeep Wadhwa testified concerning the health status of Coloradoans and the health status of the Medicaid population in the state, noting that while the overall population appears very healthy, the poor population is very unhealthy. Dr. Sandeep also discussed obesity trends that span across the country, including Colorado. Obesity is particularly prevalent among the poorest populations.

10:39 AM

Dr. Sandeep continued that Medicaid clients disproportionately engage in unhealthy behaviors such as smoking. Additionally, amount the poorest populations, Colorado's rates of mental health issues, such as adolescent depression, are among the highest in the country.

10:46 AM

Dr. Sandeep laid out a vision for reform that can improve health outcomes in the state, both for the Medicaid population and for the overall population. These reforms include enhancing enrollment structures to insure more clients, appropriately defining benefits, establishing managed care models and holding providers accountable for good health status, better evaluation of overall health outcomes, and creating support systems for reimbursements and provider services. These reforms could transform the cost-effectiveness of our public insurance programs and improve overall client health, functioning, and self-sufficiency. Dr. Sandeep added that reducing readmission rates and emergency room visits, lowering child and adolescent obesity, and reducing adult tobacco use will also have positive impacts on our health care system. He indicated that the department has several current programs and initiatives to address these challenges.

11:01 AM

Commission Recessed

11:11 AM -- Health Care (continued)

Commission Reconvened

Senator Brophy asked Director Henneberry what amount of money clients share in the cost of their health care. Director Henneberry answered that the federal government sets the allowable co-pay amount based on the client's income. Therefore, only the adult population pays a co-pay, and it is usually nominal. She also indicated that there are studies to identify affordability standards based on gross family income. These studies attempt to calculate an acceptable amount to charge a family for their health care, without sacrificing their ability to pay other necessary expenses. A reasonable level might be set at 5 percent of their annual income to cover provider co-pay amounts and deductibles; however, this is an on-going policy debate.

Senator Brophy concluded that Medicaid recipients basically pay nothing towards their health care. He added that S-CHIP recipients might be paying more. Mr. Bartholomew answered that even in these programs, the yearly premium fee and provider co-pay amounts are still nominal. Senator Brophy asserted that since the private programs are so much more expensive, there could be an incentive for families to discontinue private coverage and enroll instead in the public system. Director Henneberry responded that there are specific eligibility criteria and other incentives to keep low wage workers enrolled in existing private programs through subsidies.

11:22 AM

Commissioner Renny Fagan asked about cost recoveries from third party liabilities. What amount of money from third party payers is identified each year and how much of this is actually recovered? Director Henneberry promised to get specific numbers to Mr. Fagan. She answered that the department seeks reimbursements as a result of provider fraud and mismanagement, as well as from uncollected client payments. The department's aim is to be the payer of last resort, and require that all other sources be provided and verified before the state pays its share.

11:26 AM

Senator Morse asked how immediate needs are being met to provide a robust safety net? Dr. Sandeep answered that the cuts have not been easy for the providers and that many uninsured clients will be insured when the Health Care Affordability Act is implemented.

Commissioner Kirvin Knox asked about provider availability data. He pointed out that access is most challenging for the rural population and asked if the department coordinates efforts in these areas. Director Henneberry responded that there are programs to provide incentives for providers to operate in these areas, as well as finding alternative medical providers, such as nurse practitioners, to get better access to primary care for populations in rural areas.

Commissioner Amy Oliver-Cooke asked about Cover Colorado. Director Henneberry replied that Cover Colorado is a high risk plan to provide for individuals who are not eligible for a public program, but otherwise cannot afford or are ineligible for private coverage. This program is partially funded via state assistance.

11:40 AM

Senator Heath asked the staff from HCPF to provide some numbers for the remaining questions. Mr. Bartholomew answered that $4.2 billion is needed for minimum funding level.

Question #1: What is the department's current funding level?: $4.0 billion overall, $1.6 General Fund, $2.0 billion federal funds, $400 million in cash funds and reappropriated funds.

Question # 2: What minimum funding level is needed to maintain the department's current level of services?: $4.2 billion overall, $1.7 billion General Fund, $2.15 billion federal funds, and $400 million cash funds and reappropriated funds.

Question # 3: What is the funding level that would be needed to provide the highest quality services for the people of Colorado?: Director Henneberry remarked that there are policy questions that need to be answered first. Once it is decided how many people should be covered, the department can calculate the total costs.

Representative Court asked what proportion of the current uninsured should be covered by a public program? Director Henneberry replied that 40 percent of the uninsured would qualify for public assistance, based on data from the 208 commission.

11:54 AM

Representative Ferrandino asked what the cost is to implement all of the 208 commission recommendations? Director Henneberry answered that this amount was approximately $1.0 billion in total additional funding.

11:59 AM -- Commission Discussion - Capital Construction

Representative Riesberg, Chair of the Capital Development Committee and Kori Donaldson, Legislative Council Staff presented some of the long-term needs for capital construction. Ms. Donaldson testified that the current replacement value of state buildings is $7.6 billion (Attachment E), and that approximately $76 million is required for controlled maintenance, or 1 percent of the replacement value of the state's buildings. In the last fiscal year, the state spent only $24 million, or one third of one percent on controlled maintenance. The annual Certificates of Participation (COP - Lease Purchase) payments are $36 million. These are for a group of buildings on the Anschutz medical campus, the Colorado State Penitentiary II, and for other higher education projects funded from Federal Mineral Lease revenues. A summary of Ms. Donaldson's presentation is included as Attachment F .

Ms. Donaldson shared a 5 year history of appropriations to show that construction projects have been split equally between state departments and higher education.

Senator Morse added that these funding amounts have not really been from the General Fund, rather from the excess General Fund that would have reverted to other places. Representative Court added that no amount of our budgeted General Fund appropriations are provided to capital construction, these appropriations are exclusively for operations.

Ms. Donaldson supplied information comparing the amount requested for construction in FY 2010-11 ($1.28 billion) and the amount provided via appropriations ($4.3 million), leaving a shortfall of $1.24 billion. Ms. Donaldson then shared the four-year estimate of revenue, as compared to the state-funded capital need.

12:15 PM

Larry Friedberg, the State Architect, testified concerning the maintenance needs of the state. He provided the commission with the executive summary of the state Architect's Annual Report (Attachment F) and total gross square feet and current replacement value of state owned buildings as of January 2009 (Attachment G). Mr. Friedberg repeated that the current replacement value of the state's buildings built with General Funds is $7.6 billion. There are also buildings that are cash funded and the maintenance for these buildings is paid for with revenue sources other than the General Fund. The replacement value of these cash-funded buildings is $3.9 billion.

Commissioner Sean Conway asked where the growth has been in the inventory. Mr. Friedberg answered that this growth has occurred across the board, among all state agencies and higher education; however, this growth does not include transportation projects.

Mr. Friedberg continued that a target of 1 percent of replacement value is needed to maintain the current inventory, but that between 1 percent and 3 percent additional funding is desired to improve these buildings and make desired renovations.

12:29 PM

Representative Gerou asked about the emergency fund of $2 million, noting that with less controlled maintenance funds, emergency funds become even more in demand. Mr. Friedberg responded that as money for controlled maintenance dries up, the state ends up with critical emergency needs. The Capital Development Committee (CDC) deals with these issues regularly.

Senator Heath summarized that the state would need to include $112 million in addition to the most recent funding in order to meet current need, and that to provide ideal funding, the state should target $340 million. This amount would optimize maintenance needs and provide money for needed improvements.

Representative Riesberg testified that an additional $13 million is needed to renovate our capitol building dome. This brings the total ideal funding up $353 million.

Mr. Conway asked if there was a recommended stable revenue source to address these needs? Representative Reisberg answered that a General Fund set-aside is one possible recommendation. Mr. Friedberg added that a line item in the budget for controlled maintenance is something other states provide. This kind of base budgeting would go far toward supporting current buildings and enabling new construction.

12:46 PM

Commission Recessed

01:39 PM -- Commission Discussion Human Services

Commission Reconvened

Senator Heath reviewed the agenda for the October 15, 2009 Long Term Fiscal Stability Commission meeting, indicating that each commissioner would be given up to 5 minutes to discuss their perspective on long-term fiscal stability in the state. He then asked representatives of the Department of Human Services (DHS) to discuss their vision of the state's human services system. Representatives from DHS provided a PowerPoint presentation (Attachment H) to the Commission.

Karen Beye, Executive Director of DHS, provided an overview of the services offered by the department. She described the size of the department, consisting of approximately 5,500 state employees, and described how the department contracts with local governments and private entities to offer services. She also described the various services offered by the department, including services for mental health, domestic violence, substance abuse, developmentally disabled individuals, and aging populations (age 60+). She indicated a need for protective services for aging populations, noting that the state does not currently offer such services to this growing demographic.

Ms. Beye continued by discussing the department's state-operated facilities, which include: 11 facilities under the Division of Youth Corrections, one state nursing home, five veterans nursing homes, two mental illness institutions, and vocational rehabilitation offices.

Ms. Beye discussed the vision and mission of the department, describing DHS as the safety-net department for vulnerable individuals. She described department efforts to coordinate services with community partners, including long-term care providers, faith-based organizations, and non-profit organizations. She also discussed the vision of Governor Ritter's administration, which includes increased reliance on community partnerships, and the desire to integrate services between numerous state and local agencies. She discussed the roles of each of the six department management units and current department improvement efforts, including standardized training of caseworkers to ensure competency.

01:57 PM

Ms. Beye continued by providing an overview of key caseload statistics. She noted that the Supplemental Nutrition Assistance Program (SNAP), formerly known as the Food Stamps Program, has grown due to the current recession. SNAP currently serves over 120,000 households.

Will Kugel, Budget Director for DHS, provided a brief overview of the department budget, which currently totals approximately $2.2 billion (11.5 percent of the statewide budget). He noted that the General Fund supports about $900 million of the department budget, including about $230 million from Medicaid funds.

Ms. Beye indicated that the FY 2007-08 budget reflected a "minimal budget" for the department. At FY 2007-08 levels, the department could provide salary increases, improve capital construction projects, and improve the Colorado Benefits Management System (CBMS). She also noted that a minimal budget would allow for the implementation of anti-recidivism programs.

02:11 PM

Ms. Beye described the impact of the current economic recession, which led the department to put some projects on hold, freeze salaries, undergo furloughs, and eliminate entire programs. She also indicated that the recession has lead to caseload increases. She noted that the department made cuts from the least effective programs as well as from programs that were not fully implemented. Cuts were made while ensuring that federal funding under ARRA would not be lost.

Ms. Beye discussed what a fully-funded department might look like, which she defined as a department able to fully and completely serve people at the present time with no waiting lists for services. She also discussed the importance of maintaining transparency and accountability, acknowledging that the department has routinely been cited for not properly overseeing services offered at the county level. She indicated that in the past, the department has been successful in securing grants to fund successful pilot programs to offer some services. However, these programs could not be implemented statewide due to lack of funding. She noted the importance of best practices, and providing funding for the evaluation of programs. Ms. Beye also discussed ways to improve department efficiencies by utilizing technology for record sharing and online application programs.

02:20 PM

Mr. Kugel indicated that policy makers must ultimately decide what a "fully funded" department means. He provided cost estimates for eliminating waitlists, supporting caseload increases, and adequately staffing all state facilities. Ms. Beye discussed the costs of maintaining state facilities and shared a number of stories describing deteriorating facilities. She described interest in community partnerships to provide land for additional facilities but lack of state funding to build facilities.

Mr. Kugel discussed the findings of a study which found growing need for services in mental health and substance abuse. Joscelyn Gay, Deputy Executive Director, Office of Behavioral Health and Housing, described how providing these preventative services would reduce costs elsewhere.

Responding to questions from the commission, Ms. Beye and Ms. Gay indicated that Colorado ranks about 36th in mental health services. Ms. Beye discussed the impact of ARRA in funding increased caseloads resulting from the recession (the department has received $26 million in ARRA funds). Jenise May, Deputy Executive Director of Employment and Regulatory Affairs at the department, answered questions about the developmentally disabled population, which grows by approximately 10 percent each year. Ms. Beye responded to questions regarding time limits for the Temporary Assets to Needy Families (TANF) program, noting that individuals are limited to 5 years of participation and most average 36 months.

02:42 PM

Ms. Beye provided information on the overlap of DHS services and those offered by other departments. She also discussed services offered to youth and the need for services for populations age 18 to 21.

Commissioner Sean Conway and Ms. Beye discussed the recommendations that emerged from the Child Welfare Action Committee, and how services should be administered. A position paper from Douglas County was provided to the commission regarding the findings of this committee (Attachment I). Ms. Beye expressed that now is a good time to review how services are administered (at the state-, county-, and regional-level) and how services can be improved.

Commissioner Carol Boigon provided the commission a number of talking points about child abuse and services for child welfare (Attachment J). Ms. Beye reiterated the need to look at how services are administered and stressed the importance of accountability. She also noted that the state cannot sanction a county, nor does it have the resources to take over a county program when counties are not adequately providing services.

03:11 PM

The commission discussed current, minimal, and ideal funding amounts for the department. Mr. Kugel reported that current General Fund appropriations for FY 2009-10 are budgeted at $670.6 million in General Funds. Minimal funding would be at FY 2007-08 levels ($643 million in General Fund) plus inflationary adjustments. The commission discussed costs associated with fully funding the department, finding that an additional $813 million is needed. Ms. Beye indicated that these additional funds would put the state about average relative to all other states in the U.S.

03:48 PM

Senator Heath provided closing comments by thanking the department for presenting to the commission and for the services they provide to Coloradans. He then asked commissioners to give thought to considerations they would like to share with the commission during the October 15, 2009 meeting, and indicated that the commission would need to vote on legislation by November 4, 2009.

03:48 PM

Adjourn.