AHPR: Please give us an overview of your division's responsibilities regulating the health insurance industry in Alaska. What kinds of insurance do you regulate and what kinds you do not regulate, and why the distinction?

Linda Hall: Generally, anything that we regulate, we're doing it on the basis of Alaska statutes, which are further carried out under regulation. We're looking for statutory requirements for insurance companies to do business in our state and then the types of business that they do and how they do that--whether it's underwriting, rate making, claims handling--all of those things.

Our job really is to have the oversight and to enforce the legislative intent. That's kind of an overview but generally we regulate insurance companies, we regulate the producers or brokers who sell the coverages, and those are two different things. Depending upon who they function for, we regulate what's called the third-party administrator, who may be working on behalf of an insurance company or on behalf of an entity that has insurance. If they're operating for a self-insured entity that we don't necessarily regulate, then we also wouldn't regulate that third-party administrator.

Health insurance is a little bit different than--let's use homeowners [insurance] which most people have--in that you have a large group of people who are covered under health care plans that are self-insured, and we don't regulate [self-insured plans]. We obviously don't regulate Medicare, Medicaid, any of those kinds of plans--so the piece of the health insurance market that we regulate is smaller than when I look at the homeowners market place or personal auto, where we regulate all the insurance. It is a little bit different and it makes it more complex to understand what we can and can't regulate.

I don't want to leave anything out because sometimes people are surprised at the things that we do cover. We do all types of health insurance, and things that are considered health insurance certainly are group and individual, and those are two different things. There are different standards. On medical, we regulate long-term care Medicare supplements that people buy. We don't regulate Medicare, but the private supplement plans we regulate--disability income, dental, vision.

We regulate something called stop loss. If you have, for example, a medium-sized Anchorage employer who decides he wants to self-insure his employees, and they put together a plan with a broker and they have an administrator, but they buy an excess layer of coverage so that they take the risk up to say $100,000--this piece of insurance that they buy above that is called stop loss because it stops their loss at $100,000.

AHPR: If a private employer has an insurance plan that is self-funded, you don't regulate that at all?

Linda Hall: No, they're not considered an insurer. There is no real transfer of risk. The employer is keeping that risk him or herself.

AHPR: Does that mean that if one of the employees, for example, has some complaint against the employer in terms of, for example, what was reimbursed for medical expenses, that that employee can not come to the state for redress of that?

Linda Hall: That's correct. They would go to federal government under ERISA (Employee Retirement Income Security Act of 1974) and the Department of Labor. We usually, if we get a consumer who comes to us--because we do have a consumer complaint section and they are in that circumstance-- we will forward their complaint along with giving them advice of where to go and some contact information. So they do have a place to go, but it's just not us.

[Discussing rate regulation] We only actually have rate authority where we really review rates individually for hospital medical service corporations. For example, Premera Blue Cross is a hospital medical service corporation. We do review their rates in detail in the same way that we would review Workers Compensation rates.

We do have a statute that's fairly new, I think we just did a couple of years ago, that requires that rates not be excessive, inadequate or unfairly discriminatory. It's the same standard that we have in other rate-making authority, but we don't review rates individually. A company doesn't have to actually file their rates with us. If we found them in violation of that, we certainly would still have regulatory authority to challenge their rates.

AHPR: Some states have public hearings for rate raise requests by insurers, I think actually it's most insurance but including health insurers. Apparently Alaska doesn't do that, doesn't have such regulation?

"Rate making is a very complex process. It takes into consideration a variety of factors and medical costs."

Linda Hall: No. I guess I'm not particularly familiar with that being a real common thing in other states. The place that I see that and the place that we do that, and the only place that we do that today are in Workers' Compensation rates, and that's what I most frequently see in other states. I just wasn't familiar with the fact that states do that also.

We do have public hearings for our Workers Compensation rates. That was a statute that was passed, probably about four years ago. We've had very little participation in those. There are some parameters because we're really focused on the rate filing and the components of that, as opposed to "my rates are too high." That's not the purpose of the hearing because I would agree with probably any employer who thinks workers comp rates are too high. They are, but we review those for adequacy.

Rate making is a very complex process. It takes into consideration a variety of factors and medical costs. One of the major cost factors in workers compensation is the cost of health care. It's a driving factor, that I think that I have at least increased awareness of, in the Workers' Compensation arena. People tended not to really equate medical care costs with what they paid for Workers Compensation, and yet it's the same cost driver there that it is in health insurance premiums.

AHPR: I was under the impression that actually Workers' Compensation was regulated or administered in a different division or department.

Linda Hall: The Workers' Compensation system is administered in the Department of Labor and they have a Division of Workers Compensation and they administer the system itself: the appeals process, hearings officers, the benefits--those kinds of things. We regulate Workers Compensation Insurance: policy forms, coverages, the rates--those kinds of things.

Since I've been here, I've worked very closely with the division of Workers' Compensation on legislation. Director Lisankie attends our rate hearings frequently. We work together, but we do two very different things with workers compensation.

AHPR: Are there any particular problems or emerging issues in the health insurance industry in Alaska that you believe warrant investigation or possible legislative action?

Linda Hall: I think there is a national problem of the increasing cost of health care, which we really have no role in. I think the Governor's Health Care Strategies Planning Council is addressing those. I attend national meetings of my counterparts in other states and health care is a huge topic. Health insurance per se not in the same way because health insurance costs are reflecting the cost and availability. We talk about affordability and availability of health insurance to cover those costs.

I watch programs being tried in various areas and that's the issue that I see. It's really health care and how do we make that available--more available and accessible to people than we do today. We have a fairly substantial, although not unusually high percentage of uninsured.

Linda Hall: [Referring to a recent DHSS study on uninsured in Alaska] Katie Campbell, my life and health actuary, and I worked with them. It was very interesting for me to see that and where the uninsured are. I think that's a societal problem. Certainly the Division of Insurance doesn't have the ability to find the answers to those kinds of things. I have provided information that I gathered through the [national association] that I'm part of, the different types of things that are being tried in different states. We try to find ways to make changes that I think could help make insurance more affordable, although it's very expensive.

AHPR: When you say make changes, are those regulatory or legislative?

Linda Hall: Sometimes we've helped the Legislature. Sometimes there are things that we just suggest that people can do. We have things like community rating laws, [and] we have rating bans so you don't go above certain high or lows. Our small group are guaranteed issue and there are limits to how much those rates can increase. I think we've worked very carefully with the Legislature and [we've been] supportive of the high-risk pool: the CHIA plan (Comprehensive Health Insurance Association).

[We] Worked with Norm Rokeberg a couple of years ago to help offset some of the increasing costs of that with their premium tax offset for insurance companies who are funding that mechanism. That too has a cap on premiums so that provides a really vital function. We've tried to participate in those kinds of efforts as much as we can, but in the long range analysis, it will have to come from the Legislature and I know there are bills out there today. I've met with Senator French and talked to him.

"There aren't any easy solutions to the cost of health care--and I think you referenced [it] at some point--how much higher health care costs are here [in Alaska]."

AHPR:  SB160?

On the other hand, I'm not sure how you, I don't know how you stem that. If I had all these answers, I'd probably be somewhere other than here.

Linda Hall: I'd be happy to talk about that and I do talk about it regularly in legislative testimony. We frequently see proposals for increased health coverage mandates. I would say off the top, that we typically oppose those. Generally, we find they affect such a small part of the population that it creates an unlevel playing field. It probably only affects about 25% of insured Alaskans.

Linda Hall: It goes back to the part of the market that we regulate--private health insurance. It's not Medicaid, it's not any of the Indian health plans, it's not the self-insured plans. None of those entities have to adopt those mandates and follow them because we don't regulate them, so when the Legislature passes a mandate, it really only affects a small number of people. Our fear is [that] if you continue to layer more and more mandates you raise the cost of coverage, that you will create more uninsured. We're really more interested in making sure as many people as possible have good, basic health care.

AHPR:  Do you have any data on the assertion that it raises the cost of health insurance?

Linda Hall: Very little. As I recall, when we tried to gather data--and it's been two or three years ago since I've really seen a real serious push for a mandate--it was minimal. I'm going to say 5% maybe, maybe even less than that. It's very difficult to isolate one piece because of the way rates are done--it's a broader coverage. You really have a hard time isolating that one coverage: "How much does it cost to provide X." I think most of the insurance companies that write coverage here do provide pretty broad coverage.

I saw some attempts last year to do a mandated coverage that, in fact, would have reduced what our major carriers were already providing. It wanted to make sure they provided a certain level of coverage, and all the policies we checked that were written in our state already provided something above that.

We try to work with the legislators when they are doing that--to make sure they understand what we see as the ramifications. They are certainly the policy decision makers but we try to be a resource.

Linda Hall: Yes, they frequently do.

Linda Hall: They pick them up anyway; they just don't have to. They may benefit more than that piece. We do see that quite regularly because, generally, employers want to remain competitive in the employment marketplace. That has to do with benefits, as well as pay. They do want to provide a benefits package that is comparable to others.

"It's a fine line between encouraging companies to come in and creating an environment that is conducive to doing business--and over here doing [the] level of consumer protection that we do...If you go too far either way, you have negative effects."

Linda Hall: It's a concern. I don't know that I see it as a problem at this point. Start with the first part of your question: the health insurance market. Premera certainly has over 50% of the market. We have had, in the last couple years, two new companies come in to write in those same markets. [It] really pleases us to have new companies come in because I think it is frequently consumer choice that will bring about more competition in the marketplace.

Just this summer, we had a company that was already here that wrote only group policies who has been approved to write individual policies. It's a balancing act. It's a fine line between encouraging companies to come in and creating an environment that is conducive to doing business--and over here doing [the] level of consumer protection that we do. You have to balance those. If you go too far either way, you have negative effects.

The two that are here have "committed." Does it mean anything? Probably not--but they have pretty much committed to me that they have no intention of leaving the market. Nobody really wants all of a market, they don't want the exposure. But we can't make companies write business here.

We have three servicing carriers that handle that assigned risk pool business. All of them participate in the losses, but we have three who actually handle policies, so it does somewhat inflate what that looks like. Probably the largest market share is about 28% of one company.

I'm pleased when I see us get any new company. We talk to people as we have contacts with companies that don't write here and try to interest them and overcome some of the stereotypes that people have about Alaska. That's part of the problem too.

We had a NAIC (National Association of Insurance Commissioners) meeting in Alaska, in Anchorage probably a couple of years ago, and people were amazed. There were insurance company people here then who had the frozen, wilderness mentality. We try to tout that it's a good place to do business, but it's too small to ever have any real size.

AHPR: You addressed some of the issues of the cost of medical care and its relationship to health insurance. Some studies I read, quite a few years ago actually, indicated that the raise in rates including health insurance, often have a lot more to do with the investments made by the insurance companies than the actual rise, for example, in the cost of health care.

Just like you mentioned, the 150% raise of this one company, it probably would be impossible to attribute that 150% raise to actual issues in workers' compensation--some direct correlation. So there's some other factor causing them to do that. Do you see this as an issue in the raise of rates here in Alaska?

Linda Hall: No, not really. When we review rate filings, we review various components and we review profit levels, we review claims costs, we review company expenses--it's a fairly complex analysis. A company is entitled to make a profit, but we do look at that, and the only place we really see rates change based on investments is [when] insurance companies for a number of years lost money on underwriting and they made up that loss because they weren't charging a sufficient premium to cover losses.

They could do that because of investment income. They obviously are not going to go out of business because they cut their premiums, although some do become insolvent.

The investment piece can offset losses in underwriting--your claims are more than your premium, but we [do] regulate how much profit they can make. It's difficult to say in any given year--you set rates ahead of time [so] you might have more or less claims than the pattern would indicate. It's not an exact science, but we really do look at profit margins. Some of the things I read, I can understand why people cringe because sometimes there are some profits that are [excessive] but we really do try to look at that and it is a part of our rate-making review.

Linda Hall: In a word, no. We're not planning any legislation this year. There are always clean-up things that we can change but we didn't have anything major enough. This is the first year of a shorter session and we decided that we probably don't have anything that's critical that we can't wait another year and see.

Linda Hall: That's correct.

"I've tried to serve as a resource to legislators and if they have something about insurance, we can give them background information, we can help them understand how this may help or not help particular [situation]..."

AHPR: What about legislation that legislators might initiate? I'm guessing they probably give you a heads up?

Linda Hall: Sometimes, not always. Frequently not. They'll say, "Oh, I put a bill in about X," but usually that's later in the year than this. Generally they will ask us, "I want to do this, what do you think?" or, "Would this have an impact?"

Because I've been here several years now, and worked with the Legislature, I'm really very pleased with my relationships with legislators. I've tried to serve as a resource to legislators and if they have something about insurance, we can give them background information, we can help them understand how this may help or not help particular [situation], but I'm not really aware [of pending health legislation] other than as I've already mentioned--Senator French and Senator Ellis' health care bill [SB160].

Linda Hall: No. I heard the same thing that you're saying: that it's difficult to find. I think increasingly we have maybe a shortage of providers. I hear that from the medical society. They are concerned about continuing [to] attracting new, younger doctors to replace those who are retiring. I think that's probably a problem in a number of areas.

What I understand [is] the problem with Medicare are the reimbursement rates. That doesn't really impact what we do.

AHPR: Is there anything else that you would like to tell the readers of Alaska Health Policy Review?

Linda Hall: I guess the only thing that I would add is: sometimes I like to make sure I clarify that we have a really limited role in the health care system. We oversee the insurance system but we really don't have any impact on health care and the cost of health care. Sometimes that's not readily understood.

I would say that we are a source of consumer services. We have a staff of people who work with consumers and help them understand their policies, [or] who may tell them if a company is licensed to do business in our state. They can help them if their insurance company has acted in violation of our statutes.

We really do try to provide that service to consumers and I always like to make sure people know that.

We have, on our web site, an electronic complaint form and they can send it electronically. We've tried to make that an easy process for people to access us because we really can serve as a resource to consumers with issues.

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Jim Jordan: There is one primary theme. That is: dealing with our physician work force issues and obviously, physician workforce issues meaning lack thereof. Considering that in the best estimates that we have, we are about 400 physicians short right now, as we speak, and probably even a little bit more than that.

In order to make up that gap, plus just to meet our future needs--only looking at population growth--we're going to have to have a net increase of 60 physicians per year. I say, "net" and that's an important number to think of because that gets into the whole issue of recruiting and other methods of bringing physicians in on the front end, because if history holds, we have about 40 going out every year.

AHPR: I am guessing there is a demographic bulge so a lot of physicians are going to be aging out in the next few years.

Jim Jordan: One of the estimates is that about a third of the physician population is going to be leaving in the next 10 years. The distribution is a bimodal distribution. We have some younger docs and then we have the big bulge in the snake at the older end with not a lot in the middle. The concern is [about] the older ones moving out.

The numbers I just gave you also assumed a one-to-one replacement. That is from a productivity FTE [full-time employment]-type standpoint. However, I have heard replacement factors that would exacerbate those numbers. I've heard replacement factors ranging from 1.5 to over two.

"The reason for that is that the med students that are coming out today are not interested in the practice model that we see here in Alaska...They are not interested in the entrepreneurial model. They are more interested in a pay check, 40 hours a week..."

AHPR: Why would that be? Because of the aging of the rest of the population?

Jim Jordan: No. The reason for that is that the med students that are coming out today are not interested in the practice model that we see here in Alaska. They are interested in a practice model that is quite a bit different. They are not interested in the entrepreneurial model. They are more interested in a pay check, 40 hours a week, somebody to take care of the administrative stuff. All they want to do is see patients.

AHPR: Isn't that more the model that characterizes the lower 48 and perhaps less so in Alaska?

Jim Jordan: Well, as a general rule: no. But, there are definite indications that that is the way the model is going. For example, Maine. Seventy percent of the physicians in Maine are employed. Of those 70%, two-thirds are employed by the hospitals in Maine. And the other, nearly one-third are employed by a couple of large multi-specialty groups, group practices which we just don't have in this state. Ohio: 65% of physicians are employed. There are pockets where this is happening more and more.

AHPR: Do you know the statistic for Alaska?

Jim Jordan: I don't know the exact number but it is nowhere near that. That's not to say that won't change in the future. But that is what is happening.

The practice model in those states, and particularly Maine, which I'm more familiar with--and which is probably a little more similar to Alaska than Ohio--is [that] the docs coming out of school aren't going out and hanging up their shingle in a solo or small partnership-type practice.

AHPR: In relationship to the problem of recruitment and replacement, what are the advocacy issues?

Jim Jordan: There's not much we can do with the back end. Obviously, there are certain things we can do to hopefully encourage the aging physicians to stay in practice longer but that's something you don't have a whole lot of control over.

As you may be aware, last year we increased the WWAMI [collaborative medical school established through an agreement among the University of Washington and the states of Wyoming, Alaska, Montana and Idaho] class size. We doubled it, from 10 to 20. The effort in continuing to expand the WWAMI class size will continue because that's something that we feel we need to do for long-term growth on the front end.

Now of course, the throughput on that is seven to ten years or so out. And that still doesn't do anything for the current issues.

AHPR: Is there any requirement that WWAMI students, after they become physicians, stay in Alaska?

Jim Jordan: If they don't come back and practice in Alaska, they have to repay the cost that the state has subsidized in sending them through the WWAMI program, which can be substantial. The way that works is that for each year that they practice in Alaska, 20% of the "debt" is forgiven. So if they come back and practice for five years that will eliminate that. The theory is that if you've come back and practiced for five years, you've really sunk your roots and you're going to be here.

AHPR: Can they practice anywhere or are there restrictions on practicing in areas of higher need?

"We are competing with, in a certain sense, every state in the country. What's surprising to a lot of people is that we compete with Texas. They have about the same number of physicians per capita as we have. They have eight medical schools and countless residency programs."

Jim Jordan: They can practice anywhere.

The other aspect on the front end is recruiting those that are already trained. There are a number of things that we are engaging in, some relating to the advocacy as far as the Legislature, and some dealing with other mechanisms. I'll talk about the advocacy with the Legislature first. Frankly, over the last--probably nine to ten years--our whole advocacy agenda has been geared toward establishing a practice environment in Alaska that is conducive to recruitment.

We've been concerned about the workforce issues for quite awhile. We've engaged in different legislative efforts in order to have that competitive practice environment from the standpoint of the medical legal climate that includes a whole host of issues. We have a patient bill of rights [which] was adopted five or six years ago. We have a physician joint negotiation legislation that was enacted in 2005. We have medical liability reform that was enacted.

Those are the types of things that we're looking at, as far as enhancing the practice environment because--let's face it--we're not an isolated island when it comes to workforce shortage issues.

We are competing with, in a certain sense, every state in the country. What's surprising to a lot of people is that we compete with Texas. They have about the same number of physicians per capita as we have. They have eight medical schools and countless residency programs. That's who we are [competing] with, so we have to look at those environmental-practice issues.

Back to the advocacy issues. One of the aspects that we see as being important is being able to get out to the residencies to market Alaska. We do it with tourism. We've got a lot of assets that the state has already developed and has on the shelf that could be utilized.

Frankly, I think once you get by the technical practice environment-type thing, you're into a lifestyle in recruitment. That goes way beyond those elements that fit neatly within the practice of medicine. You're very quickly into outdoor recreation [and] you're very quickly into education--the education system for the kids. It's family recruitment because you also have spouses that are employed or at least may be employed at the front end. All of those types of elements play into it.

AHPR: How can policy address this?

Jim Jordan: Policy can address this in a couple of different ways. One is funding to get there and [to] market. That's definitely part of the political process. And even before the funding, one thing that the physician's task force didn't do that it pointed as a thing to do in the future, is to identify specific specialties that are in shortage and also, to look at specific geographic areas. That's a task that hasn't been done.

One of the things that we are doing as the state medical association to help in that process is to be prepared so that we can assist in that process. But there are other folks that we have to interact with and likewise, would have to interact with us, in order to get the good, appropriate information. Again, that falls into the policy area because that's not easy work.

But that's only the first step. The next step we're going to have to figure out [is]: where do we go to recruit? Seventy percent of the physicians in this country practice within a hundred miles of where did their residency.

We have one residency in this state. So part of the recruitment identification process is once we figure out what specialties we need, we need to figure out where in the country we would have the most success-- which residency programs in Texas, Minnesota, North Dakota? Then we can engage some of the marketing.

AHPR: Getting back to our one residency program here in Alaska. Is there any state policy that you advocate that could address that?

Jim Jordan: I think the general state policy would be to assist in the funding of residency programs in the state.

AHPR: Is there any of that now?

Jim Jordan: No. As far as I know, we're the only state in the union that does not have any state funds that go to supporting a residency program or programs. But this quickly slops into federal policy as well. There's a federal act that capped the number of residency slots. The number of residency slots in Alaska is capped at 22. We will have 36 in the family practice residency. So those 14 slots that are not receiving federal funds have to be subsidized. That money needs to come from somewhere.

Currently, Providence is making up the difference, but that's a spendy proposition and that's one residency program. We have needs in other areas, like internal medicine [and] psychiatry. The list goes on.

There is some interaction with federal policy dealing with appropriate federal support of residency programs. My guess is that that will come. It's not going to happen tomorrow.

But also, I think that there's a place for the state to support those because I think that there is some partnering that could go on because we are not in this alone.

There are ways--at least that I can envision--where there could be joint venturing with other states. And as far as that goes, with Canada's medical schools and residencies because the Canadian schools and residencies are accredited by the same body that accredits all the USA medical schools.

AHPR: And of course, they are our neighbors.

Jim Jordan: They are our neighbor. So I can see there is a lot of room for that type of interplay and of course, that would take some adjustment in state policy.

AHPR: Have ASMA put forth any specific proposals to deal with any of these issues we've been talking about?

Jim Jordan: We've espoused the idea a number of times about doing some joint venturing as far as some marketing. There needs to be a little more infrastructure put together before that can really happen, but we've been trying to get that idea on the table and getting people to think about it.

One of the other recommendations from the [Alaska Physician Supply Task Force] was to look at some kind of a state office, or at least some center within the state, that would act as a clearinghouse because right now there are a whole bunch of individual efforts. Obviously you have individual physicians that are out there recruiting.

We here in the state medical association maintain a register of positions wanted, and docs looking for docs to hire, and we try to put them together. There's that effort. There's some efforts in the state dealing with some of the J-1 visa [which allows foreign medical graduates to practice medicine in the US] programs. You have hospitals that are recruiting. You have the Native health system that is recruiting. But all this is being done separate and apart, and I think the root of the recommendation is there ought to be some kind of a central clearinghouse where all this recruiting can be brought together and done in a more efficient manner.

AHPR: I wonder if you can talk about the relationship between your legislative committee and ALPAC.

Jim Jordan: There is no relationship. First of all, you have to understand what our legislative committee does. Our legislative committee's job is to look at the various and sundry pieces of legislation that are introduced. We try to have a legislative committee comprised of different specialists in different areas because there are bills that would mean something to an OB/GYN that wouldn't necessarily mean anything to an oncologist. Their primary purpose is to do bill analysis from the pure medical aspects.

Based on that, it is their job to make a recommendation as to a position that the medical association takes. That position is then made by the Board of Trustees. The Board of Trustees' positions cannot be outside the overall policy that has been set by the House of Delegates. So there are certain items or proposals where there is long-standing policy and that is the position that is taken on a particular bill. That is the process.

AHPR: So you're saying there is no relationship between what the legislative committee does and what ALPAC does?

Jim Jordan: No. ALPAC has its own governance, its own board. It is separate and apart.

"Do you know how many pages of regulations there are on Medicare? At last count, there were 110,000 pages of regulations dealing with Medicare...Do you know how many pages are on the IRS code? Twelve thousand."

AHPR: There is a lot of concern among the public and among health planners in Alaska that many physicians will not see Medicare patients or will not take new Medicare patients. Can you talk about this? Why is that happening and what is the solution to this?

Jim Jordan: To simply answer the first part of your question: there are probably two elements involved with Medicare. One is the payments for physicians. Medicare pays about thirty-seven cents on the dollar. There's an old saying about, "No resources, no mission." There is a point at which a physician may not have a viable office financially. They are no different than any other employer. They have employees, they have health insurance, and they have all the other things that go with maintaining a business. They have rent. That's hard to do at [a reimbursement rate of thirty-seven cents on the dollar.

The other aspect is the hassle factor with Medicare. Do you know how many pages of regulations there are on Medicare? At last count, there were 110,000 pages of regulations dealing with Medicare. And there's a presumption that those who are part of the Medicare system should be familiar with the 110,000 pages. Do you know how many pages are on the IRS code? Twelve thousand. That will give you a little idea of the complexity and the degree to which that extends as far as the hassle factor.

The other aspect that kind of falls into the hassle factor--and this goes to the second part of the question--is that it's a heck of a way to run a railroad. We're involved in this with Congress again this year. The formula that produces what the physician payment levels are, in my estimation, fatally flawed. The formula produces a reduction in physician payment for next year of 10.1%. This has been going on for years.

Every year there is this game of Congressional chicken, where the formula produces this reduction and then there is eleventh-hour Congressional action to do something. In the last two years, that Congressional action has amounted in freezes to the physician payment, which in reality are reductions. The hassle factor aspect of this is that physicians don't have a clue from year over year what this program is going to do.

I hear a growing sentiment, not only here but all over the country, from physicians saying, "You know, we're not going to participate in that program until there is some predictability."

AHPR: I realize it is a federal program but I'm wondering if there is any conceivable or probable policy at the state level that could in some way address this.

Jim Jordan: I think that there is a potential for some kind of a state-supported program that could provide incentives for physicians to see Medicare patients that would deal with some of the financial issues. It would not deal with the hassle factor issues because those will continue. I have been involved with conversations with a number of legislators on that very issue--Rep. Lindsey Holmes being the one who is probably the most interested and the most engaged in the issue.

There are some very big threshold legal questions that have to be answered. The Medicare program is odd in that--let's just say that you're a physician and you are a participating physician in Medicare and you have a Medicare patient that you know doesn't have a lot of funds--you cannot legally, under the Medicare program, charge that patient "nothing". You can't do it.

The only way that you can do it, is if you were to opt out of the program. That involves a whole bunch of rigmarole that you have to go through, which includes individually contracting with every Medicare patient. That Medicare patient cannot submit a claim for Medicare, nor can you and you have to buy into that for two years at a time.

You're not allowed to do what I call the "Gates routine" where Mr. Gates can obviously--or at least would appear to be able to pay--for any medical care that he would need out of his pocket change, out of his lunch money, if you will. You, as a practicing physician, could not charge him on the basis of your costs, and then for the indigent patient, charge nothing. You can't do that unless you completely opt out of the program.

The threshold legal question is whether a state can engage in such a program so it does not run afoul of the Medicare position. I think that it is possible but I'm not a lawyer.

AHPR: You're not aware of any other state precedents in this regard?

Jim Jordan: I am not aware of any other state precedents.

AHPR: Does ASMA have any particular view or perspective on the federally-subsidized community health clinics?

Jim Jordan: Not specifically, no.

AHPR: My understanding is they often do see the Medicare patients that can't find treatment elsewhere.

Jim Jordan: I think they have a limit, too. They also have to remain solvent and that's the issue. Those are really gnarly issues to deal with and you're looking at somebody who is looking over the fence at being a Medicare beneficiary in short order and it's of concern.

Another aspect [is that Medicare] does not provide payment mechanisms--I suppose as far as that goes, that also holds true in the privately funded insurance programs--that would attract physicians into specialties like general internal medicine. A general internist is the quarterback and is an important player in the whole team of delivering medical care to the Medicare beneficiary.

AHPR: As a specialty, they are among the lowest paid.

Jim Jordan: Right. I think we as a society don't value the cognitive. We value the procedure--somebody doing something or giving you a widget--as opposed to paying for your thoughts.

You have people that are in medical school and in training that may start in general internal medicine and then end up specializing in some other area of internal medicine [because] these days folks coming out of public medical schools are coming out with $150,000 of debt. If they are in a private medical school, it's over $200,000.

That's a lot of money, and they're not coming out of school at age 21. If they've gone into some of the other specialties and subspecialties, they're looking at six and seven years beyond medical school as far as residency training and fellowship training.

"There are a limited number of physicians that are seeing Medicare patients. What do we tell them when the number of general internists [in Anchorage] has dropped from 37 to 19 in the last three years?"

AHPR: I assume every now and then a patient calls and says, "I'm on Medicare and what do you recommend?"

Jim Jordan: We don't have a lot of good recommendations. There are a limited number of physicians that are seeing Medicare patients. What do we tell them when the number of general internists [in Anchorage] has dropped from 37 to 19 in the last three years? General internists are very rare elsewhere. It's difficult.

AHPR: Are DOs eligible to be a member of ASMA?

Jim Jordan: Absolutely, MDs and DOs. Our current president is a DO, Dr. Tanner.

AHPR: ASMA, if I'm not mistaken, has its own or had its own liability insurance. Is that correct?

Jim Jordan: No. It's never had its own liability insurance company. It endorses--and has endorsed for nearly 30 years--one of the two major players up here. That's the Medical Insurance Exchange of California, the MIEC. The other main player in the market is NORCAL. Where you may have thought about this is that NORCAL in the early nineties purchased the assets and took over the business of MICA, the Medical Indemnity Corporation of Alaska.

The seed money came from the state to start MICA and MICA and NORCAL and MIEC, those type of doctor-owned--or "bedpan mutuals" as they have been affectionately called--that started in the mid-seventies when the commercial insurers got out of that business and left Alaska without any. That's how MICA began and then MIEC came in at that same time, in order to have markets here for professional liability coverage for the docs of the state.

AHPR: That's working out well now?

Jim Jordan: Yes, and I think they are two very good, excellent companies. They are providing good coverage and good service to the physicians of the state.

AHPR: I see also that you have an Information and Technology Committee. What policy issues are they concerned about?

Jim Jordan: First of all, they are more interested and concerned with the nitty gritty of our own computer stuff in the office. That's their primary function. The chair of the committee is Dr. Jerome List.

AHPR: Who I have interviewed for this publication in the past.

Jim Jordan: Dr. List is very involved with electronic health records or electronic medical records, interoperability, [and] telemedicine. He is [the president of the board of directors] for the Alaska Electronic Health Records Alliance. I'm on the board of that as well. What our interest is--and I suppose tangentially through the IT committee because of Dr. List's involvement--is that we are very interested in how we can get electronic medical records and electronic health records into the offices of the small physicians in this state, small practices. That's what we are. That's what we're made up of in this state.

It's not an easy task because you have a whole number of factors they must deal with. The financing aspect is one--and it's not only the upfront cost for hardware, software--but it's also dealing with how you determine what the right product is. How do you deal with the loss in productivity?

AHPR: You mean just initially. Presumably, there would be a gain in productivity after it is implemented.

Jim Jordan: Presumably, but initially how do you deal with that? That can involve some very substantial pressures on one's cash flow.

AHPR: Is it too early to talk about the policy issues?

Jim Jordan: I think that there are a lot of different aspects in dealing with the policy issues, but a couple have come to mind that haven't been resolved. The question of property rights: who owns the record? [This] is a huge legal question.

AHPR: Why would this be different with an electronic record versus a paper record?

Jim Jordan: Currently under Alaska law there is no difference, but there's a difference between an electronic medical record and an electronic health record. That's one of the issues and frankly, that's one of the jobs that I think that is important for anybody involved in this whole area is to get a good glossary so that we are all talking about the same thing.

AHPR: Some, or maybe all of these issues, could be federal as well--versus state.

Jim Jordan: Absolutely. The federal aspect has to do with interoperability, so [that] your medical record--be it a chip under your skin or something that is web-based--could get to that hospital in Butte, Montana and it has the stuff that they need. The interoperability aspect of it, which is state to state, federal and we're dealing with all these different health systems and agreeing upon what elements are important in the clinical record. All of that stuff. It's fascinating

AHPR: Is our state generally ahead or behind of other states, in terms of electronic records? Or can you even look at it that way?

Jim Jordan: It depends on the definition of "ahead" or "behind" but I would say this: I think that we are ahead from the overall standpoint. We've been ahead of the curve when it comes to telemedicine. For example, the one thing that I always find interesting is that when I talk to my colleagues in other states about our legislative hearings and the teleconferenced hearings, and the video-teleconferenced hearings--that doesn't happen [in other states]. We've embraced that for years so I think there's acceptance of that type of environment. From that standpoint, I think we're ahead.

As far as the other elements, I don't know exactly where we stand because there are so many things involved. It's a difficult issue to be able to do comparisons with other places.

AHPR: What are the top bills or issues you expect to be covering in the 2008 legislative session?

Jim Jordan: Bills or issues? Probably the top of the list is again, expanding the WWAMI program and looking at other ways we can engage the state and others in recruitment activity. I think there are going to be others that will be interested in these same issues because we're all interested in having sufficient numbers of health care professionals that are there when we need them. I think we're going to have lots of partners in looking at those various aspects. Primarily, I think that is what our interest in going to be. Obviously, we have an interest in some of the proposals that are out there involving enhancing access to care.

"We're interested in enhancing access [to medical care] but there are a lot of aspects to enhancing access to care. It's just not an insurance card. It's just not a funding issue."

AHPR: Like SB160 for example?

Jim Jordan: Like SB160, and no doubt there are going to be proposals from the Governor's Council that will come out. The one thing we know about such proposals from other parts of the country, is that as they go through the process, a great deal of change occurs in them as they go along. We're interested in enhancing access [to medical care] but there are a lot of aspects to enhancing access to care. It's just not an insurance card. It's just not a funding issue. We also have yet to have the workforce there to see the patient, nor to have the funding.

There are aspects of electronic health records that play into all this stuff that will enhance access and enhance the process. It'll all fit together. At this point, we're not taking any specific positions on the various proposals. However, what we've developed are some principles that we will utilize to review all these proposals as they move on--because these are going to be moving targets. These are going to change and we felt this would be a good way to approach it.

We're not alone. This is not original thinking. We're not the only medical-type organization that has adopted this process. Obviously, this is going on nationally and it's going on in the various states in all sorts of different forums--like good, organized medical associations-so we lift from other people's thinking. They don't mind it but for example, the American College of Physicians has done a similar thing in establishing principles and looking at these issues. The AMA debated some principles the first part of this month in their meeting. That's the approach we'll be taking.

AHPR: Here in Alaska, how would an interested party who isn't a physician, know, for example, what your principles are or what positions you're taking, or is that just something that when the press release comes out, we find out?

Jim Jordan: That's correct. When we testify; when it becomes public. That's how we operate. We're a private, not-for-profit and we have our interests and we will address them publicly.

AHPR: What are your expectations of the Governor's Health Strategies Planning Council?

Jim Jordan: Hopefully, they come up with some good recommendations. They're faced with a real daunting task because they are looking at a lot of information. What I bounce that against is that, for example, I served on the [Alaska Physician Supply Task Force]. We met for six months with a very specific topic and very specific things that we were charged with doing. That was a ton of work in a short period of time--with one topic. The Council is looking at the work product of that--certainly--but there's more to it than just looking at the work product. You can look at the recommendations, and then you have to do some kind of evaluation. They are faced with a daunting task. I'm just using the Task Force as but one piece of paper that they have looked at. I wish them well and I think they've got some good folks sitting on it.

AHPR: I wonder if the implication is that maybe there should be some state task force that's permanently situated to consider these issues.

Jim Jordan: Maybe you recall, but I think there used to be some kind of a

health commission way back when.

AHPR: Back in the seventies, there were a number of planning bodies and I don't recall if there was a health commission specifically, but there were certainly state planning bodies.

Jim Jordan: For some reason I thought there was a health commission at some point in time. I think that, my personal opinion, is that in the long run, [such a] body would be a good body to have, that's at a relatively high level that can look at different aspects of health policy, health planning, and provide recommendations to the administration or to the Legislature. That's kind of what the Council is doing in a way but it's the first step.

AHPR: I'd be interested in hearing about Certificate of Need in general, and specifically this negotiated rule making process that is going on right now. Could you comment on both?

Jim Jordan: It's through. Its last meeting was a week ago yesterday (November 20). It's through from the standpoint that all of the discussion's done; now it's a matter of the production of reports.

Jim Jordan: This is a process that I believe has only been used one other time. [The process is] that the various stakeholders are identified and then invited to participate. The job of the Negotiated Rule Making Committee is to provide recommendations to the Commissioner or whoever the convening person is, and then the Commissioner will take those recommendations and do whatever with them. That's the process [and] the process is over. The state hired a facilitator. The facilitator is the one that's putting together all the stuff. We've not seen any drafts or anything, but those will be circulated, I'm sure.

You're probably interested in the policy of the Alaska State Medical Association on Certificate of Need. I'll start by saying this policy was relatively recently modified but for many, many years, the longstanding policy has been to eliminate the Certificate of Need.

This past spring, at our House of Delegates meeting, it was discussed and the policy was modified to support eliminating Certificate of Need in all except the small communities without defining just where that cutoff is. The first part of this month at our last House of Delegates meeting, the small community was defined as less than 60,000. Essentially, everything outside of Anchorage, Mat-Su and Fairbanks is a small community.

AHPR: Can I ask what the rationale was for that decision?

Jim Jordan: It's a complicated rationale, but cutting to the quick, the House of Delegates felt that competition can work in the larger communities. I think all of the smaller communities are all community-owned hospitals-- they may be run by other corporations but they are community-owned. They are in small communities and there is an expectation of a certain level of service in those hospitals. Unfettered competition may not work to the benefit of the long-term viability and survivability of the small community hospital. That's the bottom line.

I want to mention one thing that about Certificate of Need that [I raised] at the Negotiated Rule Making Committee. What everyone has to understand, is that the default position is wide open, pure competition. The only way that you get by this default situation is you have to look at how a state is able to enact a Certificate of Need program. It's under a very strict set of rules that were established over years but they have their roots in a 1943 US Supreme Court decision: Parker v Brown.

The document that was developed is the State Action Document. It is only under this rubric that you can gain an exception to federal antitrust laws because what you're looking at is changing the whole concept of pure competition. The FTC and the US Department of Justice for years, whenever they testified, they always testified against Certificate of Need because they're coming from the angle of "that's the way federal law is." Our Certificate of Need program only exists by meeting these requirements of the State Action Document.

The first element, and I'm simplifying this, is the state must have a very well articulated reason for doing this and what they are going to accomplish with it. The second step to this is that the state must provide oversight to make sure that what they said they are going to do is done. In so doing, they do not overly impinge upon the competitive model.

AHPR: You served, as I recall, on the negotiated rule making process.

Jim Jordan: I was the substitute for Dr. Tanner. There were other substitutes, as you can well imagine. The reason that that happened is that this was done in a very short timeframe and Dr. Tanner is booked out until March.

AHPR: It sounds like there are a lot of hours involved in this process.

Jim Jordan: There were a lot of hours.

AHPR: Do you have any idea of what the final report might say, some notion of direction? 

Jim Jordan: What I suspect it will say--and I missed two of the meetings--both Dr. Tanner and I missed two of the meetings because we had other engagements elsewhere, so I can't give you exactly because I've seen some of the stuff from the other two days [of] meetings, but [I have] not seen it all nor did I hear all of the discussion.

Primarily, I think that what you're going to see--and this is in terms of what consensus was, and there will be a definition of consensus and it won't mean 100%--there will be a consensus that the Certificate of Need program continue in some form and that it needs to be modified so that the process works efficiently and fairly. One of the goals at the outset was to get around some of the litigation that has occurred.

One of the other aspects that will probably be reported on is what the definition of a physician office is because there is no definition in statute or regulation. The reason that's important is that a physician office is exempted from CON requirements. The consensus was that, in order to have a physician office exempted, the physician office be defined as being 100% owned by a physician. That would preclude a joint venture with a hospital, or with Wal-Mart, or with whomever--to be able to utilize the exemption. I think that's what you're going to see.

There were a lot of issues that weren't brought to finality because I think we'd still be sitting there. For example, one of the aspects of the Certificate of Need is that you're looking at granting a certificate at a certain point in time when you've got certain demographics, certain market place conditions, all those factors and it's a point in time determination. What happens six months from then? Those are thorny, thorny issues. Is it a franchise for life, or is it for six months, or one month, or two months, or at what point in time are there material changes that throw it wide open?

AHPR: Having participated in this rare event, do you feel like this type of process, the negotiated rule making process, is a good process that perhaps should be used more frequently?

Jim Jordan: It's a good question, I don't know if I've really come to that answer yet. I've thought a lot about that. Maybe it's because of the topic of Certificate of Need because what you had, by and large, in that room, were those that are stakeholders today that have had Certificates of Need granted or refused.

I think it was worthwhile from the standpoint that you got an appreciation of where all of these different interests were coming from but I think in a way, [what happened in the end is] somewhat colored because there is so much vested interest.

That's what I'm still wrestling with. Actually, to a certain extent, I had the easiest job and the most difficult job because I probably had the largest number of constituents. What I've noticed over my tenure here, is that there's probably a relatively set number of physicians that are interested in Certificate of Need. It's small; it's a small number as far as our organization goes. What happens over time is that the names change and the specialties change, so the discussion about physician [interest] on Certificate of Need, within this organization, is more driven by philosophy than it is [by who] the individual stakeholders that are involved right now at this point are.

AHPR: Just to follow up a little bit about what you were saying about that process, are you implying that there was a missing third sector, like objective economists or objective medical planners?

Jim Jordan: There is all sorts of data out there about Certificate of Need. What it boils down to, in my estimation, a lot of it, it falls on both sides of the fence. It's dueling economists at ten paces with laptops. Sometimes I don't know what you get out of that because the amount of information seems to be so disparate and there's a lot of it. I don't know that that was missing because I think it may have been more confounding.

AHPR: You had access to their products even if they as a sector weren't there at the meeting.

Jim Jordan: Yes, there is lots of stuff out there that all of us have seen off and on over the years that this issue has been around

AHPR: Is there a growing segment of physicians who are beginning to refuse to see Medicaid patients, or additional Medicaid patients?

Jim Jordan: Not that I'm aware of but that's a concern that I have. Medicaid has a better payment mechanism than Medicare. It's the same methodology but what the state of Alaska has done is that they pegged the conversion factor back in 1998, I believe it was. Well, to give you an example: The conversion factor under Medicaid is $49.90. The conversion factor in Medicare is $36 and change. Medicaid still is not picking up the entire tab for opening the front door in the morning but the concern I have is, you throw enough of the other hassle factors in--and also the $49.90 hasn't changed since 1998 either.

AHPR: Any final thoughts you'd like to say to the readers of the Alaska Health Policy Review?

Jim Jordan: We're at a critical time in health care in this state, in this country. Get involved. Be involved. I think that's the important issue. You've got to be. We have all these issues that are facing all of us that are not only impacting us personally but also deal with intergenerational issues that get very complex and very all encompassing at the same time.

AHPR: Thank you very much.

• Ward Hinger, administrator for Diagnostic Health, Anchorage
• Jeff Kinion, CEO of Alaska Open Imaging Center, Wasilla
• Robert Bridges, MD, of Aurora Diagnostic Imaging, Fairbanks
• Chakri Inampudi, MD, president of Alaska Radiology Associates, Anchorage
  
• Bradley K. Cruz, MD, of Alaska Imaging Associates, LLC, Anchorage

• Shawn Morrow, CEO of Bartlett Regional Hospital, Juneau
• James Shill, CEO of NorthStar Behavioral Health Systems, Anchorage
• Edward Lamb, CEO of Alaska Regional Hospital, Anchorage
• E. Al Parrish, CEO/VP of Providence Health Systems, Anchorage
• Mike Powers, CEO of Fairbanks Memorial Hospital and Denali Center, Fairbanks
• Norman Stephens, CEO of Mat-Su Regional Medical Center, Palmer
  
• Ryan K. Smith, CEO of Central Peninsula Hospital, Soldotna

• Creed Marnikunian, MD, Geneva Woods Surgical, Anchorage
• Baxter Burton, CEO of the Alaska Heart Institute, Anchorage
• Gerald L. Nicholson, administrator for Katmai Oncology Group, Anchorage
• Jeremy Hayes, administrator for Advanced Medical Centers of Alaska, Anchorage
  
• Bruce Jayne, administrator for Alaska Surgery Center, Anchorage

• J. Ross Tanner, DO, president of the Alaska State Medical Association

• Victor Joseph, Health Director for Tanana Chiefs Conference Health Services

• Jay Butler, MD, Chief Medical Officer Department of Health and Social Services

• Personal communication with Pat Carr, Health Program Manager in DHSS; and Kevin Henderson, Medical Assistance Administrator in DHSS
• State Certificate of Need website

The Review is issued electronically weekly during the regular legislative session and monthly the rest of the year. A 12-month subscription to Alaska Health Policy Review is available for $850. Please inquire about discounts for multiple issues for the same organization, and for smaller nonprofit organizations. Don't miss an issue! Send orders, comments, and inquiries to Lawrence D. Weiss at health.policy.review@gmail.com, or call (907) 276-2277.