Alaska Legislature: Senate Health & Social Services, 4/28/26, 3:30pm

This hearing of the Senate Health and Social Services Committee will now come to order. Today is Tuesday, April 28th, and the time is 3:30 PM. We're in Butrovich Room 205. Members present are Senator Myers, Senator Giesel, myself, Senator Dunbar, and here comes— and Senator Tobin, and we expect Senator Clayman along shortly. Let the record reflect we have a quorum to conduct business.

Before we begin, I would like to thank Mary Gwen Kawakami, the Senate Health and Social Services Recording Secretary, and Kyla Tupou for from the Juneau LIO for staffing the committee today. We have two items on our agenda this afternoon. First, a second hearing on SB 261, unhoused young adults' IDs and birth certificates, sponsored by Senator Grey Jackson. And second, a presentation on state strategies for addressing the affordability crisis in the commercial market. Excuse me.

So we'll begin with SB 261, unhoused young adults' IDs and birth certificates. See here, at the previous hearing we heard from the bill sponsor and took invited testimony. Today we will have a brief recap from the sponsor, take public testimony, and look to the will of the committee. I set an amendment deadline for 5 PM yesterday. My office received one amendment.

I will note we have the— oh, they are not online actually. Let's see here. Oh, but in the room we have available for questions Brian Wilson, Executive Director of the Alaska Coalition on Housing and Homelessness, and Laura Herbert, no, and she's not online either. We'll see if perhaps they will come at a later time. Laura Herbert.

Senator Gray Jackson, do you have any comments before we begin? Thank you, Mr. Chairman. Senator LB Gray Jackson, Representative District G in Anchorage. I want to thank you, Mr. Chairman, and the rest of the committee for hearing this bill again. So a brief recap.

This bill, it aims to help unhoused young adults in Alaska ages 18 to 25 to access essential identification information like birth certificates and state IDs. And what the bill also does is removes financial and bureaucratic barriers by allowing fee waivers, expanding acceptable forms of identification, and proving— providing flexibility for listing an address. Ultimately, it supports these individuals in securing jobs, accessing services, and building disability as they transition into adulthood. Thank you, Mr. Chairman. Thank you, Senator Gray Jackson.

So, um, as mentioned, we have one amendment submitted at the request of the bill sponsor that will be carried by Senator Myers. Senator Myers, do you want to move that amendment? Yeah, Mr. Chair, I will move Amendment A.2. I will object for the purposes of discussion.

Uh, does everyone have a copy of that amendment? Yep. Wonderful. So, Senator Myers, would you please explain the amendment? Yeah, Mr.

Chair. So the bill refers to unhoused youth, and all that this amendment does is it gives us a definition for unhoused. And this is the federal definition that already exists in federal statute. We just haven't adopted it yet in state statute. So unhoused means an individual lacking a fixed, regular, and adequate nighttime residence.

And then it runs through a bunch of things that does not qualify for that, such as an emergency shelter or hospital or, you know, couch surfing, things like that. So pretty straightforward amendment. And as you said, this was at the request of the bill sponsor. Very good. Any questions or comments before I remove my— excuse me, my objection?

Senator Tobin. [Speaker] Thank you, Mr. Chairman, and I— this actually might be better for our representative from the Alaska Coalition for Homelessness, but I'm curious about how this definition works with the HUD definition or some of the— if it's in compliance with how we already define houseless and homelessness underneath the HUD definitions. [Speaker] Mr. Wilson, you want to answer that question? I'll say for the record, we do have now Lura Herbrecht, Covenant House Director of Youth Engagement Services.

She's online for questions if folks have them. Mr. Wilson, could you please put yourself on the record and answer Senator Tobin's question? Yeah, Brian Wilson, Executive Director of the Alaska Coalition on Housing and Homelessness. Through the chair, this is consistent with the definitions that we use for our federal housing programs. It's the definition that comes from McKinney-Vento.

Thank you. Thank you, Mr. Wilson. Thank you, Mr. Wilson. Any further questions? Seeing none, I will move— remove my objection.

Are there any further objections? Seeing none, that amendment is adopted. At this time, we're going to, uh, open public testimony.

Is there anyone in the room who would like to testify to this item?

Seeing none, I don't see anyone online either, just for questions, so I'm going to close public testimony. Is there any final discussion before we look to the will of the committee?

Madam Vice Chair. Mr. Chairman, I move Senate Bill 261 version 3-4 LS 1532 backslash A as in Anchorage as amended from committee with individual recommendations and attached fiscal note. Legislative Legal has the authority to make any necessary conforming changes. Any objections? Seeing none, SB 261 version A as amended moves from committee with individual recommendations and attached fiscal notes.

Thank you, Senator Gray Jackson. Thank you, Mr. Chairman and committee members. We'll take a brief at ease, set up for presentation.

Our next agenda item today is a presentation on state strategies for addressing the affordability crisis in the commercial market. Presenting today is Michael Baylet, President of Baylet Health. He's on Teams. We also have in the room Director Lori, or former Director Lori Wing Hyre, who I'm sure would be eager to answer questions if anyone has some of hers. Mr. Bayhlet, if you can hear us, please put yourself on the record and begin your presentation.

Good afternoon, committee members. This is Michael Bayhlet, and I'm pleased to have the opportunity to speak with you today. As indicated, I am going to give you an overview of strategies that states have been adopting to address the affordability crisis in the commercial market. I'm going to give a little contextual information on the problem of high and rising commercial healthcare costs and a little bit on the causes for the rise, but most of my presentation is going to focus on an overview of what other states are doing. I'd like to encourage you at any point to stop me and ask questions should anything that I present motivate you to inquire.

So why don't we go to the third slide for a little context on the problem. And this is very briefly, what do high healthcare costs mean for Americans right now? And these are just four indicators. Over a third of adults report that they are skipping or postponing healthcare that they think that they need solely due to cost. In some states, there are surveys that indicate that it's over half of adults are doing so, and about 20% aren't filling prescriptions.

About 40% of adults report having debt from medical or dental bills. Half of American adults say that if they had an unexpected medical bill of $500, they couldn't pay for it without incurring debt. And And the leading cause of personal bankruptcy in the United States actually for years is medical bills. It accounts for two-thirds of all filings. Just to make this all a little bit more personal, human, on the next slide I have a couple of headlines that I observed.

The one on the left is a story in the Washington Post a couple of months ago. It's reporting on a survey where Americans are reporting skipping meals to cover healthcare expenses. And on the right A couple in Wisconsin sued Walgreens and OptumRx because their son stopped taking his asthma meds after a price spike and subsequently died.

What about Alaska? On the next slide, you can see Alaska's the fourth highest premiums in the country for Marketplace, second lowest cost silver benchmark plans. Only Wisconsin West Virginia, Vermont, and Connecticut come in the same class as Alaska. So, so why? I'm not going to spend a lot of time on this topic, but I will say that if we look at where commercial spending is focused, about half of it is spending that goes to hospitals.

And if we consider that hospitals increasingly employ healthcare professionals, physicians and otherwise, then total spending that goes to hospitals and health systems is is north of half of healthcare spending. So for that reason, a lot of states are focusing their attention on healthcare spending— on hospital spending, sorry. The next slide has a graph that shows growth in spending looking at 3 general categories: hospital, professional, which is physician and other clinicians, and prescription drugs. You can see that growth between 2018 and 2023 was fastest for hospital, although closely behind was prescription drugs. And for that reason, states are primarily focused on hospital spending and prescription drug spending when they are trying to address affordability.

Professional spending is not low, but it's not been growing at the same pace that hospital and pharmacy spending has been growing.

Okay, so that's, that's my brief contextual overview. I want to spend the to balance my time giving you a description at a fairly high level of the range of strategies that states are pursuing. So on the next slide, I have a list of a number of strategies. They are quite diverse. I'm going to cover many of these in my presentation, but not all of them.

They range from very basic measurement and public transparency. So when I say measurement, I mean under— measuring and reporting on healthcare spending within the state, how it varies within the state, and what's driving it. And when I say what's driving it, I mean which services, and is it growth in utilization or growth in prices or a combination thereof? That's the most basic, and in some cases foundational step, but then there are a range of other actions that are focused on placing restrictions on prices in some way, trying to enhance market competition, and in some cases making investment in primary and preventive care, which is believed, and there's some evidence supporting it, that over the long term slows and reduces spending. So, before I go into the examples, I just, I want to pose for you a key strategic question for policymakers, and that really relates to: do we have a market for healthcare.

And I start here with a quote from Representative Julie McGuire from Indiana, who was the co-sponsor of a series of bills that passed in Indiana last year focused on prices, and in particular hospital prices in Indiana. And Julie, in a presentation to states a handful of months ago, said, "This is not a free market. There's no competition. There's no transparency." So, you know, one can debate whether that's true or not, although there are a number of people who believe this to be true. Why might it be the case?

Well, there's been a tremendous amount of market consolidation in healthcare. And when I say consolidation, I mean really in all areas of the healthcare industry—hospitals, physicians, nursing homes. In addition, There's not— despite many efforts for many years, there's not good transparent information on cost performance or on quality performance. And then, finally, patients don't act like rational consumers when they buy healthcare. They don't approach healthcare like they're buying a car or they're buying a dishwasher.

And there are a couple of reasons for this, or at least a couple. One is that when we make our biggest expenditures for healthcare, usually they are not discretionary decisions. It's because we're rushed to a hospital in an emergency room where we cannot be an informed shopper. In addition, the.

Emotions that are attached to the need for healthcare lead people to not shop for healthcare the same way that they might otherwise. And then finally, as I noted earlier, even if they wanted to, the information isn't available to them. So can healthcare work as a market? There's a diversity—. Mr. Bailey, I apologize, let me just insert here, we have a question from Senator Myers.

Thank you, Mr. Chair. So you're mentioning, you know, the fact that, you know, you get into— get in a car accident or somebody has a heart attack, you rush to the nearest hospital. You know, you're focused on dealing with the issue. You're not focused on acting like a rational consumer.

And I agree with that. But I guess when it comes to the healthcare market, how much of— while those are the issues that are the events that stand out, how much of healthcare spending is done in that manner versus healthcare spending, you know, which is, you know, regular doctor's visits. Hey, I've got an infection. I got a prescription, you know, elective surgeries. You know, I'm getting a knee replacement and I can shop around 2 or 3 different doctors.

I'm trying to get a handle on how much of that is done in that emergency mode when we don't have time or inclination to try to shop around and act like rational customers? Yeah, yeah, great question. So, you're right, there are certainly instances when we're not in an emergency mode and we can act like rational shoppers, but it's a substantial percentage of healthcare spending that are non-elective admissions or visits to the emergency room. But that's not to say that there are no occasions when we can't shop and say, hey, I need a knee replacement. I don't need it right away.

I can shop around and figure out who's got the best outcomes and who's got the lowest price. Okay, so both situations exist, but I just want to acknowledge there are some situations when people don't act rationally, and there are other times when because of the emotions that are attached to fear of whatever we need to heal ourselves, that we tend to rely as people more upon the recommendations of our clinicians or our friends than we operate as sort of rational actors. So I'm not—. [FOREIGN LANGUAGE] We got a follow-up here from Senator Myers. Yeah, thank you, Mr.

Chair. So to that point, though, that you're making there, that, you know, we kind of fall back on who we trust. Wouldn't that— I kind of, you know, as a consumer myself, wouldn't I then, at least when there are options available, which is not always the case in rural areas, wouldn't that then mean that during those non-emergency times, I am slowly learning which providers to trust, and so those are the ones I would tend to fall back on in the more emergency times?

You might, but it's hard for you to know whether a clinician is technically proficient. In fact, it's hard for physicians to know whether other physicians are technically proficient. My dad was a physician, and, you know, he would know what was the reputation of other people, but he didn't actually know what happened when they were doing diagnoses or performing procedures. Dangers and whether they were any good or not. Okay, thank you.

Yeah, it's an interesting conversation, and I think as, as Senator Myers indicated, there's another layer here, and it's very much connected to market consolidation. But in Alaska, we might just not have that specialty or not have them in, in network. And so we see either people going without— and I've had that exact experience where there was literally no one in the specialty in Alaska that took my insurance because I'm on TRICARE— um, or we've seen medical tourism, people leaving, people going to Mexico Mexico or Thailand or even just the lower 48 because they know it's so much cheaper there than it is here in Alaska. So, on that, let's, let's go on to the next, let's go on to the next slide. Okay, great.

So, I'm going to now give you an overview of strategies. I'm not, I'm not presenting them to endorse any of them. I'm just giving you a description of what states are doing. A lot of them address hospital and pharmacy prices. That's what states are focused on.

And that's because those have been the primary forces driving up healthcare spending, and particularly commercial premiums, and commercial spending for the self-insured as well, for over the last decade. So, one other note before I go on to the next slide. These strategies are often pursued in combination by states that are particularly engaged in addressing the affordability problem. And I'll note, not all states are. But for states that are focused on commercial market affordability, they tend to pursue multiple strategies at once.

Okay, so let's begin with measurement, transparency, and collaboration. Next slide, please. There are several states that measure annual cost growth across markets. So by that, I mean commercial, Medicare, and Medicaid. They identify what's driving spending, and they convene convene stakeholders to collaboratively develop strategies to improve affordability.

And I've got 3 examples here, there are many more. Rhode Island began doing this in 2018. This is a program convened by the Health Insurance Commissioner. They have a special commissioner just for health insurance. And the stakeholders, so it was the insurance industry, employer purchasers, consumer advocates, large provider organizations.

They all signed a compact in December of 2018, committing themselves to a per capita spending growth target and said, "We're going to work together to hit the target." Minnesota, a few years ago, established within its new Center for Health Care Affordability, this time within their Department of Health, a couple of different advisory committees, one industry-focused, one non-industry-focused, both to advise them on strategies to improve commercial market health care affordability. And then finally, a third model, the governor of Utah sparked the creation of something called the One Utah Health Collaborative. This is a public-private initiative that was initiated by the governor's office, but it's actually an independent nonprofit initiative that's got a range of stakeholders who have committed to working together to address both quality and affordability. And this launched just last year. So you can see in these three examples that the locus of the activity can vary significantly by state.

Okay, the next category, and an area of tremendous activity in just the last year really, has been the concept of price caps. So if you'd go to the next slide, please. So states use different terms for this. Sometimes it's a price cap, sometimes it's reference-based pricing, but the general idea is to limit how high what payment amounts can be for hospital or other services. They're usually established in reference to an external benchmark.

The most common benchmark that states have been using has been Medicare. So they'll set a cap and say prices should be no more than X percent of Medicare. This has so far been done in states for inpatient and outpatient hospital services. It does not have to be restricted there. Um, on the next slide, there are 3 ways that states have been implementing price caps.

One, through their state purchasing authority. So, um, in New Mexico, Oregon, and Washington, the state, in its purchasing of public employee health plan benefits, has applied caps on how high their prices will be relative to Medicare. Second approach is insurance regulation, where for the fully insured market, the state insurance department regulates the maximum reimbursement rate that insurers can pay to hospitals for their fully insured private plans. And then third, and most expansively, is provider price regulation, where the state limits the prices that providers can charge and be paid. So this— there are states pursuing all three of these, and you can see they use different vehicles, and they have different levels of impact on the market.

So a couple of state examples on the next slide. Indiana uses nonprofit status of hospitals as a lever to push prices down towards the state average. So they have said targeting their 5 largest not-for-profit hospital systems, and they've got a lot of market consolidation within the state, that their prices by 2029 cannot be above the state average or they will forfeit their nonprofit status for at least 1 year within the state, and obviously for more than 1 year if they remain above it. So this is legislation that was passed in a series.

Bills last year by Indiana, and takes a novel approach to trying to compress hospital prices. You'll note they're only focused on the largest systems. So independent hospitals, rural hospitals, community critical access hospitals, they are excluded unless they happen to be part of these large systems. A different approach, New Mexico. They capped hospital prices in their state employee health plan effective last July.

The cap is 200% of Medicare for in-network. Out-of-network, 175%. That's to keep hospitals within their network. They limited this only to urban hospitals. So this only applies in, I think, 3 metropolitan areas within New Mexico.

Hospitals everyplace else are exempt. And that's, as you'll see, that's a little bit of a theme in how states have approached implementing price caps. They've tended to focus on metropolitan areas where the largest hospitals with the highest prices and the most market power and the greatest impact on total commercial market spending reside.

Okay, I'm going to go a little bit deeply into the longest-standing example, and this is Oregon. So Oregon implemented their price cap earlier than the Indiana and New Mexico examples. They put it in for their state and school-based employee health plan— or plans, actually, it's two— in 2019. It was mandated through legislation. Their cap is 200% of Medicare.

They exempted small hospitals, rural hospitals, critical access hospitals, and certain sole community hospitals in order to protect their financial stability. As a result, the cap applies to, to 24 of 62 hospitals within the state, but those 24 hospitals represent the majority of healthcare spending in the state. Okay, next slide. Their cap is included in the contractual requirements with Public Employee Health Plan carriers. The state monitors the carrier performance.

This is really the— they're plan administrators because these are self-insured plans, and they audit compliance.

They have a differential on the in- and out-of-network cap the same way that New Mexico does. What's unusual about Oregon, and this is on the next slide, is it's been— the program has been evaluated. So in the first 2+ years, they saved $108 million to the state, and that amounted to about 4% of their plan spending. Subsequently, some independent researchers from Brown University looked at the impact, and they found there was no evidence of hospitals leaving the health plan networks for the state employees or increasing prices to other commercial health plans. It doesn't mean they didn't try to increase their prices in other markets.

That wasn't studied, so maybe they did for Medicare Advantage or for Medicaid, but they didn't do it in the commercial market based on this evaluation.

So this is first category of state activity, and there's been a lot going on in terms of hospital price caps with other examples too. I want to focus a little bit on pharmacy, an example from Colorado. So Colorado was the first state to set an upper payment limit, which is really a price cap, on a high-cost drug. They did so for the drug Enbrel, setting it at $31,000 a year. The average price was in excess of $50,000.

The cap becomes effective next year. Colorado was sued or challenged in court, and they won, which doesn't mean they're not going to continue to be challenged in court, but they are ahead of a series of states that have created prescription drug affordability boards that by statute are empowered to set upper payment limits on drug prices. Can I—. But they, they are ahead of the other states. Yes, question.

Pause you there, Mr. Baylet. Um, so they passed in 2021, but it's not going to affect 2027. Is that as a result of the lawsuit? Was there an injunction, or they really set the effective date that far out? Well, it— I think it also reflects that after the law was passed They had to convene the Prescription Drug Affordability Board, then it had to conduct its review.

Could that process have moved more quickly? Perhaps. And should you ever want to consider Prescription Drug Affordability Board, I think it's worth thinking about how to make that process move quickly and to conduct reviews for more than one drug. I mean, Enbrel is a high-spend drug, but it's only one drug.

So I think it was not just the challenge, but also the process of standing up the board and conducting the review in a comprehensive manner. So a follow-up on that, and then we've got a couple other questions. How does this work in terms of if the— let's say the company says, well, we're going to— we won't sell it for less than, let's say, $40,000 a year to a pharmacy. But it's capped at $31,000. How do pharmacies continue to be solvent in this system?

Or did this cap cause the manufacturer to begin to offer it at a cheaper price within the state? Yeah, so this requires a manufacturer to cap it at $31,000. So it has to make it available to the pharmacy at $31,000. And is there any indication, I guess it hasn't gone into effect in 2027, but have they said, "We're not going to sell our drug in your state?" Yeah, this question comes up all the time, and it's especially of concern in small states that are afraid that the drug manufacturer will say just that. We don't know.

This is— these policies in general are all relatively new. You'll note that, you know, for the hospital price cap, the oldest example I had is only from 2019. So the experience with drug price caps or upper payment limits is even more limited than it is for hospital price caps. So I just think there are a lot of unanswered questions, and other states will learn from the pioneers that are going first, Colorado being one of them. Thank you.

Senator Tobin, then Senator Myers. Thank you, Mr. Chairman, and this is quite interesting. Thank you for this presentation and for this example. I'm actually looking at the summary of the legislation on the fiscal note, and I noticed that along with attempting to rein in the costs, it also costs a significant amount to implement this policy. And I see here in fiscal year '21-'22 that they're estimating approximately $843,000 and 5 FTEs, full-time equivalent employees, for enforcement, regulation, promulgation, convening this board, and so I'm curious just from your perspective in terms of how much it costs to build this out versus how much the cost savings are to the community.

Has there been any analysis or evaluation of that juxtaposition?

Well, the savings are dependent on them reviewing a lot more drugs over time. Than just one, obviously, and bringing their operation to scale, which hasn't happened yet. I will note, just as an aside, that I have long thought that it does not make sense for individual states to be independently conducting reviews like this. And I think that if this idea develops currency across a larger number of states, it makes a lot more sense for states to do this in coordination with one another. And develop some economies of scale.

I know that in Medicaid, there's been a longstanding effort across multiple states to pool resources to conduct drug effectiveness reviews, and I think it would make sense to do the same thing here. But right now, there simply aren't enough states that are doing this. I think we're too early on. Follow-up, Senator Tobin. Thank you, Mr. Chairman.

And so Just out of curiosity, and you might not know the answer to this, but do you have any insight if the National Conference of State Legislatures or the Council of State Governments are convening groups of lawmakers together to talk about kind of this economy of scales model? Do you have any— is there any other group that might be working together? Yeah, I don't know. Sorry. Thank you, Senator.

Thank you, Mr. Bayhlet. We will continue to the next slide. Okay, so another strategy that states are contemplating is to advance policies for site-neutral payments and facility fee bans. So let me explain these concepts on the next slide, starting with site-neutral payments. So the idea here is to restrict hospital prices so that for those services that can be safely delivered in a community-based setting, but that are also delivered in a hospital or hospital-owned or affiliated setting, that the price paid for the service in the hospital-owned or affiliated setting is no higher than what the price is for the service in the community-based setting.

There typically can be large differentials. The National Academy for State Health Policy developed a model law to do this last year. States could apply it across fully insured and self-insured markets by prohibiting what providers can charge. They could also choose to exempt certain hospitals if they thought it made sense to do so based on financial status or other factors. This is a policy that New York has been pursuing.

They've proposed— they've got a bill right now prohibiting payers from charging more than the lesser of 150% of the Medicare non-hospital rate for certain services or for the existing contractual rate. We have a question from Senator Kiesel. Thank you, Mr. Sherman. So in Alaska, what we're seeing is the hospitals eating up private clinics. In other words, vertically integrating, integrating, and it's really driving up costs and limiting access.

Are we an outlier in that? No, you're not. Hospitals are buying up practices everywhere. And when they do so, they often will add— they will either increase the prices for those services, which is what this policy tries to get at, or on my next slide, they'll add new facility fees. So yeah, this is trying to get at that differential.

And as hospitals vertically integrate, It's driving up prices across the country because the independent providers typically have— typically, not always, but typically have prices that are lower than the hospital-owned providers. Senator Myers. Yeah, thank you. So to follow up on that question from Senator Giesel, because I had the same one, my question is, as we're seeing that trend, are these site-neutral payment policies driving that trend faster? You know, are hospitals seeing those policies enacted and then turning around and then buying up, you know, you know, buying up practices that they otherwise might not have?

Yeah. So I would say hospitals typically are buying practices to help feed their system more than they are to buy them to mark up their prices and generate margin. So, I— if anything, a site-neutral payment policy would economically dissuade a hospital from buying a practice if their goal was simply to add some margin. But if their goal is to feed more volume into the hospital, then they might say, "That's okay. I'll deal with the site-neutral payment because I'm still getting more patients coming into my system." Okay, thank you.

Thank you, Mr. Bailey. You can continue the next slide. Okay, so I mentioned facility fees. So often when hospitals buy practices, they will add a facility charge for patients who go to the practices. So I'll give you a personal example.

I went to my primary care physician recently. Her office is in a small office building in a suburban community, nowhere near the hospital where she has admitting privileges, but there's a sign on the wall that says, "This is a hospital outpatient facility, and you might be charged for a hospital outpatient visit." So, there are a number of states that have created bans on hospitals charging facility fees when services are delivered in office-based settings. I, I'll note that the site-neutral payment policy is not widely implemented, but the facility fee ban in some form is much more widely implemented. And the example I have here is again from Indiana. This is part of this group of bills that they passed last year.

They prohibit facility fees for care provided in an off-campus setting owned in whole or in part by a hospital system. It's— and they're applying it only to their large systems. Now, there are some facility fee bans that apply both to on- and off-campus office settings. Indiana did it only for off-campus, but of course, there are lots of hospitals that have office buildings on their campus that are not technically part of the hospital.

Okay, let me move to the next policy, a price growth cap. So this isn't capping hospital prices or drug prices, it's capping how fast they can grow. So, next slide, please. The growth cap is typically linked to an economic indicator— CPI, gross state product growth, perhaps median household income growth. It can be applied to all hospitals, some hospitals.

It can vary so that it's lower for the hospitals with the highest prices and higher for the hospitals with lower prices. That's what California does. And it's— and it can be applied in any number of other variants. So lots of flexibility here. This concept has been around for a while.

On the next slide, it was implemented in 2010 by Rhode Island's Office of the Health Insurance Commissioner as part of a group of regulations that they refer to as affordability standards. So we've got, you know, going on 16 years of experience with this. In Rhode Island, they limit how much commercial insurers can increase their hospital payments for inpatient and outpatient services to the Consumer Price Index plus 1%. And they enforce it through regular oversight authority that the agency already had. This program has been evaluated a couple of times.

On the next slide, A study published last year found that the affordability standards, but principally this hospital price growth cap, generated $88 million in annual savings, $64 million going to employers, $24 million going to plan members that they realized through both lower premium and out-of-pocket costs. Overall, hospital prices decreased 9% over 10 years. As compared to neighboring regional states. And over 2 years, Rhode Island went from having hospital prices that were 106% of the national average to 84% of the national average. So, a pretty dramatic impact in the course of the 10 years that they studied.

One of my favorite slides is the next one. This is a graph of hospital prices in Massachusetts and Rhode Island. So two states right next to each other, about the same size. And if you look in 2011 on the far left, you'll see that their hospital prices and their hospital costs were about the same in 2011. But beginning in the next year, Rhode Island put in a growth cap.

Massachusetts didn't have one. So what happens? The prices in Massachusetts grow much faster than in Rhode Island. But interestingly, so do the costs. So the hospitals in Rhode Island were able to manage their costs at a lower growth level than those in Massachusetts where there were no constraints whatsoever.

Okay, so interesting comparison of two neighboring states. I've got one—. Mr. Baylet, can I ask a practical question about that? Yeah.

How do they measure the total price and the total growth? That is, Is this just from the state's plan, or is it all of the billing from, from all of the hospitals? How do they sort of gather the, the data? Sure. Yeah, yeah, a couple different ways.

So this is a regulation applied to the commercial fully insured market. Now what's interesting is the insurers that operate in Rhode Island, and they only have really 4 in the commercial market. They use the same contracts for their self-insured and fully insured market. So even though technically they're regulating the fully insured market, the self-insured market receives the same benefits.

Although I'll note that this evaluation didn't find that, but I'm I think that has to do more with their methodology because the way— to answer your— really answer your question, the way the state determines compliance is two ways. One, they conduct periodic market conduct exams, which is an authority that insurance departments have, where they literally audit the contracts that the insurers hold with the hospitals, and they look at the payment terms in them, and they look to see how much payments grow. But separately, Rhode Island's developed a very sophisticated set of interactive dashboards that sit on top of their all-payer claims database.

And they're able to track what's going on in terms of spending growth for hospital spending, inpatient and outpatient, in their commercial market, and to do so by insurer. So that gives them a second check. And I'll just note, in case you're interested, if you do a search for OHIC Data Hub, You will find their online dashboards because they've made several of them publicly available, and you can see the tools that they have to monitor healthcare spending within the state. They're quite remarkable tools. So those are the two ways that they monitor compliance.

Very good. I have a brief follow-up, and then I think Senator Tobin has a question. What's the enforcement mechanism? That is, if the hospital grew at 2%, uh, or the whole system grew at 2%, what punishment is there, or what enforcement mechanism is there? So enforcement is applied against the insurers, not against the hospitals, because it's the insurers who are held responsible here, right?

You might recall earlier on I talked about three levers: state purchasing lever, state insurance regulation, and provider regulation. Rhode Island is using the insurer leverage. And again, it works well in Rhode Island because the insurers have only one set of contracts for their fully insured and self-insured markets. That's not necessarily the case in all states. And so what is the enforcement?

They just say, well, we're not going to pay you the difference, or how do you get them to actually do this thing? Yeah. So the insurance commissioner can fine the insurers for the excessive spending. So it's fines. Okay, thank you.

Senator Tobin. Uh, thank you, Mr. Chairman. And I'm curious, and I am reaching back into, uh, some conversations I had with, uh, other state colleagues this summer related to several hospital closures in Rhode Island. And I'm curious about that dynamic because I've tried to do a quick Google search here, and I found that it does seem like there are a few hospitals that are slated to close in in Rhode Island. And so how is this policy impacting access to some of these facilities?

Yeah, I think since this went into effect, I think only one hospital, Memorial Hospital, has closed in Rhode Island. They have a couple of private equity-owned hospitals that are safety net hospitals and are distressed, and they're in the process of being, or they just were, acquired. But I think they've only had one hospital close in the state. During this time period. So I want to acknowledge this has not been easy for Rhode Island hospitals, and none of them are sitting on really fat profit margins because the price growth cap doesn't allow them to do so.

But they have not had any bankruptcies, and they have all, to date, managed. And so that's a decade of experience. Is that guaranteed forever? Of course not. But this policy, while it's certainly created a financial challenge for the hospitals, has not led to bankruptcies.

Follow-up? Go ahead. Thank you, Mr. Chairman. And I'm curious, just in your understanding of the Rhode Island medical structure and system, The, the lawmaker I was talking to was a, a trained doula. She believed very strongly in maternal health access and knowing that in some of these facilities, maternal health is, is not a profitable, uh, service to provide.

Uh, has there been service gaps, uh, that this, this practice has created, uh, maybe closing down, uh, maternity wards or access to certain types of, uh, to clinical practices that have forced constituents to go farther or drive farther to receive those services? Yeah, so I mean, I don't have complete knowledge to answer that question. As you're probably aware, as large as Alaska is, Rhode Island is tiny, tiny, tiny, tiny. So you would find it laughable the maximum amount you would have to drive in Rhode Island, you would think, you know, in Alaska terms, is around the corner. Rhode Island has one hospital, Women and Infants, where the vast majority of all their births take place.

There are a few other community hospitals that also have maternal, maternity services. I'm not aware of any hospitals that have closed their maternity services. You are right that that is a service along with inpatient psychiatry that often are not profitable for hospitals. And hospitals across the country, when they're financially distressed, will often drop those services. But I'm not aware of that having happened, at least to date, in Rhode Island.

Thank you. Let's go on to the next slide. Thank you, Mr. Kline. Okay. So another price growth cap.

This, I'm also, I'm staying in lower New England, Connecticut. They have passed last year a cap on prescription drug prices, but it also caps the rate at which the prices can grow at the Consumer Price Index. So this is just saying that both the price cap and the price growth cap concepts could be applied and are being applied to some degree in both hospital services and with drug prices.

Okay, my last category of strategies, and then I'll wrap up on the next slide, are strategies to increase competition and address market changes. So as we have touched upon, if you go on to slide 33, please, there's been a lot of healthcare ownership changes across the country, lots of consolidation among hospitals that's reduced competition and and driven up prices. And there's enormous evidence that consolidation drives up prices. A big influx of private equity investment throughout the healthcare system and increasing levels of vertical integration.

And so states have responded to that. You'll see that on this map, Alaska is a state that's considered to be more highly concentrated than many other states. You'll note that this is a characteristic of a number of rural states.

The next slide has strategies that states have been pursuing, and I list some state examples here. Mr. Miller, I'm sorry to interrupt. We have a question from Senator Myers on your last slide. Yeah, thank you. Okay.

Thank you, Mr. Chair. So, Mr. Bayhlet, with all of this consolidation, I guess the question is, what are— how are different states or maybe even the federal government addressing this? Are we— has there been any increase in antitrust lawsuits under either state or federal law? Or have there been any attempts to, I guess, address the drivers of the consolidations?

Yeah, so I am going to view that as a two-part question. First, has there been any federal action, and then addressing the drivers. I would say over multiple presidential administrations in Washington, there has not been an interest in aggressively going after market consolidation in healthcare. That is regardless of party. Any particular reason?

I wouldn't know. Okay. Yeah, I just, I don't know why. But we're seeing consolidation grow not only now within states but even across states. I mean, there's a big California health system, Sutter, that just bought a health system in Minnesota.

And of course, there are some big national systems that already exist with hospitals in many states. You know, is there going to be more aggressive federal action in the future? Maybe, but the levels of consolidation that exist within states right now are very high. I mean, I would say that within the hospital market. The only markets that are really competitive at this point are in our very largest cities.

So New York, Chicago, Los Angeles, there's still a lot of competition there, but hardly any place else. Hmm, okay, okay. So what are states doing about this? A number of things. They are broadening reviews of transactions.

The model state for this is Oregon. The Oregon Health Authority conducts reviews of all large transactions, and unlike in a lot of other states, they actually have statutory authority to approve or deny. So in many states they have— they— an agency, executive branch agency might make a review, but they have to refer to the Attorney General's office. In Oregon, the executive branch agency is authorized to make a review.

Denials of potential transactions.

Increasing transparency about ownership is something that a number of states are doing because it's often not known who owns different facilities. 3, Several states have pushed to strengthen corporate practice of medicine protection so that hospitals can't own own physician practices. And then a number of states have tried to prohibit anti-competitive contracting practices where large providers will say, you can't— large providers will say, look, if you contract with us, you have to take all of our hospitals, or you have to give us the best prices, or you can't steer people away from us. So states have passed legislation that says no, you can't do that in contracts. And these state examples are actually far more numerous than just the states you see listed here on the right.

So one last state example of increasing health plan competition, this comes from Nevada. They launched this year a public option on their health insurance exchange. This is a product that can't have its premium grow more than another economic index called the Medicare Economic Index. Premiums have to be at least 5% lower than a reference premium tied to the second lowest cost silver plan, and the provider reimbursement can't be lower than Medicare. So this is an attempt to create a more affordable commercial health insurance product in their marketplace.

All right. So, um, that's it. Mr. Bailey, I'm going to pause you there for a second. I know it's very early, just January 2026, but is there any data on the uptake on that? Are folks purchasing or are folks going into the public option?

I don't know. Sorry. Fair enough. Yeah. I don't know.

There are a few other states that have public options that have been around longer. Colorado has one, but I don't know about Nevada's. Very good. Let's go on to the next slide.

Oh, that's it. So that's it for my examples. I have a few resources here for you. The State Hub for Hospital Pricing Strategies is something we created with the support of the Commonwealth Fund. So it goes into greater detail and has more state examples on what states are doing on hospital pricing.

The Peterson-Milbank Program for Sustainable Health Care Costs involves 13 states that are all working on commercial market affordability and has a broad range of resources that you can tap into. And then finally, a brand new resource, the Health Care Affordability Lab at Yale has created new tools to look at market concentration across states. Very good. So we have Senator Myers has a question. Yeah, Mr.

Chair, I think this is the end of the presentation if I understood correctly, so I've got kind of just some general questions to ask.

So my— well, my first question is, you know, we've talked about all the consolidation and everything, and so, you know, one obvious example would be, well, if the consolidation is driving larger— or driving price increases, what about trying to make the market a little smaller, so to speak? So what about attempts at direct primary care models. You know, we had a bill go through the legislature here a couple of years ago to authorize that. We've got one bill in process right now to authorize the same model for dental care.

You know, and then there's the question of kind of— I don't know if anybody started to address this yet— of kind of how you integrate that into standard traditional insurance then, you know, so you've got your direct primary care, but then a catastrophic plan. So to speak? And, you know, I know as of right now, to the best of my knowledge, the two don't really talk to each other. You know, is there ways to make that better that anybody's tried?

I don't know the answer about how to tie together direct primary care with the delivery of all other services. I will say that I think direct primary care is a fine idea, but primary care is not the reason that healthcare spending is so high. We need more primary care, I would say, to keep spending from growing higher so that people can access care and don't have to go to emergency rooms because they can't access primary care. But I think nationally we have a significant problem with primary care supply and supporting our primary care infrastructure. But primary care doesn't drive healthcare spending growth, and if anything, it might serve to offset it.

Well, okay. Hang on a minute. I'm hearing some conflicting statements you're making. You're telling me primary care isn't driving growth, but then you're telling me better primary care could keep costs down. I'm hearing messages in opposite directions.

Yeah, yeah, right, right. Sorry, I don't mean to sound contradictory. Yes, having more access to primary care will, to some degree, slow the pace of spending growth. But I say only to some degree because the primary drivers are high and fast-growing prices for hospital services and for drugs. And more primary care supply can't address that problem.

What it can do is help promote better health status, better management of chronic conditions, and keep people out of potentially avoidable ED visits and hospitalizations. Okay. Yeah. All right. I've got another question on another line, so I don't know if you want to go to somebody else first, but—.

Well, I have a question on slide 25, and we have Ms. Lori Winghier here, too, to perhaps help you.

If we can go back. There we go. I'm interested in these facility fee bands as a for outpatient settings? And I don't know if you would know this, Mr. Beyer. I'm wondering if this happens in Alaska.

I just don't know the answer to that question. Are there hospitals— my colleague is nodding. I don't recall if I'm getting a hospital fee for an office visit that is not in the hospital. So if that is happening, has Alaska ever considered doing this? I guess, Ms. Winghyre, you might be the best person to answer that question if you know.

For the record, my name is Lori Winghyre. I'm the healthcare liaison for the Alaska State Legislature. I do believe it is happening, Senator Dunbar. Um, as you watch some of our larger hospital systems buy up clinics, specialty clinics, surgery centers throughout Alaska, I have no doubt that they are charging then a fee, uh, as well as the professional services back to the consumer. Good to know.

If I can, Mr. Chair. Go ahead, Senator Myers. Yeah. My wife and I have been seeing a couple of providers in the Fairbanks area that were recently bought out by the Fairbanks Hospital.

We've noticed hospital fees showing up on our— facility fees showing up on our bills in the last couple of years. So. Very good. Well, I don't think it would be a conflict of interest if you wanted to run that bill to stop that next year. Senator Myers, I'll co-sponsor that with you, perhaps.

Okay, well, thank you for that answer, Ms. Wingeyer. Do you know, have— has there been any attempt or has the administration, when you used to work for the administration, ever talked about this kind of reform? Mr. Chairman, no, not to my knowledge. I mean, Governor Dunleavy was interested certainly in the cost of healthcare and access. There were not any proactive steps really taken.

When I was hired by the legislature, that was what my goal was or why I was hired. Sure. Was to address affordability and accessibility looking at some or all of these measures and how would they help Alaskans. It's been kind of sank, if you will, because of the RHTP. Yeah.

But I hope to get back on that with the next legislative session to see what we can do. I think there's a lot of opportunity for us to address the cost of healthcare in Alaska. And it's just taking the time and actually doing it. Thank you. Senator Myers, you had another question?

Yeah, I do. I did. So, Mr. Bayhlet, you talked a lot about consolidation in various places, and a lot of these policies that you mentioned were various ways of addressing consolidation, if I understood them correctly. I mean, it seems like— my understanding of the kind of the history of the healthcare system is that, you know, a lot of this has been waves of consolidation kind of going back and forth to counteract waves in other places. So you had a wave of hospital consolidation around the '90s.

You had a wave of insurance consolidation around the 2000s. Then you had a lot of government action start around that time, most obviously the Affordable Care Act. I mean, it kind of feels like, you know, we're getting attacked by an 800-pound gorilla, so the way we solve that is we find a 900-pound gorilla.

And the eventual result is that it feels like individuals get trampled underfoot. You know, and I guess that we've talked a little bit about kind of rationing, you know, losing access even though you might— even though the care might be more affordable, now you've lost access to it because it's gone out of business, and I'm reminded of a recent statement I heard from Ezekiel Emanuel, who was one of the guys that was one of the architects of the Affordable Care Act, who said, looking back on it now, 15-odd years later, saying that, you know, one of the effects was we effectively started rationing some care. And I'm wondering, you know, I guess it's how do we address consolidation without ending up in the rationing era? Because that's what it feels like the direction we're heading.

Is that—. Well, I was the Mr. Baylor, I believe. Okay. Yeah, sure. So I would say yes, we do have gorillas trying to get bigger and bigger, and we've had tremendous consolidation in both markets, meaning insurers and providers.

I mean, I would say that Right now, if you go back, you don't have to look it up, but my third slide that I presented said that over a third of Americans are skipping or postponing care due to cost. That's rationing to me, right? That's, that's, that's consumers self-rationing care because how expensive it is. Well, and And I would say that that's also putting our public health at risk when people aren't going for care that they need. So we're in a hard place right now.

But I think that the further that we allow healthcare spending to grow at a pace that outstrips the rate at which wages are growing, the more we're going to see patients skipping or postponing care because they can't afford it. I guess to respond to that, I mean, you know, self-rationing is one thing, and as bad as it is, you know, that is kind of one economic, uh, you know, one economic consequence. It's an economic behavior. But then the other rationing that I'm a little more concerned about, we've seen a lot of in Alaska in the last decade or so is practices closing up, and especially on the specialist side, uh, where, you know, we're now, you know, you know, me living in Fairbanks, I often have to go to Anchorage for a specialist, or I've had to take one of my kids down to Seattle because there wasn't a pediatric specialist that we were looking for. Um, and, and, you know, that's, that's the other version that I'm more worried about, that we're going to potentially be putting enough business— enough providers out of business with whatever policy we do that we're going to end up, you know, making it, you know, okay, I can afford it because there's a cap on the price, but now I can't find one.

If I could—. Go ahead, Ms. Winghier. Again, Lori Winghier. Through the Chair to Senator Myers. I think we run that risk.

And I think part of it is not because of the clinic closing so much. We're a very small state. And for some of these specialty providers to stay in business, they need a larger population. And unlike the example we were shown of Rhode Island and Massachusetts, we can't drive across the border, you know, to access care in another state. It's, we go to Seattle or we go to New Mexico or wherever we go.

We go somewhere else for specialty care. And I don't think that's gonna change when you have a population of under a million people in an area as vast as Alaska is. I think there's some things we just need to accept. We're not going to have everything for everybody. And yeah, it's not convenient and we'd like to have it all.

I don't think we ever get it. Well, Mr. Chair, I think she makes a good point. I guess what that puts in my mind is it makes it more imperative that we get the gas line here and attract more people to Alaska so that we're a larger market for medical providers. That's right.

And we have to have good infrastructure with a, you know, a broad-based tax like every other state that has a larger population than us. I agree with you, Senator Myers. Okay, um, thank you, uh, thank you, Miss Wingeyer. Thank you, uh, Mr. Baylet, for your time. I realize for my colleagues this is fairly late in the session to have a presentation.

However, I felt it was necessary because this is one of the primary focuses of this committee, and it's something to always keep our eye on. The affordability crisis in healthcare in Alaska is very real, and what we do about it is still up for debate, but that it exists, I think, is undeniable. Senator Tobin, do you have something? Thank you. Thank you, Mr. Chairman.

And I apologize, Mr. Bayliss, when I was looking through or listening to your presentation, one thing I noticed that we didn't talk about, and this may be a very touchy subject, but it's the folks who work in the C-suites, the folks who make the big dollars, who make the big decisions, and some of the dynamics that we know do happen in some of these companies around waste, fraud, and abuse and fraudulent charges to governments and misuse of insurance. Do you have, just off the top of your head, an enumeration of what that cost is to consumers when we don't have better regulations on some of those dynamics that are happening with our for-profit healthcare system?

I'm sorry, but I do not. That's okay, Mr. Baylet. We appreciate it. And these slides have been posted online for members of the public that might want to see them. And there's a number of links here to your sources and other sources as well.

So thank you, Mr. Baylet, for your time. Thank you, Ms. Wingeyer. For announcements today, a reminder that the amendment deadline for SB 281, Health Care Compacts Rural Health Program, is 5:00 PM Wednesday, April 29th. Tomorrow. If you're considering amendments, please submit them to my office by that time.

The next meeting of the Senate Health and Social Services Committee will be held on Thursday, April 30th. We'll have our 4th and perhaps final hearing on SB 281. We plan to adopt a committee substitute, and I will look to the will of the committee regarding the bill. Thank you everyone for a productive hearing. It is 4:41, and this meeting is adjourned.