MINUTES OF THE meeting
of the
ASSEMBLY Committee on Health and Human Services
Seventy-First Session
May 7, 2001
The Committee on Health and Human Serviceswas called to order at 1:30 p.m., on Monday, May 7, 2001. Chairman Ellen Koivisto presided in Room 3138 of the Legislative Building, Carson City, 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.
COMMITTEE MEMBERS PRESENT:
Mrs. Ellen Koivisto, Chairman
Ms. Kathy McClain, Vice Chairman
Mrs. Sharron Angle
Ms. Merle Berman
Mrs. Dawn Gibbons
Ms. Sheila Leslie
Mr. Mark Manendo
Ms. Bonnie Parnell
Mrs. Debbie Smith
Ms. Sandra Tiffany
COMMITTEE MEMBERS ABSENT:
Mr. Wendell Williams
GUEST LEGISLATORS PRESENT:
Senator Bernice Mathews, Senate District 1
Assemblywoman Barbara Buckley, Assembly District 8
STAFF MEMBERS PRESENT:
Marla McDade Williams, Committee Policy Analyst
Darlene Rubin, Committee Secretary
OTHERS PRESENT:
Debbra King, CPA, Administrative Services Officer, Department of Human Resources
Beverly Kling-Hesse, Disability Rights Advocate, Northern Nevada Council for Independent Living
Paul Gowins, Disability Forum
Bobbie Gang, Nevada Women’s Lobby
Jon Sasser, Washoe Legal Services
Thelma Clark, Las Vegas
Carla Sloan, American Association of Retired Persons (AARP), Las Vegas
Michael Hillerby, Deputy Chief of Staff, Governor’s Office
Dr. John Ellerton, Member of Task Force for Healthy Nevada, Las Vegas
Ruth Mills, AARP, Las Vegas
Gilda Haus, Nevada Women’s Lobby
Mary Albers, League of Women Voters
Dalton Wellman, Alliance for Retired Americans
Martha Spenny, Council for Affordable Health Insurance
Marjorie Powell, Assistant General Counsel, Pharmaceutical Research and Manufacturers of America
Note: Simultaneous videoconference was held in Room 4406 of the
Grant Sawyer Office Building, 555 East Washington Avenue, Las Vegas, Nevada
Chairman Koivisto announced that all three bills being heard dealt with the same issue, therefore, she asked the presenters from the Department of Human Resources and from the Governor’s Office to make their introductions.
Senate Bill 167: Requires Department of Human Resources to study expansion of program of subsidies to senior citizens for prescription drugs and pharmaceutical services to include certain persons with disabilities. (BDR S-827)
Debbra King, Administrative Services Officer, Director’s Office, Department of Human Resources (DHR), addressed S.B. 167, first reprint. The bill would require that the Department of Human Resources (DHR) contract with an actuary to determine the cost of the program under various scenarios. Neither the DHR nor the Fund for a Healthy Nevada was currently funded to pay the cost associated with contracting for an actuary. The prior biennium Task Force on Access to Public Health had contracted with an actuary to analyze some of their proposals. That contract was approximately $20,000. The cost for the actuarial study requested in the bill would be similar in scope and size.
Chairman Koivisto asked if the only element of the bill was to fund an actuarial study for the Senior Rx Program. Ms. King explained it was not only the Senior Rx Program. It was intended to do an actuarial study of the cost of the program if it included only seniors, and again later if expanded to include the disabled population. It would also identify the number of people who could be served under either scenario. The funding for the actuary could, with approval of the legislature, be taken from the Fund for a Healthy Nevada. That would be at the direction of the committee and would not need a General Fund appropriation.
Assemblywoman Leslie asked if the amount of money in the prescription program would remain the same. Ms. King assumed the money projected as being available would be used. Thus, if only seniors were covered, then a certain number could be served; if only disabled were covered, then another number could be served; if 50 percent in each category were covered, then still another number could be served. The bill was requested by the Task Force for the Fund for a Healthy Nevada and was amended in the Senate. Ms. Leslie asked for confirmation that a larger number was not being used in terms of available funds. Ms. King confirmed that assessment.
Assemblywoman Parnell asked for an explanation of the process of change from the original S. B. 167 to the current reprint, which she stated appeared dramatically different. Ms. King said the original bill required that the program for prescription drugs for seniors be expanded to include disabled persons. The reprint simply required that the department do an actuarial study to determine the impact of adding disabled persons to the Senior Rx Program.
Vice Chairman McClain asked for clarification. If the intent of the bill was to determine whether or not to add disabled people to the Senior Rx Program, why, was it necessary to request an actuary for studying seniors? Ms. King said she would have to refer that question to someone representing the Task Force for Public Health. She added she was not sure why they included seniors. She was only present to testify for the Department of Human Resources that it would require an actuary to do the study, and that cost would be approximately $20,000.
It was explained that Chairman Koivisto brought the bill back to committee because she felt additional information was needed before proceeding.
Beverly Kling-Hesse, Disability Rights Advocate with the Northern Nevada Center for Independent Living, urged the committee to include people with disabilities in the study. She stated she much preferred the original version of the bill, which did include the disabled. She urged passage of S.B. 167.
Paul Gowins, representing the Disability Forum, felt that questions to the department staff were pertinent, and he wanted to address some of those issues. The disability community approached the Governor’s Office last September and asked him to look at prescription drug coverage for people with disabilities. Much like the seniors, the disabled were on fixed incomes, did not qualify for Medicaid, and had Medicare with no drug coverage for years. There were many people in that situation for which his group advocated. The Governor decided he would consider that and hence the bill was brought forward. Mr. Gowins added the bill had been watered down, and although Mr. Gowins did not understand the cost involved in the actuarial study, originally the testimony seemed to indicate it would be costly to provide the disability groups with any type of coverage. As he understood the process, the department would consider it, and the costs would be determined so they could come before the committee with that information. Mr. Gowins noted the bill did not say the department needed to go outside to obtain that information. He felt some information could be obtained inside the department. His concern was that coverage for the disabled be considered, and he hoped that would be the case with S.B. 167.
Assemblywoman Leslie stated the issue was confusing. If it was unknown how much money would be available, how could an actuarial study be done? Mr. Gowins responded that his concern for the disabled community was that they wanted to be included in whatever program was developed. There was a great deal of conversation about the best vehicle, but time after time they ended up as they were now: without coverage and living on a very limited income. The original intent from the community was to get someone to investigate to see what was needed and to estimate the cost. What was transpiring at the meeting did not meet that intent. The information needed to be brought forth so that when the disabled community came to the table, there would not be a lot of bantering about not knowing how many would be covered and what the cost would be. Ms. Leslie said the population needed to be identified, their needs assessed, estimates of costs, and how that could be rolled into an existing program. Mr. Gowins felt it was an opportunity to implement good policy for the citizens with disabilities. Ms. Leslie suggested perhaps the need was for an actuarial study on the disability community only.
Vice Chairman McClain commented that one program had already been set up for Senior Rx, and she hoped an actuarial study had been done for that program. It seemed redundant to include in that actuarial study projections of the cost of the program if limited to senior citizens, because that was the current situation.
Assemblywoman Parnell referenced the reprint of S.B. 167 which did include the disabled; however, she was unsure about the wording on page 2 of the bill where it said, “a senior citizen who was also a person with a disability may if otherwise qualified for.” The disabled population was one about which she was concerned if they did not already qualify for a program. Therefore, that population became more specific when one looked outside the current box, and that was an area she would like to have addressed, as well.
Mr. Gowins explained that when an individual first became injured and qualified for Social Security Disability, they were placed on the list to become Medicare-eligible. That process took two years. Thus, they were not only without drug coverage, but also without any kind of medical coverage at all for two years. Accordingly, that was a very needy group, but it became less critical when coverage became effective after two years. Regardless, there was still no drug benefit.
Mr. Gowins acknowledged that population was not inexpensive. Some cost estimates presented at the last hearing on the matter revealed a 20 percent cost increase in the disability community. Mr. Gowins reiterated his hope the committee would do whatever it could to assist the disability community in obtaining drug benefits.
Bobbie Gang, on behalf of the Nevada Women’s Lobby, said they supported the study and the original bill, which included the disabled community and Senior Rx. They felt that group of citizens needed to be covered for low-cost pharmaceuticals. They faced the same dilemma as anyone else who had a problem paying for expensive prescription drugs. Ms. Gang said that if there had already been an actuarial study done, those figures would become part of the report that would be made by the DHR. The report would reflect both scenarios, namely the expected expenditures without the disability community and with the disability community. The latter, she believed, would probably be a very small percentage compared to what was being considered for the Senior Rx. She urged support of the study.
Jon Sasser, Washoe Legal Services, voiced support for S.B. 167. He acknowledged there might have been an oversight in the last session of the legislature when the Senior Rx Program was designed. It was done toward the end of the session, and the disabled community was simply forgotten. Most of the disabled also relied on Medicare for their medical coverage and, like seniors, they had no prescription drug coverage. As such, their needs were exactly the same. That had been brought to the attention of the Task Force for a Healthy Nevada, the Interim Health Committee, and in discussions with the Governor’s Office, as reported by Mr. Gowins. When it was heard in the Senate, there was some concern expressed by witnesses for the senior community about whether there was enough money in the present program to cover both groups without harming the seniors already enrolled. Additionally, no one had actually determined what the cost would be. Therefore, the bill was reprinted to include that actuarial study and then make the change two years from now. Mr. Sasser strongly urged support for the measure.
Chairman Koivisto called for testimony from the Las Vegas audience.
Thelma Clark, a resident of Las Vegas, stated that line 5, page 2, defined the disabled as “person who is domiciled in the state and who has physical or mental impairment.” She said she had been working with some brain-injured clients, and they were in as much need as the physically impaired. Some of the brain-injured, however, were not mentally impaired, but some could not move from the waist down. She asked if the bill included those persons.
Chairman Koivisto said the definition went on to say that “a person who is domiciled in the state and who has physical or mental impairment that substantially limits one or more of the major life activities of the person.” Ms. Clark felt it was not specific enough, and therefore she could not support the bill.
Carla Sloan, representing the American Association of Retired Persons (AARP), stated her organization had over 247,000 members in Nevada and over 34 million members nationwide. Ms. Sloan said that S.B. 167, as amended, required the DHR to review the advisability of expanding the program to provide subsidies to senior citizens who purchased insurance coverage for prescription drugs and pharmaceutical services and to include persons with disabilities. AARP supported the study to understand the fiscal impact on the Fund for a Healthy Nevada in expansion of the program. She urged consideration of the expansion. She provided her written testimony (Exhibit C).
Assemblywoman Tiffany noted that Ms. King had testified that the Fund for a Healthy Nevada could provide the $20,000 for the audit. She asked if there was explicit authority for that coverage. Ms. King said statutorily there were two options: The first was the Fund for a Healthy Nevada could pay administrative costs of up to 2 percent and that could be viewed as part of those costs; however, she felt “we were very close on that.” The second option allowed for two 20 percent pools. One was controlled by the Task Force for the Fund for a Healthy Nevada, and the purpose of that pool was to fund projects that related to improving the health for children and persons with disabilities. The money could come out of either one of those depending upon how the Task Force for the Fund for a Healthy Nevada or the legislature determined the appropriateness.
In response, Assemblywoman Tiffany said if the bill was passed today, was it explicit within the bill that those funds could be available. Ms. King said there was no funding and if nothing was done by the legislature it would be necessary to either return to the Interim Finance Committee and to the Task Force for the Fund for a Healthy Nevada to find funding. Ms. Tiffany asked if it could be put into the current bill and then refer the bill, or do a Letter of Intent. Ms. King did not know. Ms. Tiffany said, even if the bill was passed, it was still not done. Ms. King said there was no funding mechanism for the DHR to get an actuary, unless it was put into the bill. She added that the Finance Committee and the Ways and Means Committee could close the budgets with that item. Ms. King also said she had based the $20,000 figure upon the actual bids that had come in for the Task Force for the Fund for a Healthy Nevada; however, it could be only $10,000.
Chairman Koivisto asked for witnesses in opposition, but there were none. She closed the hearing on S.B. 167 and announced it would be placed in a work session. She opened the hearing on S.B. 239.
Senate Bill 239: Makes various changes concerning provision of prescription drugs and pharmaceutical services for senior citizens. (BDR 40-1318)
Michael Hillerby, Deputy Chief of Staff, Governor’s Office, stated S.B. 239 and S.B. 539 were similar in many respects, but he would only address S.B. 239. He stated the measure made two very simple changes to the Senior Rx Program. Section 1, page 1, would make available more than one policy of health insurance coverage, which was currently done with the Blue and Silver plans. The language already set in the bill was that the state could arrange for policies of health insurance.
Page 2, subsection 3, stated a senior citizen described in subsection 2 who purchased the basic policy of health insurance was entitled to an annual grant. A change was proposed so those people in the lowest income categories (i.e., less than $12,700) would qualify for the state to pay 100 percent of their premium. Currently the subsidy was 90 percent. There were between 85 and 100 people who had applied and had been accepted into the program, but who said they did not have the money to pay even the subsidized portion of the premium. Mr. Hillerby noted there was also some language in the bill that the amount of the subsidy could not exceed the cost of the program.
Assemblywoman Leslie, referring to Section 1, asked if it was it sounded like clarifying language for something the state was already doing. Mr. Hillerby said that was the case. Line 4, Section 1, stated the state could provide “policies” and it simply clarified that there were two policies. He said that would be handled later as part of the hearing on S.B. 539. Ms. Leslie commented that she thought the state would say one policy was being dropped, which seemed an odd way to do things. Mr. Hillerby agreed. Ms. Leslie then referred to the second page of the bill, and Mr. Hillerby’s testimony that if those changes were made, 85 to 100 people would qualify for the program. Mr. Hillerby said a number of people had already qualified, but did not have the money to pay the small balance of the premium after the subsidy. He noted that 57 percent of applicants to date earned less than $12,700. The lowest two levels, up to $12,700 and $12,700 to $14,800, made up 71 percent of the approximately 2,000 applicants. Ms. Leslie wanted to clarify that the goal was to reach between 10,000 and 12,000 clients with Senior Rx. She explained 2,000 had applied, 227 were enrolled in the program, and with the changes proposed, there were 85 to 100 more people who would immediately be included if the state helped pay their premium. Mr. Hillerby confirmed that was correct.
Assemblywoman Gibbons asked Mr. Hillerby if he felt there needed to be any confidentiality clause in S.B. 239 to protect seniors, as had been done on other bills before the committee. Mr. Hillerby deferred to Ms. King. Ms. King stated the confidentiality was currently covered in the Senior Rx Program statutes. There was a section in the existing statutes that required the department to maintain confidentiality of any information provided by the senior. Mrs. Gibbons asked for the statute number to be provided to the committee.
Vice Chairman McClain asked about the process of how the premium was paid for those people currently enrolled. Ms. King responded that if the applicant was eligible for the 100 percent subsidy, it was paid directly by the department. The senior was only responsible for the copays and the deductible. If the senior was eligible for a small subsidy, the department paid the insurance company that percentage directly, and the senior paid the balance.
Assemblywoman Leslie asked if an actuary had looked at the numbers being discussed, and further, if the subsidy was increased as high as 100 percent, would that mean fewer seniors could be enrolled. Mr. Hillerby said that was correct. The higher the cost of the program to the state, the greater the impact on the number of people enrolled. Ms. Leslie asked again if an actuary had looked at the numbers. Mr. Hillerby did not know, but said the calculations were simple and based on the percentages of people that applied in each income category. Ms. Leslie assumed there was “plenty of room” since only 227 people had signed up.
Assemblywoman Parnell asked for an explanation of subsection 4(b) on page 2. Ms. King said there were two programs, the basic program and the enhanced program. Under S.B. 239, the senior still had the option of enrolling in either one; however, if they enrolled in the enhanced program, they would only get a subsidy calculated as though they had enrolled in the basic program. In other words, the maximum subsidy under the basic program was $74.76 per month, which was equal to 100 percent of the basic premium cost. The maximum subsidy in the enhanced program was $74.76 per month, so the senior would still be responsible for the balance of $23.55.
Assemblywoman Gibbons asked for an explanation of the differences between the basic and enhanced programs. Ms. King said the basic program was a “managed formulary.” Seniors were required to use a generic drug if an FDA approved generic was available. If there was only a brand name for that type of medication, there was a payment for that. For the generic drug, the copayment was $10, and for a brand name the payment would be the greater of $40 or 40 percent of the cost of the drug. If a person was required to take brand name drugs, the enhanced program would be better. Under that program, the copay was $10 for generic drug, $25 copay for preferred brands, and a $40 or 40 percent copay for nonpreferred drugs.
Mrs. Gibbons asked how seniors who could not take generic drugs were being protected. She wanted to make sure they were not penalized for their inability to take a certain generic drug. Ms. King said the program did not require a blanket generic substitution. The program only required a generic substitution when the FDA had determined that the generic drug had the same bio-equivalency as the brand drug. There were controls set by pharmacies and therapeutics committees that consisted of doctors and pharmacists knowledgeable about the impact of drugs. Mrs. Gibbons asked if a senior was under the basic plan and they had to take the name brand drug, would they have to pay the same amount. Ms. King answered if it was not a preferred brand under the basic plan, they would receive a slight discount. Even if it was not a covered drug under the plan, the insurance company did allow the senior access to their corporate-wide discount, but it was not a significant savings. She added that if a senior could not take generic drugs, it would be more beneficial for them to be on the enhanced plan, because then, if the drug they wanted was a preferred brand, their copay was $25.
Chairman Koivisto asked how much more would it cost them to be in that plan. Ms. King responded the unsubsidized cost, before the state subsidy, was $98.31 per member per month for the enhanced plan. For the basic plan it was $74.76. The cost was about $25 more per month to get the greater variety of drug coverage.
Vice Chairman McClain was interested in the committee that set up the formulary. She asked how often the prices changed and how often the premiums and copays had to be adjusted. Ms. King said the difference could be significant depending upon what drugs the senior was taking. The $10 and $25 copay for the enhanced plan were contract items, and those would stay in place through the contract period, currently a one-year period and renewable for two more years. The current contract expired on December 31. Ms. McClain asked if it could significantly change then. Ms. King said that was possible, but if the contractor was going to significantly change the copays, there would be no reason for the state to continue to contract with that contractor. Ms. McClain said she understood it had been difficult finding that contractor in the first place. In essence, she was concerned about short-term contracts and the parameters of the programs that could fluctuate on a yearly basis. She felt that a senior did not have a real grasp on what they could expect from the programs.
Mr. Hillerby stated that Ms. McClain’s questions could be more adequately addressed at the hearing on S.B. 539. He did point out, however, that any insurance product, upon renewal, was subject to price negotiations and was likely to change. In time, with greater enrollment and more cost experience, the greater stability the future premiums would have.
Chairman Koivisto asked if S.B. 239 was to give DHR the flexibility to arrange for different kinds of prescription plans. Was the DHR already doing that and now coming forward for official authorization? Ms. King responded that the reason the changes made to page 1, lines 6 through 11, were to allow the bill drafter a reference point so the basic program could be defined. That had to happen before saying the subsidy would be equal to 100 percent of the premium of the basic program. The intent on lines 6 through 11 was to say that a basic program would be offered, others might be offered, and it began the definition of the subsidy. Mrs. Koivisto asked what would prevent the insurer from increasing the amount of the premium. Mr. Hillerby reiterated his earlier statement that the insurer could always increase the premium at the end of the contract year; however, at that time there would be some cost experience and the state would negotiate to see about continuing with that contractor or look elsewhere.
Assemblywoman Gibbons interjected the NRS statute she asked about earlier was NRS 439.690.
Assemblywoman Barbara Buckley, District 8, said in the last session she was honored to draft the bill to provide for allocation of the tobacco funds. She was pleased with the choices the state made to allocate money, which included scholarships, prescription drugs, programs to keep seniors living independently in the community, health care programs to help disabled children, as well as programs to stop the use of tobacco. She supported the goal of S.B. 239 to ensure that senior citizens, especially low-income seniors, had affordable drug coverage. It was well known that low-income seniors were often choosing between rent, food, and prescription drugs. The best drug program would be affordable, would cover the drugs seniors needed, and be simple to use and to understand. S.B. 239 was getting closer to the goal of affordability; however, Mrs. Buckley felt the state could do better in designing a prescription program for seniors. She illustrated her point by referring to the provision that the subsidy must be calculated as if the senior citizen had purchased the basic policy. She understood the next bill might do away with the basic policy, so perhaps that language was no longer needed. She felt that was the type of provision to be avoided in designing drug coverage for seniors. A senior would not be able to understand that a subsidy was calculated under the $75 rate even though they were buying a $98 insurance policy. She believed A.B. 545, already heard by the committee, covered more drugs, more people, in a simpler way, and was the better way to go.
In closing, Assemblywoman Buckley applauded the Governor’s Office for bringing forward the concepts that drugs should be more affordable and she looked forward to continuing to work with the Governor’s Office on the shared goals of affordable drug coverage for seniors.
Dr. John Ellerton, a member of the Task Force for the Fund for a Healthy Nevada, said he had the honor of participating in that process to define a very necessary health care benefit, the Senior Rx Plan. He said that one of the problems with the current plan was it was very confusing and difficult to figure out. The more confusing it was, the less valuable it was to seniors. Regarding the question about raising the premium, Dr. Ellerton said that could happen, and, for that reason, he supported A.B. 545. The bill eliminated the insurance company and the uncertainty that came with having the insurance industry involved in a plan. Dr. Ellerton pointed out that type of plan had been testified against in Congress. What was needed was a comprehensive program, as specified in A.B. 545. It was clear that problems existed with the current plan, when out of thousands of seniors who were eligible, only 200 had enrolled.
Assemblywoman Vivian Freeman, District 24, stated she was co-chair of the Interim Task Force for the Fund for a Healthy Nevada with Ms. Buckley, and they had spent a great deal of time in hearings at both ends of the state on the issue. She echoed Ms. Buckley’s appreciation to the Governor’s Office for its participation. The basic issue was providing a program that helped the most seniors for the lowest cost. For low-income seniors, weeding through the process was difficult enough; however, going to a pharmacy and trying to figure out what they qualified for and what they owed compounded the problem. That should not be a partisan issue, nor an issue based on the source of the proposal. The amount of dollars was finite. Tobacco funds were precious dollars, and everyone should do the right thing.
Mrs. Freeman said she had watched the health insurance issue for many years and how it factored into the delivery of health care. For too many years, the dollars had gone to the insurance industry rather than to those who actually needed the service and to those who provided it. When one “bought in” to using the insurance model, it had to be understood a certain amount of those dollars would go for administration. That had occurred with the public employees issue last session when the state wrote out a check for $26 million to make up the difference in health care insurance for public employees. Mrs. Freeman cautioned against thinking the issue was “child’s play”; it was not something that could be fixed “next month.” The tobacco money might not last, and the state must not promise the seniors something it could not deliver. Mrs. Freeman offered to help in whatever way she was needed so the tobacco dollars could be used to the best advantage. She believed that during the month remaining in the session, it should be worked out.
Assemblywoman Tiffany said she was just as concerned about self-insured programs and government-paid programs as she was about “beating up the insurance companies.” She found the state’s self-insured plan under which she was covered to be totally confusing. The teacher’s union benefits and the police department’s program were both self-funded, and it appeared that self-insured programs had no more reliability than an insurance-based program. Mrs. Freeman said she did not dispute that, but she felt it depended upon the commitment of those who made those decisions at the state level. Moreover, if the right people were hired in the administration, individuals who were committed and knew what they were doing, there was no reason why it could not be done right. She felt Nevada might be a model for the rest of the nation. Ms. Buckley commented that a good plan design was essential, specifically to make it as easy to use as possible. One of the advantages of A.B. 545 was that the payments were $10 and $25; but, when percentages were used, and with the “Blue” plan and “Silver” plan designations, it became very confusing for seniors. It was more expensive to administer a confusing program that had so many rules and exceptions that would require a great deal of explanation and telephone calls.
Assemblywoman Leslie asked Dr. Ellerton about the formulary, an issue of concern to seniors in her district. Some needed drugs, such as Coumadin and Vioxx that were not on the formulary. She noted with interest that a pamphlet indicated contraceptives were on the formulary; which was ironic because in some other insurance plans it was a fight to get contraceptives included. She wanted to make sure that whatever plan was chosen, the formulary met the needs of seniors. Dr. Ellerton said he had the formulary with him, and it was enormous; however, while it appeared to be comprehensive for seniors, it was not. He noted there were generic “Coumadins,” but physicians would not prescribe it as it was not biologically equivalent. Brand name Coumadin was color-coded as to dose, which was critical, and the generic was white. Many internists with whom he had spoken were very nervous that brand name Coumadin would become an expensive drug, because they would not prescribe generic “Coumadin.” Most physicians would not prescribe generic “Lanoxin,” because there had been several incidents published in the last 25 years in which the generic forms of that drug were found to be vastly inferior. Dr. Ellerton also mentioned that generic drug companies were not above trying to sabotage each other, and there had been famous cases of that.
Dr. Ellerton said he had been through the formulary a number of times and could not identify all the drugs that seniors commonly took; however, most were brand name only. There were documented reasons to take them, and he thought it was a reflection of a formulary, not inspired by seniors, but by the insurance company attempting to minimize their risk and not maximize the benefit. He said he had polled the people in his practice, half or more being seniors, and he could not find a plan with a copayment that was a percentage of the drug. With PacifiCare, Sierra Health, Aetna, US Healthcare, and others, nongeneric drugs had a fixed copay. Taking the total amount that was available every year could decrease more rapidly buying nongeneric drugs. He concluded by saying none of his patients had a percentage-based copay, adding that a percentage system made budgeting more difficult.
Assemblywoman Leslie said that whatever plan was selected, the state needed to insist on a formulary that addressed the needs of seniors. She asked if there was such a formulary. Dr. Ellerton was not sure if it was for seniors, but in A.B. 545 it suggested the Medicaid formulary. In his view, it was not a “bad” formulary, and it was adapted for use by the physicians in the state, where there was a higher percentage of seniors than in other states. Dr. Ellerton asked long ago, when that first came up in the Task Force, if there was going to be any local input into the formulary. He had anticipated problems might arise, and there was no recourse nor local input.
Ms. Tiffany noted that Dr. Ellerton was an oncologist, and, as such, his cancer patients might use drugs that were unique and more expensive than prescribed by an internist. Dr. Ellerton said that was true; however, his current testimony was not based on his experience with cancer drugs, but with the results of his survey of ten general internists in Las Vegas in which he asked them for a list of the five or six most common drugs they prescribed. Specifically, he had asked them to put those drugs in combinations of prescriptions they might give post-menopausal women with osteoporosis or elderly men with prostate problems. Ms. Tiffany said she knew of no physician who ever thought a formulary was perfect or could agree with each other on what was an ideal formulary. She asked if Dr. Ellerton thought he could design a formulary that would meet the needs and copay requirements, and put it out for bid by insurance companies. Dr. Ellerton responded that he felt there would be agreement among physicians on many of the common drugs; however, he was not convinced that having an insurance product was the solution. Ms. Tiffany commented the witness simply did not like insurance plans.
Dr. Ellerton countered by saying that was not the case. The insurance industry had testified in Congress against the very plan under discussion. They did not think it would work, the risk was spread over a very narrow window, and it was a prescription-only plan. He was neither for nor against insurance companies; however, as an insurance product, it appeared not to be viable. That was a concern expressed by every single member of the Task Force when it was discussed on numerous occasions. Returning to the question of designing a formulary, Dr. Ellerton said he thought it could be done. He had formularies in companies that were not entirely satisfactory, but under specific circumstances, treatment could be changed if a benefit could be shown, for example, keeping an individual out of the hospital.
Chairman Koivisto closed the hearing on S.B. 239 and opened the hearing on S.B. 539.
Senate Bill 539: Makes various changes concerning fund for a healthy Nevada. (BDR 40-536)
Michael Hillerby, representing the Governor’s Office, stated the prior bill, S.B. 239, was an important piece of legislation. Regardless of what decision the committee made with regard to the changes in S.B. 539, the Senior Rx Program operational and would continue. The changes in S.B. 239 could help a group of people in need of assistance.
Regarding S.B. 539, Mr. Hillerby hoped the groundwork to prepare the bill and the kind of changes being discussed, would address many of the concerns aired in the committee. The goal was clear, namely to provide a plan that was affordable and met the needs of clients. The object was to provide a subsidized prescription program for low-income seniors and provide a high level of benefits with a $5,000 cap for those who most needed catastrophic prescription drug coverage. He emphasized there was an important aspect of Senior Rx that needed to be understood: the premiums were subsidized for those in the lowest income categories. Any senior citizen in Nevada could apply for that insurance if they met certain criteria.
Mr. Hillerby said widely published studies indicated the average senior spent about $1,594 per year to cover an average of 30 prescriptions. In researching states that had prescription drug programs in place for some time, staff found three; Connecticut, New Jersey, and Pennsylvania, each having a state-run plan. The cost per participant in Connecticut was $1,358 per year for an annual average of 22 prescriptions. In New Jersey, the average cost was $1,313 for an average of 30 prescriptions. In Pennsylvania, the cost was $1,350 for an annual average of 40 prescriptions. The average of those three plans was $1,340 per enrollee for 31 prescriptions per year. Mr. Hillerby provided a handout (Exhibit D).
Continuing, Mr. Hillerby explained Nevada Medicaid spending on those over 65 under that plan was about $1,425 a year. The premium cost of offering a Nevada senior a $5,000 maximum annual benefit was currently $1,180 a year, a reasonable premium compared to similar programs; however, Mr. Hillerby said those numbers could not be compared directly across the board. He had tried to do some “weighting” based on the amount of the copay for each prescription program versus the copay on the Senior Rx program. Generally that was a fair comparison. The average prescription spending for all seniors was $1,594, the average cost per enrollee in three of the larger state programs was $1,340, Medicaid spending was approximately $1,425, and the premium cost for providing Senior Rx was $1,180.
Mr. Hillerby thanked committee members, the senior community, his own staff, and others who participated as the Senior Rx Program was developed. He understood there were aspects of the plan that were confusing, and there were recognized areas for improvement. He had tried to take those suggestions and work with them. For example, the formulary was currently being negotiated to cover more needed drugs and make it easier to understand. While a dollar or percentage copay on formularies was not unusual, it might lead to some confusion on the part of the seniors. Other changes under consideration were covering more of the popularly-used drugs under the $25 preferred copay provision, implementing a mechanism for those drugs determined to be medically necessary to be covered at $25, and determining the $40/40 percent option could be left in or eliminated completely. All those items figured in the cost of the plan. As with any other kind of plan, the more items factored into the formulary, the higher the cost.
According to Mr. Hillerby, the changes proposed to the plan would include:
Mr. Hillerby explained why the Governor had chosen an insurance model when he first presented the plan to the legislature last session, and why he continued to believe it was still the appropriate way to go. The reasons were the issues of risk and of limited funds. Funding for Senior Rx was limited to a set percentage of the tobacco settlement, and that was the money available for the program. If at some point in the future the number of applications overwhelmed the amount of money, then it would be a policy question for the committee, working with the Governor and the Governor’s Office, to determine what other financial resources might be available. Under current law, there was a limited amount of funding derived as a percentage of the tobacco settlement. Another reason for going with an insurance company was an insurer had significant resources, experience, expertise, and economies of scale that the state did not. He recalled Assemblywoman Freeman had mentioned that there would always be a percentage of dollars that went to administration. If a state-run program was chosen, that percentage would also go to the state for administration. How were those dollars better spent? Mr. Hillerby felt there was a sound argument to be made that insurers with a large pool of people, with national exposure and experience, and a significant track record had an ability to run that administration more effectively. Going with an insurance model also limited the size, complexity, and the cost of a state bureaucracy.
Under the plan proposed in S.B. 539, with the money available in the tobacco fund the coming year plus money carried forward that was unused in the current year, 7,000 seniors could be covered with a maximum potential benefit of $35 million and at a cost to the state of $7.5 million. The state would bear none of the risk of the other $27.5 million being offered in benefits.
Mr. Hillerby said Senior Rx was a very good investment for the seniors. It provided affordable prescription drug coverage, and $35 million in guaranteed benefits with $7.5 million cost.
Chairman Koivisto asked the source for the other state figures quoted; Connecticut, New Jersey, and Pennsylvania. Mr. Hillerby said they came from a National Conference of State Legislatures report on prescription drug use. He said he would provide the title and Web site after the meeting. He noted those states’ plans were widely modeled, particularly Pennsylvania’s which was considered a benchmark for such plans. Also, he stated that $1,180 premium for the Senior Rx would increase by $100 if S.B. 539 was approved, and the revisions to the plan (e.g., the $100 deductible payment) went into effect. Nevertheless, the increased premium of $1,280 was still below the other states’ premiums.
Vice Chairman McClain asked if the three states had insurance-based plans. Mr. Hillerby said they did not. They were state-run plans.
Mr. Hillerby then highlighted the key points of the first reprint of the bill:
Assemblywoman Gibbons asked how the eight percent for administrative expense was derived and what other grants were available that could be used for prescription drugs. Mr. Hillerby said the eight percent dealt specifically with the Division of Aging Services grants and did not involve the Senior Rx or prescription drug program; it was a separate part of the tobacco fund settlement. Ms. King could provide details.
Mr. Hillerby continued with the bill reprint explanation:
Chairman Koivisto asked why it was necessary to raise administrative costs from two percent to five percent. Would that increase not effectively eliminate coverage for some seniors? Mr. Hillerby said there seemed to be some confusion last session whether the 2 percent was used to administer the various programs of the fund or to administer the costs of the fund itself; investing, tracking, and monitoring that money from the state treasurer’s office. The Task Force had allocated money to the Department of Human Resources to help staff both the grants programs in the Division of Aging Services and to Senior Rx. He thought Ms. King would be able to comment on the source of those various funds from within the divisions across the larger Task Force Funds.
Assemblywoman Gibbons voiced concern that the language conflicted with NRS 439.605 under the Trust for Public Health, which stated: “Actual costs incurred by the health division for providing administrative assistance to the board but in no event may more than two percent of the money in the fund be used for administrative expenses or other indirect costs.” She wanted to know if that was happening in other areas. Ms. King responded that all the money that went into the Trust Fund for Public Health stayed there, and the Nevada Health Division was only able to expend the interest from that; however, their administrative limitation was based upon the principal balance of that trust fund. Therefore, their two percent limitation on the principal balance, as opposed to the interest, was different than what was being discussed currently for the limitation. The total administrative cost for the Division of Aging Services, for the grants portion of the Task Force for a Healthy Nevada and for Senior Rx, was limited to two percent of the amount of funds deposited into the Fund for a Healthy Nevada, and that was allocated out of the various cost pools. It was not necessarily that each cost pool paid two percent, because there were some shared costs.
Mr. Hillerby returned to his explanation of the bill reprint:
Chairman Koivisto asked for identification of the money source to pay for those extra subsidies. Mr. Hillerby said the money would come from the existing money set aside for the Senior Rx Program. The more expenses that were paid, the lower the senior’s cost. The money expended from the fund had an impact on the number of people who could be enrolled.
Assemblywoman Leslie thought that in Senior Rx there was an insurance company and two PBMs (pharmacy benefit manager). She asked why there were three middlemen, what did they do, what did they charge, what was the profit margin, and who received the rebates from the pharmaceutical companies. She assumed the administration and the PBMs received that rebate. She reminded Mr. Hillerby of his earlier statement that an average person would spend almost $1,600 on prescription drugs, and yet the premium was $1,200. As such, a $400 difference before copays or percentages was why the average person was not signing up. They had to feel they would rather keep their money and take a chance, rather than give it to an insurance company. Therefore, the people who would sign up would be people who knew they would have the higher drug costs. The insurance company did not make money from those people, so they had to be making money off the administration and the rebates to ensure the profit margin. Mr. Hillerby wanted to come back to that issue at a later time.
Mr. Hillerby returned to the final sections of the bill:
The people who would be attracted to the plan fit into one of three categories: They were either not insured now and would move into the plan immediately with its “first dollar” coverage. The second category included those who were insured by some form of supplemental Medigap that probably provided an average of $1,000 to $1,500 a year benefit. The final group included those whose drug usage was substantially higher and for whom the plan held a benefit.
Assemblywoman Gibbons asked if the Senior Rx was the best plan. Mr. Hillerby said it was. The state could take the money it had and buy a guaranteed benefit that covered a large number of people and did not subject the state to an undue amount of risk. There was clearly a benefit to the plan, he said, which was why the Governor continued to support it.
Assemblywoman Leslie asked Mr. Hillerby to provide the committee with the written assumptions for the new plan, specifically how many people it would cover, in what income groups, how much of the money would go to pay the deductibles, and if an actuary would do a risk assessment. Mr. Hillerby said he would provide that information to her. He had used the basic information available on the existing Senior Rx Plan and applied a fairly simple set of calculations. He based his projections on over 2,000 applications, including people who were in the different income levels, and then estimated the number of people that could be covered. Ms. Leslie said that was a different plan, and she assumed he would have had an actuary or a financial person calculate the new risk. Mr. Hillerby said, in talking with the contractor, they had reviewed that; however, he reiterated the calculations were simple. The amount of the subsidy had gone up, but the cost of the plan was known, and it was a simple matter to fill in the numbers. Ms. Leslie still wanted to see it in writing.
Debbra King, Department of Human Resources, again came forward to answer Ms. Leslie about the number of administrative levels or functions in the plan. The department had the insurer and the TPA (third party administrator) who was responsible for setting up the program and supervising the PBM (pharmacy benefits manager); thus, there were three entities involved in the program. It was similar to three layers of administration and similar to the way the state worked: the Legislative Branch, the Budget Division, and the Department of Human Resources, and there was scrutiny of their actions. The rebate was taken into consideration by the insurer in developing the amount of monthly premium. Ms. King explained the basic concept: “You can pay ‘x’ dollars and get the rebates back into the plan, or you can pay ‘y’ dollars and not get the rebates back, and generally those would offset themselves on an ongoing basis.”
Assemblywoman Leslie asked what percentage of the money was paid for administrative costs and the level of profit margin. Ms. King did not have the percentage of money paid for administrative costs. The profit margin, with only 242 enrolled currently, was a negative 40 percent. The insurance company was as anxious as the state to get more people enrolled in the program. Ms. Leslie felt the contract would dictate an administrative fee. Ms. King said it did not specify an administrative fee; however, it specified that the state would pay either $74.76 or $98.31 per member per month. The insurance company would provide certain coverage. Ms. Leslie assumed, then, that the administrative cost was included in the premium.
Assemblywoman Smith returned to Mr. Hillerby’s testimony on the previous bill, where he stated he had 2,000 applications, 227 enrollments, and he anticipated adding another 85 to 100 with the additional premium subsidy. She asked for an explanation of the gap, specifically, the majority of those who had applied were not covered. Mr. Hillerby said one of the most important parts of redesigning the plan and offering just one plan was that the application process was simplified. The senior filled out some information about their household income and sent it to the DHR. They made a determination about eligibility, then mailed the person a document that described the amount of subsidy to which they were entitled. With the enrollment information from the insurance company, the senior estimated the money he could afford to pay per month and then decided which of the two plans he preferred. By offering only one benefit, the application and enrollment could be done in one step, which would be faster and less confusing. The turnaround should be 21 days or less, Mr. Hillerby added. On the first day of the following month, they would have their card from the insurer and be able to use it.
Regarding the “gap” cited by Ms. Leslie, Mr. Hillerby said there had been a lot of publicity about potential changes. The Governor had spoken publicly a number of times about wanting to increase the amount of premium. People were waiting to see what kinds of changes would take place. Also there had been publicity about changes at the federal level. The number of applications received as of April 30 was 1,826, and enrollment as of May 1 was 242.
Assemblywoman Smith asked Mr. Hillerby to explain the word “applied.” Was he referring to the first step, and was the “gap” the number of people who had not followed up with the second step? Mr. Hillerby deferred to Ms. King who said, because of the process, some of those people had elected not to purchase the insurance. Their estimate was that 725 of the “gap” were people who had definitely not chosen to sign up for the insurance at the present time. The remainder were people who were in some phase of the enrollment process. They had sent in their first application, and the information was sent back to them for their review or perhaps to call the insurance company to ask questions.
Mrs. Smith said there was also a gap between 2,000 and 7,000 as the ultimate goal. Mr. Hillerby said he believed they could safely offer the coverage to approximately 7,000 seniors. Mrs. Smith referred to Mr. Hillerby’s discussion about improvements to the plan and his remark about “medically necessary” prescription drugs and asked him to explain. Mr. Hillerby said he had already talked to the contractor to get costs to include certain medications in the existing formulary so they could be covered at the $25 level. He would continue to try to find ways to make that work, including ways to eliminate the $40/40 percent tier entirely. That could include adding a number of other drugs into the formulary and telling people if the drug they needed was not on the formulary, they could buy it at a discounted cost, but not the $40 or 40 percent. Also it could include a determination of medical necessity to get out of the third tier and into the $25 copay. All of those things were based upon getting solid information from the provider and working with members of the committee and interested constituents about what kinds of improvements they felt should be made. Regardless of the type of plan offered, the more drugs included in the formulary, the higher the cost. It was a trade-off.
Mrs. Smith asked in the “medically necessary” discussion if he was talking about verifying the medical necessity on every prescription. Mr. Hillerby responded confirmation would be sought only on those not included in the formulary.
Chairman Koivisto addressed the audience in Las Vegas and called for testimony, noting time was limited.
Ruth Mills, a resident of Las Vegas and the Silver Representative for Congressional District 1, commenced testimony. She had been a member of the National Silver-Haired Congress for the past four years. The Silver-Haired Congress was a senior mirror of the United States Congress with Silver Senators and Silver Representatives from different states who met annually to prioritize issues and to present resolutions to Congress on issues important to seniors. Prescription drug coverage was number three in priority for her organization. The resolution called for Congress to approve a comprehensive prescription drug benefit under Medicare to assure that equal access was attainable. Ms. Mills provided her written testimony (Exhibit E) and urged the committee to consider A.B. 545 as an alternative to S.B. 239 and S.B. 539.
Gilda Haus, a resident of Las Vegas and representing the Nevada Women’s Lobby, said that seniors faced with the predicament of rising prescription and other costs saw their ability to afford necessary pharmaceuticals slipping farther away. She was pleased the Governor had pioneered the Senior Rx Program and that in S.B. 539 he was making the premiums more affordable for low-income seniors. The Nevada Women’s Lobby had not opposed either S.B. 239 or S.B. 539; however, they did support the passage of A.B. 545, known as “Senior Options,” which was currently being considered in the Senate. Ms. Haus said without the insurance company involvement, over 8,000 seniors could be covered. There were at least that many eligible in Nevada, and the program would save $800,000 a month. The program would use the Medicaid formulary, and no drugs would be excluded. Some of the retail pharmacy copayments and most of the mail order copayments could be reduced. The main advantage of A.B. 545 was it served twice as many seniors for the same amount of money, with no premium payments and lower copayments for both preferred and nonpreferred brands.
Ms. Haus concluded that the Senior Rx Program was a positive step, but the Nevada Women’s Lobby recommended that the state of Nevada also offer the Senior Options program as outlined in A.B. 545.
Mary Albers, Las Vegas, President of the League of Women Voters of Nevada, spoke in opposition to S.B. 239 and S.B. 539. The intent of those bills was worthy, but there was an alternative, A.B. 545, which Ms. Albers supported for all the same reasons as expressed by the previous speaker.
Dalton Wellman, a resident of Las Vegas, an active participant in senior citizen organizations, represented the Alliance for Retired Americans. He read from an article that explained states were not waiting for the federal government to act, but rather were addressing the problem of providing prescription drug coverage for low-income seniors. Mr. Wellman said, of the bills offered, he favored A.B. 545.
Vice Chairman McClain directed her comments to Ms. King and Mr. Hillerby. She stated the three entities they were dealing with, the insurance company and the two PBMs, were not state agencies; each was a profit center. If they were already “in the hole” at 40 percent half way through the year, how many more people would have to be enrolled in the program to keep the company from dropping the program at the end of the year?
Ms. King responded that the insurance company’s goal was to have 5,000 people in the program. That number was determined because it represented a favorable “spread of risk”; the more people in the program, the varying degrees of drug usage. Presently, those in the program were all high users. The insurance company believed that one of the ways they were able to control the costs for seniors was through the utilization review. Ms. King explained the department sent to the PBM sample profiles for ten homemaker-clients. That included the list of drugs they used, and it asked what the senior would be paying under either program. The PBM came back on three of the ten people, or 30 percent, and identified some significant drug interaction risks; multiple diuretics, multiple drugs that suppressed respiratory function, and so on. That was how the insurance company believed they would make money in the future from the product, through utilization control.
Ms. McClain asked if they had given a timeframe for the estimated number of people to be enrolled. Mr. Hillerby said they were not happy about losing money but with so few enrollees it was not that bad, and the company was clearly committed to making the program work. The company realized it was on the ground floor of an interesting experiment. Nevada was unique in offering that kind of stand-alone, private prescription drug benefit and using that as a method to address the prescription drug needs of particularly low-income seniors. The sooner more clients were enrolled to spread the risk and get a reasonable size population from an actuarial point of view, the better for everyone involved.
Ms. McClain was concerned the program would not reach the neediest people soon enough to make it viable. Consequently, many people would be depending on the program, and it would be defunct because the insurance company said “forget it.” She believed it was the state’s responsibility and agreed that A.B. 545 was a better, simpler plan, it was state-run, and she felt the seniors would get more benefit from it.
Mr. Hillerby felt strongly that an insurance model did make sense. The notion of leaving the state subjected to a $30 million unfunded risk was serious. With the changes being proposed and the decision to make those new laws effective upon passage and approval, people could begin to be helped immediately. The program would be paying the full premium for 71 percent of the people who had applied to date.
Assemblywoman Parnell was concerned about an earlier explanation. She asked Mr. Hillerby if he felt it was the paperwork or the process that was responsible for having an enrollment of only 242 people. Mr. Hillerby said that was one of the issues. The bill to create Senior Rx was passed unanimously out of both houses of the legislature in 1999. There had been some question and debate about funding and some attendant publicity, coupled with the paperwork, all of which contributed to slowing down the enrollment. Ms. Parnell said that her concern continued to be if it was more of a procedural problem getting through the application process, the plan would have to be looked at as well, if the expectation was to climb from 242 to 5,000 in a six-month period. She felt it was logistically impossible. Moreover, she felt with that small number of enrollees, the reason was more likely to lie with the plan rather than the process. Mr. Hillerby said that was exactly what had been done in S.B. 539; choosing the premium plan that was simpler, with a higher level of benefits, and had an increased subsidy that made it more affordable to more people to get the better plan. Once that plan was marketed, he felt clients would enroll quickly. He added that all those people did not have to be enrolled by December 31; if enrollments were moving along and applications were coming in, a projection could be made for six or nine months, up to a year. He reiterated his earlier statement that a great deal was not known about that senior population.
Chairman Koivisto asked how many seniors had input in drafting the plan. Mr. Hillerby said the bill came out of discussions with the committee, with the senior citizens who were filling out the applications and from volunteer organizations.
Assemblywoman Berman asked about the “break-even” point, what was the goal for the number of new enrollees per month, and the means that would be used to achieve that goal. Ms. King responded that, based upon the funds available, certain projections were made, and she would provide that information to Ms. Berman. Ms. Berman pressed for an answer to the “break-even” figure. Mr. Hillerby said the insurer would like to see a population of roughly 5,000. He then digressed to explain that insurance products varied widely, depending upon the type of insurance and the level of benefits offered. With health insurance, that could approach 20,000 to 25,000 people to make a “really going concern” of a group. The prescription plan would be a more focused type of program with a narrow scope.
Assemblywoman Smith returned to the question of the deductible and Mr. Hillerby’s offer to provide some information. She wondered if any consideration was given to improving the benefit elsewhere rather than eliminating the deductible. Most people were used to having deductibles, and with the prices of prescriptions, that probably would involve a couple of prescriptions versus using that money elsewhere. Mr. Hillerby noted the deductible served a very important purpose in the insurance industry, namely limiting first dollar coverage. It would help people in their decision-making process.
Assemblywoman Tiffany stated it appeared the plan met Ms. Buckley’s goal of being affordable, covered the types of drugs necessary, was simple to use, and could be started quickly. She asked Mr. Hillerby to contrast his plan with a non-insurance-based plan, recalling that he said earlier that risk and limited funds were the bottom line importance for an insurance-based program. In response, Mr. Hillerby explained, for the risk part, the state did not have to pick up a $35 million liability; A.B. 535 put the state at risk for $35 million. Secondly, with the amount of money budgeted, 7,000 seniors could be served under S.B. 539. How would that compare to the funds and number served under A.B. 535?
Mr. Hillerby said that by using an insurance model and covering 7,000 clients, a total maximum benefit of $5,000 per year would equate to $35 million. That cost the state $7.5 million to provide. That $27.5 million potential risk was born by the insurer; they did not think that would be met or they would not have written the contract. Without an insurance model, that $27.5 million was the state’s potential risk. That money would be almost impossible to find, and that was the reason the bill’s proponents felt the model made very good sense. It was an affordable premium for the level of benefit provided. Someone else was taking on the vast majority of the administrative and bureaucratic work for running that kind of system, and that risk was insured by someone other than the state.
Ms. Tiffany said the “bottom line difference is the $27.5 million,” because the same amount of people would be served, the benefits would be the same, and it would still be the same affordability. Mr. Hillerby said that, as the negotiations continued on the contents of the final package, it would be very similar to the seniors signing up for the plan. The proponents were continuing to refine the package and would work with the committee and others to try to make those kinds of changes. The question was the risk of $27.5 million, or $5,000 multiplied by the number of people projected to sign up, minus the amount of money available.
Assemblywoman Leslie felt that was a very specious argument. There were so many holes in that argument, she added, but time would not permit exploring them. Nevertheless, there were definite ways to minimize the risk under A.B. 545, and obviously, people were not all going to max out at $5,000 or the insurance company would go bankrupt.
Assemblywoman Angle asked that with the current plan, had not the state escaped a risk already, by having the insurance company taking the loss of 40 percent. Mr. Hillerby replied “yes, to a certain extent;” however, based on 242 enrollees, it was hard to make realistic projections on the actual risk and potential savings. Mrs. Angle then asked about coverage, cited by Ms. Leslie, in which seniors would not want to be enrolled. Her question was: “Legislatively, have we exempted those plans from that, or did the insurers have to cover the things that were mandated legislatively.” Mr. Hillerby said it was a very specific policy that only required that because it was a voluntary policy. It did not fall under the purview of the general health insurance policies and the variety of mandated benefits that had been put on those policies. Mrs. Angle said in that case, contraceptives could be eliminated. Mr. Hillerby said that could be negotiated in the formulary. He added that no one assumed every single person who signed on to the plan would max out at $5,000, but one had to start there and work down. There were a variety of cost-containment issues, and it was a subject for a wonderful debate.
Martha Spenny, representing the Council for Affordable Health Insurance (CAHI), stated CAHI was an association of health insurance companies and related industries that believed in free market solutions to health insurance needs. She supported a private sector/public sector solution to provide prescription drug coverage to seniors. S.B. 239 and S.B. 539, in conjunction with Senior Rx did that. She said an established company with expertise was running the program, and incentive to manage the Senior Rx Program well was provided by the company’s assumption of risk beyond the fixed appropriation. Additionally, another CAHI principle was that insurance premiums must be actuarially sound and represent the risk being taken. Not all people could afford those premiums, especially those on fixed incomes. Income-based subsidies were a sound way of providing socially responsible programs using broad-based funding, as found in the program enhanced by S.B. 239 and S.B. 539. The additional guidelines in the original bill for seniors over eligible income levels to apply for subsidy under hardship or special circumstances, allowed for movement in and out of the subsidy appropriately. She believed that S.B. 239 and S.B. 539 would enhance the Senior Rx Program in a meaningful way.
Chairman Koivisto asked about the membership of CAHI. Ms. Spenny replied there were insurance company members who participated mostly in the individual, small group, and senior market. Chairman Koivisto then asked, as Ms. Spenny was an actuary, could she obtain for the committee the average cost that seniors spent a year for prescription drugs. Ms. Spenny responded that those numbers would be available to seniors who currently had prescription drug programs. Additionally, there were statistics that were available to the committee regarding existing state-run programs.
Thelma Clark of Las Vegas interjected that AARP Pharmacy, which she used, was not on the list of pharmacies for the plan. She noted that Prilosec, which cost $100 at Sav-On, was only $37 at the AARP Pharmacy. She also wanted to know how the “medical necessity,” mentioned earlier in testimony, would be determined. Chairman Koivisto responded that one’s doctor would be the one to determine what was medically necessary. Ms. Clark said that when she applied for the Senior Rx Program, it was $100 and not $10. Chairman Koivisto asked if that was a cost per month. Ms. Clark did not know.
Marjorie Powell, representing the Pharmaceutical Research and Manufacturers of America (PhRMA), a group of research-based pharmaceutical companies, offered to address the enrollment issue that Assemblywoman McClain had raised a number of times. Ms. Powell said she had watched a number of state-operated programs get started, and in her experience it had taken anywhere from 18 to 30 months to generate the kinds of publicity and experience in the community that started the enrollment process; once it began moving, it did increase. With the existing program only part of the way into that time frame, if the switch to a state-run program was made it would take the same kind of enrollment period. She urged the committee to consider that point.
Chairman Koivisto closed the hearing on S.B. 539 and announced she would schedule it for a work session.
With no further business before the committee, the Chairman adjourned the meeting at 4:09 p.m.
RESPECTFULLY SUBMITTED:
Darlene Rubin
Committee Secretary
APPROVED BY:
Assemblywoman Ellen Koivisto, Chairman
DATE: