Alaska Health Policy Review

By Lawrence D. Weiss PhD, MS

Executive Director, Alaska Center for Public Policy

Editor, Alaska Health Policy Review

November 2009

Senate Bill 61 is cosponsored by Senators French and Ellis, and seeks to establish the Alaska Healthcare Program. To the best of my knowledge, this bill is the most far-reaching health reform bill to be introduced in Alaska since the early 1990s. It is an important bill that addresses life and death issues for tens of thousands of Alaskans. I have been thinking a lot about SB 61. Will it work as intended in Alaska? Should it be improved or replaced by a "better" approach? Perhaps most importantly, does Alaska have an adequate process to evaluate different and perhaps competing health reform policies?

The Alaska/Massachusetts Connection

SB 61 was modeled after health reform legislation in Massachusetts enacted in 2006, often referred to as "Chapter 58." The primary goal of the Alaska Healthcare Program is to "ensure that residents of the state have access to affordable healthcare insurance." The central components of SB 61 have a superficial relationship to those in Massachusetts:

establishment of the Alaska Healthcare Board to manage the Alaska Healthcare Program. The Board is housed in the Department of Health and Social Services and has 14 members appointed by the governor. Massachusetts has a similar board.

establishment of Alaska Healthcare Clearinghouse, which would disseminate information about healthcare insurance products available through the Clearinghouse. Massachusetts has a similar clearinghouse.

requirement that every resident of the state participate in the Alaska Healthcare Program, a requirement often called an "individual mandate." There may be certain exceptions, for example if a person already has comparable health insurance. Low-income residents would receive vouchers to help pay for all or some of the required health insurance. Massachusetts also has an individual mandate and provides subsidies to low-income people to help them purchase health insurance.

requirement that large and medium-sized employers either provide health insurance or pay the state a fee of 1 to 2 percent payroll. This is often called "play or pay." Employers in Massachusetts have comparable responsibilities.

establishment of certain minimum criteria for providing essential health care services. Health insurance would have to meet this requirement. There is a similar provision in Massachusetts.

establishment of the Alaska Healthcare Fund, which would be made up of state and federal monies, and employee and employer contributions and fees, and other sources of funding. There is also a mix of funding sources in Massachusetts.

It is clear that a superficial structural overview of both programs indicates key similarities. However, unlike Senate Bill 61, which is merely a proposal, the Massachusetts health reform plan has been operating since 2006. How has it fared?

The good news:

Massachusetts is now first among all states in terms of the percent of children and adults who have health insurance, with 97.4 percent of all residents having health insurance coverage.

In 2007, the first full year of reform, the Massachusetts rate of residents deferring needed healthcare because of financial barriers was one-half the national average.

About 70 percent of doctors and 59 percent of residents support the health reform plan, according to a poll recently released by the Harvard School of Public Health, and by even larger margins, physicians and patients said they want the law to remain.

The bad news:

The program is considerably more expensive than initial planning indicated.

Services have been drastically reduced to tens of thousands of legal immigrants in the state in order to save money.

Safety net hospitals are suffering severe revenue shortfalls.

A special statewide commission recently established to deal with rising costs released a report with the recommendation that the state radically transform the way it reimburses healthcare providers by moving to global budgets. The concept of global budgets is typically associated with single-payer systems, such as in Canada. The idea is that various healthcare provider groups, such as physicians or hospitals, band together and negotiate annual budgets with the state. Think negotiated block grants -- a radical idea in the United States at this time.

In light of the known successes and problems experienced by the state of Massachusetts, could we expect similar results here in Alaska if SB 61 were implemented? The problem with the superficial structural comparison of the two health reform plans is that this type of comparison leaves out some important historical, cultural, and political differences such as:

Massachusetts has been actively discussing and enacting health reform legislation for 25 years.

Even before the 2006 health reform legislation, Massachusetts had much higher health insurance coverage rates for both children and adults than most other states.

In stark contrast with Alaska, Massachusetts has many more Democrats and Independents than Republicans.

Based on statewide polls, 92 percent of Massachusetts residents think that health care is a right. I strongly suspect that such a consensus would be more elusive in Alaska.

Massachusetts has numerous large nonprofit health care providers, health maintenance organizations, and research institutes, not to mention medical schools -- an extraordinary health care infrastructure that Alaska almost entirely lacks.

Alaska has one of the most concentrated and poorly regulated health insurance industries in the nation -- in contrast to the situation in Massachusetts.

A Comment on Revenues

The Massachusetts plan appears to make much greater use of Medicaid as part of the health reform effort than does Alaska's SB 61. This is important because the state is reimbursed for approximately 50 percent of all Medicaid expenditures by the federal government. We will take a look at this in more detail. Moreover, Massachusetts negotiated with the feds to receive a 50 percent reimbursement on many additional expenses associated with health reform. SB 61 does not mention a comparable arrangement or intention.

In light of the highly concentrated health insurance industry in Alaska, and the absence of any significant health care cost controls, I would expect that health care costs would rise at least as fast in Alaska after implementation of health care reform modeled on the Massachusetts plan, as they did in Massachusetts.

Here is an extensive quote from the fiscal note for SB 61 written by Linda Hall, director, Division of Insurance. It is important because it documents baseline costs and assumptions. The analysis starts out with this rather curious paragraph:

Caveat: The Division of Insurance has no existing expertise in establishing or administering State benefits programs. The Division of Insurance oversees the conduct of insurance companies, ensures solvency, and approves rates and forms. The Division of Insurance does not determine what are minimum essential health services or how they should be priced. Further, the Division of Insurance has no expertise in determining the eligibility of individuals for government subsidies. All of this expertise will have to be developed by the Division of Insurance from scratch, primarily by recruiting and hiring a substantial number of employees with this type of expertise.

The tone leaves me with the distinct impression that Director Hall is not enamored with this bill, but to continue:

Senate Bill 61 allows for a wide range of options that may be considered essential health care services. As a result, it is not possible to determine the cost of the bill with a high confidence in accuracy. The range of possible costs is wide, depending upon how the Board defines certain terms.

This fiscal note examines the potential cost of the program, as well as the estimated cost of administering the benefit. Costs for insurance premiums are very preliminary until the "essential health care services" are defined. This fiscal note reflects the high-premium scenario using the state of Alaska employee plan as a model and is not broken out by budget component.

Assumptions:

The Health Care Fund only pays for the non-Medicaid eligible population. State matching funds for Medicaid do not come from the fund.

The estimated cost for insurance premiums is $12,000 per person per year (based on the state of Alaska employee insurance plan).

The cost of premiums to purchase insurance is on a needs-based sliding scale. The state share of premiums will be paid from the fund.

Co-pays and deductibles are not addressed in the bill so we assume none are required by any plan.

There are an estimated 115,000 uninsured persons in Alaska, 83 percent of whom are adults.

Cost Estimates for Alaska Health Care Program:

There are 27,000 uninsured persons who are below 100 percent of the poverty level. Insurance is provided at no cost to the individual. Total cost to the state is $324,000,000.

43,000 have incomes between 100 percent and 300 percent of poverty. They would pay premiums on a needs-based sliding scale. With an estimated average cost of $6,000 per person, the total cost to the state is $258,000,000.

Above 300 percent of poverty: $0 total. No cost to the state.

There are about 25,500 uninsured individuals who are above 300 percent of the poverty level. They would bear the full cost of the mandatory insurance. These individuals would bear a total cost of about $306,000,000.

The idea that families with incomes of 100 percent to 300 percent of federal poverty level could pay any significant portion of premiums, not to mention co-payments or deductibles if that were the case, is very misguided. Based on research we have done at Alaska Center for Public Policy in the last year, families trying to survive at these levels of income are well below what is required for the most rudimentary basic family budget in Alaska, especially in rural areas.

Note in addition, "The Health Care Fund only pays for the non-Medicaid eligible population. State matching funds for Medicaid do not come from the Fund." This was determined at the present levels of eligibility for Medicaid and Denali KidCare (which provides health insurance to children of low-income families, and to low-income pregnant women). The current maximum level of family income for eligible children and pregnant women is 175 percent of federal poverty level, among the lowest eligibility rates of all states.

A Key Issue

Here is the key issue: When the SB 61 plan buys or contributes to purchasing health insurance, every penny of that money comes out of the state coffers. However, the federal government pays at least 50 percent of the health bill for every child and pregnant woman who qualifies for Denali KidCare. If the child is eligible to use any of the Alaska Native health services, the federal reimbursement rate is 100 percent! Consequently, the state could save tens of millions of dollars per year, and maybe more, by first expanding Denali KidCare to at least 300 percent of federal poverty level before using state funds in the SB 61 plan.

There are some additional benefits that accrue using this strategy. Perhaps the major one is that there are no premiums, deductibles, or copayments with Denali KidCare, so those potential assaults on family budgets are off the table. Another potential benefit is quality of care. SB 61 offers "at a minimum, essential health services," whereas Denali KidCare offers a wide range of health care services, presumably well beyond the "essential health services" that SB 61 is likely to offer. Denali KidCare is part of the larger Medicaid program in Alaska:

Medicaid, an entitlement program created by the federal government, is the primary public program for financing basic health and long-term care services for low-income Alaskans. It is funded 50 percent by federal funds and 50 percent by state general funds. The program focuses on coverage for low-income children, pregnant women, families, the elderly, blind and the permanently disabled. The federal government establishes guidelines that require the state to cover specific categories of people and types of benefits. It is, however, the Legislature's responsibility to determine which services are to be covered, the qualifying standards and the categories of people who will be eligible for benefits under the Medicaid program. Within these guidelines and constraints, the Department of Health Services has considerable flexibility in establishing financial eligibility criteria, benefit packages, and payment policies.

The benefits for expanding Medicaid to include as many Alaskans as possible are quite similar to the benefits with Denali KidCare. Compared to the health program outlined in SB 61, an expanded Medicaid would offer better health care, would be much less expensive for the state, and would have no financial impact on low-income families.

Community Health Centers

I don't think that community health centers are even mentioned in SB 61, but I believe they have a central role to play in ensuring that every Alaskan has access to high quality health care. Community health centers are already major players in terms of the delivery of health care in this state, and are by far the largest source of health care for low-income Alaskans, and increasingly for Alaskan seniors who have Medicare but cannot find a primary care provider who will accept them as a new patient. According to the Alaska Primary Care Association,

A community health center is a non-profit, community-owned health care organization serving low-income and medically underserved communities. For more than 40 years, the national network of community health centers (also known as federally qualified health centers) provides high quality, affordable primary care and preventive services, and often provide on-site dental, pharmaceutical, behavioral health, and substance abuse services. Community health centers are located in areas where care is needed but scarce, and improve access to care for millions of Americans and thousands of Alaskans regardless of their insurance status or ability to pay. [Today in Alaska there are] 26 organizations employing over 900 people [who] operate 141 sites across Alaska through the Community Health Center system. Those sites serve over 80,000 people each year through 331,000 visits, providing them with comprehensive, quality primary care.

Community health centers already exist in Alaska, and they serve communities and populations across the state. They play a critical role as a health safety net, and they are often the sole health care provider in small towns and villages. They are required to adhere to strict quality-of-care standards and to report those regularly. Despite chronic underfunding, they have only received small amounts of state funding once or twice since they have began operation in Alaska.

I strongly suspect that for a fraction of the funds that would be spent on private health insurance vouchers via the SB 61, directly funding community health centers would be far less expensive for the state, and would contribute to far better health care outcomes. This is, of course, a testable hypothesis, but who in the state Legislature or administration has actually evaluated comparative health reform alternatives? To the best of my knowledge, no one.

Health Insurance Consumer Protection

The state of Alaska has some of the weakest health insurance consumer protection regulations in the nation. I believe that any serious health reform effort in the state needs to address this significant policy deficit. Last year Families USA conducted a comprehensive study titled, "State Consumer Protections in the Health Insurance Market." Here are their main findings:

In the vast majority of states, insurance companies are permitted to reject individuals for coverage based on their health status, occupation, or even their recreational activities.

Only five states prohibit all insurance companies from cherry-picking the healthiest consumers and excluding everyone else.

If an insurance company does accept an individual's application for coverage, few states significantly limit how much an insurer can increase an individual's premiums based on what the insurer deems to be health risks (which can include anything from cold sores to hobbies to below average height).

In 35 states and the District of Columbia, there are no limits on how much insurers can vary premiums based on health status. An additional six states have limits that still allow dramatic variations in premiums.

Insurance companies will not necessarily provide coverage for the very health services individuals need when they sign up for a policy. In all states, insurance companies are not obligated to cover pre-existing conditions for most people for at least the first six months that an individual has a policy.

In 21 states and the District of Columbia, insurers can exclude coverage for pre-existing conditions for more than one year.

In eight of those states and the District of Columbia, insurers can exclude coverage for pre-existing conditions for the duration of an individual's policy.

Not every state ensures that premiums are reasonable by reviewing premium rate increases before insurers impose them. And few states require that at least 75 cents of every dollar collected in premiums be spent on medical services rather than administration and profit.

In 20 states and the District of Columbia, insurers can set and raise premiums without adequate oversight.

In 45 states and the District of Columbia, insurers can spend less than 75 cents of every premium dollar on medical services.

In the majority of states, insurance companies can move to limit or revoke an individual's policy long after it was purchased by claiming that the policyholder did not adequately reflect his/her medical history on the application. Oftentimes, this leaves individuals with huge medical bills that must be paid out of pocket and no recourse.

Insurers in 29 states and the District of Columbia are allowed to look at a policyholder's medical history and perform medical underwriting months, or even years, after they issued the policy.

In 44 states and the District of Columbia, insurers can revoke an individual's health insurance policy without advance review by the state.

Alaska scores zero on the Families USA scorecard on every consumer protection point in this summary, with the exception of "partial credit" for reviewing premium rate increases. In fact, of 14 health insurance consumer protection standards found across the nation, Alaska has "zero credit" for ten of them, "partial credit" for one of them, and "full credit" for the remaining three. This leaves Alaskans more vulnerable to commercial health insurance abuses than in nearly every other state of the nation. SB 61 would require the purchase of private health insurance policies by tens of thousands of Alaskan families and individuals, but does not address the issue of consumer protections.

A comment on process:

I commend Senators French and Ellis for developing their precedent-setting health reform legislation, and for encouraging wide debate about it. However, the fact is that SB 61 was created and has proceeded in a vacuum of health policy analysis. Outside of the legislative fiscal notes there has been no serious systematic discussion of costs or consequences -- intended or otherwise -- of SB 61. There has been no systematic discussion comparing SB 61 to other health reform plans in order to determine which would be better public policy and why.

Most importantly, there is no institution in Alaska, public or private, that has the resources, expertise, and mandate to conduct rigorous, nonpartisan, comparative health policy analysis. In light of the $5 or $6 billion dollars per year spent on health care in Alaska, and in consideration of the importance of the issue to the lives of all Alaskans, shouldn't we have an ongoing process to analyze proposed health policy changes in Alaska?

In recent years a number of other states have established processes whereby they select or invite a range of health policy reform plans and then evaluate them against a standard set of criteria. California comes to mind as one of the earlier states to have done this. In that case rigorous evaluation criteria were established, then nine different state health policy proposals were solicited from different organizations representing the spectrum of very conservative to very liberal health reform plans with statewide impact. Two outside organizations with expertise were engaged to thoroughly and dispassionately evaluate and score all of the proposals against the criteria. Ideological variables were not included. The result was an extraordinary resource for making health policy decisions that may actually have the desired outcomes when implemented, and may actually avoid many of the unanticipated and undesired outcomes.

The health of the people is too important to squander because of negligent planning. I believe we can and must develop the capacity here in Alaska to conduct logical, systematic, unbiased, and ongoing evaluations of prospective health policy proposals. Compared to the billions of dollars that will be spent on health care in Alaska every year, the cost of good analysis will be absolutely insignificant, the prospects for better health policy will be enormous, and the improvement in the quality of Alaskan lives will be incomparable.

Plan B

One of my colleagues likes to call it "The Larry Plan." That would be silly indeed. For lack of a more meaningful name, how about "Plan B." In summary, Plan B has the following central components:

Maximize Medicaid benefits and eligibility in order save state dollars and ensure a comprehensive health care package for recipients.

Maximize Denali KidCare benefits and eligibility in order to save state dollars and ensure the best health care package for children and pregnant women.

Give adequate state support to community health centers across the state so they have sufficient resources to provide primary care to all Alaskans who need it. This would likely cost a fraction of providing vouchers for commercial health insurance, and would ensure high quality care.

Greatly strengthen Alaskan health insurance consumer protection laws so that the state and all private payers are more likely to get the coverage they expect and need.

In comparison to SB 61, Plan B may have some additional features, which some may see as benefits:

No individual mandates. In other words, no one will be forced to buy private, for-profit health insurance.

No employer mandates. In other words, no employers will be required to purchase private for-profit health insurance or pay a "fine."

No new state institutions will be established to oversee a new complex state health plan. Plan B is built entirely on ongoing public health insurance programs, private non-profit primary care facilities, and the regulatory framework of an existing Division of Insurance.

Is Plan B better than SB 61 in all respects? Probably not. For example, those who do not qualify for Medicaid or Denali KidCare and have access only to the community health centers will get good primary health care, but they will not have access to specialists or hospitals in the event of major illness. They might under SB 61.

What to Do?

What to do? SB 61, Plan B, and any other serious proposed health reform legislation being contemplated in the near future really need that rigorous, nonpartisan, comparative health policy analysis in order to determine the good, the bad, and the way forward. We have creative, competent people right here in Alaska who would perform this service admirably. We just need leadership and minimal resources to put a process in motion.

One other thing I need to comment on: the question of immanent health reform at the federal level. I have heard some legislators say that they will not move certain important (in my opinion) pieces of health legislation out of committee because, "We just don't know what is going to happen at the federal level and how that will affect Alaska."

That's right, you don't. And that is precisely why we need to pass legislation now that will maximize the support of the state in any way we can to strengthen safety net providers such as community health centers and health departments, to maximize eligibility criteria for public programs, and to strengthen health insurance consumer protection. Legislators can comfortably wait for years while federal health reform takes shape and trickles down to Alaska, but Alaskans who require preventive, routine, and critical health care cannot. We need it now.

Back to top

Representative Mike Kelly wants to put the breaks on "Obamacare." In January of 2010 he intends to introduce the Health Care Freedoms Act, which "would give the people of Alaska the opportunity to vote on ... a change to the Constitution. It would amend the constitution to, very simply, prohibit the passage of laws that would force any person or employer to participate in a particular health care system or plan." In this interview Representative Kelly candidly discusses why he is introducing this legislation, why he supports the Certificate of Need Program, unlike most Republicans, and why he and AARP "are often on different sides of the political spectrum." Representative Mike Kelly represents House district 7, which includes Chatanika, Fairbanks - Steese Hwy, Fox, and Two Rivers. He is a member of the Finance Committee and has several Finance Subcommittee positions including chair of Corrections Finance Subcommittee, member of Fish & Game Finance Subcommittee, and chair of Natural Resources Finance Subcommittee. He is a former electric utility CEO and commuter airline pilot.

AHPR: I would like to talk to you about your intention to introduce a resolution to place an amendment to Alaska's constitution, regarding health reform. But first, I would like to ask you about your general interests in health care. So, for example, what is your view on the current structure of health care for Alaskans? Does it work well the way that it is, or do you think it needs significant reform?

Kelly: Okay. As far as my connection to health care, the only connection is I've served for over 20 years now on the Hospital Foundation here in Fairbanks. So, that probably should [be stated] right up front here. That is, except for being a patient, that is my volunteer connection to health care here in Fairbanks. To your question about my view, I guess [I would like] to give it a context. I am a person who believes that the health care system in the United States is among the best in the world, but that it has problems, and those problems need to be tackled. Then the question becomes, how? You know, I don't want to harm the good things about our current system while attempting to move to a better system in access, quality, and cost.

I'm a conservative, which means I want to change carefully as we go forward. So, when I look at the current system, I have the conviction from information that I have received over time, that probably three quarters of the country or better believe that the current system we have now, that they are satisfied with it or they are generally pleased with it. About the same number, somewhere in the 75 to 85 or so percent, are covered or could be covered by the system. So, that would tell you that as we move forward with improvements to the system, they should be done carefully so that we do not trigger a result, which is different from what our goal is. For example, dramatic increases to cost are absolutely to be avoided, in my opinion. So, I hope that answers your question.

AHPR: Thank you. It sounds like you're largely satisfied with the system as it is, but if there were any aspects of the system that you think might need reform, what kinds of reform elements would you support, if indeed you support any, at this point?

Kelly: I would not characterize me as happy with the current system. That would be going overboard because I have significant problems with the current system. What I am on guard about is not to make it worse, but to truly make it better. Having worked in the volunteer role up close to it for over 20 years now, I have a sense of the precious things that we have created, and I have a pretty good sense of the fact that on cost, quality, and access, those are always the three challenges as we go forward. So, I just wanted to state that.

Now, as we go forward, what are some of the things that frustrate me? We have a current system that here in Alaska, we are going to see a dramatic -- only exceeded by one other state -- a dramatic increase in the Medicaid population between now, and I think the date is 2030, [according to] when the data I saw is based on. And yet, a vast majority of the doctors in Anchorage won't see a new Medicare patient. Just under half of the ones in my town, here in Fairbanks, are in a similar situation. Now, we might be tempted to pitch a rock at a doc for that, but on the other hand, the part of the system that already is touched by the federal government in some cases reimburses them fifty cents or less on the dollar.

It doesn't take a genius to see that that system ... and then we wonder why we can't recruit new docs. I'd like to see that problem solved, and I don't see it as one that is going to be solved by continuing to cut reimbursement rates to doctors for their services. You can't get a guy to drive a truck for half wages, or build a building, and I don't think these docs are going to come to the table if they get treated that way. The evidence is clear that they won't. So, that's one area where the current system needs to be improved. Just to comment on that, I am very suspicious at having the federal government leading that effort -- since they are deeply invested and involved in the current problem -- is necessarily the way to go forward.

" ... it would probably be very difficult to snap one's fingers and change to a system that had no involvement [by] the state or the feds. However, I am one who is aware that the U.S. Constitution, for example, does not provide that the government is going to provide or control health care for Americans ..."

AHPR: Talking about Medicare leads me to want to ask: Do you believe that there is any role at all for the public sector in financing, or in the delivery of health care to Alaskans? And, by public sector, I mean either the state or federal government.

Kelly: Well, I think that they are involved to an extent now. Back to my first premise that we have to make changes carefully to the health care system, I don't believe you just rip the foundation out from under what we are doing now, and expect that you're not going to do harm. So the answer to your question is that it would probably be very difficult to snap one's fingers and change to a system that had no involvement [by] the state or the feds. However, I am one who is aware that the U.S. Constitution, for example, does not provide that the government is going to provide or control health care for Americans, and that the part of the feds meddling in, well, social security systems is another example of why I am a little skeptical about government increasing its involvement.

I tell my kids, and I think they have pretty much figured it out for themselves, "Don't count on that out there, because the Social Security system, which is called 'insurance,' never was and isn't, and is headed for disaster. If you are counting on that instead of your own personal savings, and 401(k), and things like that, you are going to be very disappointed." So it's, things out there, Larry, that I see, that cause me to be skeptical about increased government involvement. And that's part of why I intend to offer the Health Care Freedoms Act in the Alaska Legislature in January.

AHPR: We will get to that in a moment. I just have one additional question I would like to ask you. You mentioned that you were a trustee in the Fairbanks Community Hospital Foundation, and on your bio it says you are also a trustee on the American Hospital Governance Committee.

Kelly: I am off [the American Hospital Governance Committee] now, Larry. I served my, I guess about a term and a half. I replaced somebody on the first term, partial term, and then I served a full term. But I am off of that now.

AHPR: Okay, now you are off of that. In any case I was wondering if you have anything to say about whether these positions, in some way, helped shape your views on health care, and if so, how?

Kelly: I would say yes, because they have given me a closer look than the average guy driving down the street. Although I am not a doctor directly involved in it, it gave me a closer look as a citizen, a volunteer, and so I think the answer is "yes."

AHPR: Is there anything else you might want to say about in what ways [your views were shaped]? Was there some lesson, some take-away lesson you have from that time you spent with these two organizations?

Kelly: Well, I know that, for example, in the CON battle here in Alaska, If you are familiar with that -- the certificate of need -- and I'm sure you are, that rises up and settles back down and rises up from time to time. My position on that, new entrance into the market, has been one of being careful as well. We are close to the end of the road here in Fairbanks. We have a limited market and we have built a kind of a partnership with the doctors over the years where the Foundation provides the bricks and mortar, infrastructure, the machines, the property -- all of those things to offer them a place to perform their health care services.

We are also involved in the Tanana Valley clinic, the clinic up here. When new entrants come into the market, the certificate of need has kind of provided for a look at that by the state to determine if additional capacity is needed, because in a limited market like this, if you add new capacity and increase the number of services, then from the bricks and the mortar to the actual payments for use of the machine, it is going to increase procedures and increase costs.

Now, would I like to be able to have come to the conclusion over that time that just taking away all of the regulation, and just letting folks open new facilities on any street corner they pick, that would be my preference? Yeah, I would like to see it work that way. However, to change from a very highly regulated system that we currently have, which places burdens on our hospital system -- come one, come all, the "will-pays," the "can't-pays," the "won't-pays," the uninsured -- all of these people come to our hospital. When someone has a problem, we do not focus on their ability to pay, we take care of them. That's a long way to saying that I am definitely someone who prefers the private sector competitive solution, but understands that in highly regulated health care, you have to be careful just as in the electric business, that I had quite a good career with. When California ripped all of the stops off, you are old enough to know, it came down to its knees before they could recover.

And so, when you do something like that in the interest of changing -- a real game changer -- you've got to be careful not to harm what you are doing. You have got to be careful that what you are doing is going to play out to be to the benefit of the patient, and in all three ways, and not harm them. So, I am not as easy to read as you might first might think by my political affiliation, as I once told somebody in a moment of frustration on the CON debates, because I think it is a crude and miserable tool. If we are going to move away from it, we have to do so carefully.

I said that the reason I am not as easy for you to just place in the conservative, open competition [pigeonhole] when it comes to health care is because I know too much by being close to it here. So I just want to be careful. It isn't that I don't want to move in that direction -- because I surely do -- of competition. I believe it offers lots of solutions in health care, but they have to be moved to carefully so you don't end up in the mishmash between heavy regulation on one side of the street, and the other side of the street is wide open -- self-referral and all those things that have real serious challenges -- as you work through the change.

" ... It would amend the constitution to, very simply, prohibit the passage of laws that would force any person or employer or to participate in a particular health care system or plan. ..."

AHPR: Thank you. That lays a good foundation for now moving on to the specific kind of policy change that you would like to see. I would like to focus in on your intention, announced in a press release at the end of September, to introduce a resolution to amend Alaska's Constitution regarding some aspects of health reform. I wonder if you could tell us what the main features of this constitutional amendment would be, and why you are introducing it?

Kelly: Okay, huge hilltop concept first. I wouldn't have introduced this if we did not have what is referred to as "Obamacare" coming at us wide-open throttle. So that is part of a trigger mechanism for, in my opinion, making it necessary, particularly at this time, to move forward with this health care freedoms act. Specifically, what it would do first of all, it would give the people of Alaska the opportunity to vote on it -- I think it would be November 2010 -- as a change to the Constitution. It would amend the constitution to, very simply, prohibit the passage of laws that would force any person or employer or to participate in a particular health care system or plan.

It derives its context from the fact that health care control is not a power that is enumerated in the U.S. Constitution, and that the 10th amendment pretty much says the feds should act only in the areas, which are specifically enumerated to give them the power to act by our constitution. So, what I am trying to do here, and I think it's up to 20 states now that are looking at the passage of the same sort of act, is just to make sure that we send a strong signal that government is not to get into the private lives of individual Americans when they make their health care decisions. They should be free to join any plan, whether it is a government plan, or any plan. But to force them into it is wrong and is not constitutional, and that's really what it simply does. It also adds one other element, and that is [it] frees up the ability of the individual to pay for their own health care services. It's on its face ridiculous that we cannot choose to freely pay for a service, but are forced to -- "No you can't pay for that." You've got to go through this horrible rigmarole and the reimbursement problems and all that and the things that are associated with it when you can't actually have some say directly with the doctor in the exchange. You pay for your own stuff if you choose to, and then choose to join, or not join any health care system whether you are an individual or an employer.

AHPR: In terms of paying for your own care, are you referring to Medicare, for example? I'm not exactly sure where that comes from, or what the actual problem is.

Kelly: Well, it is bigger than just Medicare, but that would be a good example. You have a situation where, if you have the free choice, then you can deal with your employer who can provide health care coverage as part of your benefits package. You deal with some employers that say, "Look, we are not going to buy the health care. We will give you the choice, or you've got the choice, you can either have health care or we can raise your compensation and you can pay for it yourself." Or any of the different ways, including insurance company health care-type coverage that is very, very prevalent, and something that I've been familiar with all my work life. You get to choose to stay with that, and to make that payment. Not to the government, but to an insurance company, or through your employer, or directly, yourself, to cover yourself. That choice would stay with you.

AHPR: When can we expect you to introduce this legislation?

Kelly: In January the bill would be just pre-filed, which it is. And then, as soon we convene, I think it is the 19th of January, then all of the bills that have been pre-filed are read across the floor and they become bills that are then ready for action.

AHPR: Oh, so it is already written and pre-filed?

Kelly: Yeah. What we have done is we've said, essentially, "Here is the bill." We have worked with legislative drafting folks and gotten it, essentially, in ready form. It doesn't have a bill number yet because they do that when they read it across the floor.

AHPR: Okay, thank you. I'm curious, and I think a number of our readers will be also, why you want this, specifically, to be a constitutional amendment, rather than just a regular piece of legislation? It seems like this would have the effect of greatly inhibiting legislative flexibility to respond to health reform opportunities in the future that might benefit Alaskan families, but that we don't know about yet.

Kelly: I don't think it would restrict them at all, as long as it doesn't attempt to muscle in and take away their freedom of choice in those three areas.

AHPR: But again, why a constitutional amendment, rather than a regular piece of legislation?

Kelly: I think that all of the states that are going down this trail are looking at the fact that this is not an enumerated power in the U.S. Constitution, and that if we are going to have a discussion at that level, which is whether it is an enumerated power, we are very much advised to raise it to the level of a vote and a constitutional provision. We think it deserves that horsepower.

AHPR: You know, something occurs to me. I don't have the Alaska Constitution in front of me right now, but it seems to me that there is a phrase in there about the role of government, in part, is to look after the welfare of the people, or something like that. Would this in any way inhibit that?

[Note from editor: Alaska Constitution, Article 7 - Health, Education, and Welfare; Section 4. Public Health, "The legislature shall provide for the promotion and protection of public health."Section 5. Public Welfare, "The legislature shall provide for public welfare."]

Kelly: Well, I think what it does is, it sends a clear message from the people, should they pass it, that that is fine, that that power is consistent as long as it does not tread upon the three areas that we talked about: with the individual, the employer, and the ability to pay directly.

AHPR: You mentioned Arizona in your press release, and probably, to the best of my knowledge, this type of bill is furthest along there at this time. AARP in Arizona came out against it for a variety of reasons. Just to note these, for example, AARP believes that the state constitutional amendment could raise health care costs for state Medicaid and certain Medicare plans. It could raise costs for private insurance, Indian Health Services, veterans affairs systems, and other state health care programs that prioritize medical options on the basis of cost or quality. So I would like to ask you, could these consequences happen in Alaska if your constitutional amendment were passed?

" ... I would throw out that if they think that a government-run system, Obamacare, is going to be less costly than a more carefully crafted, less focused on government but more on doctors and patients and choices at that level, then they are ignoring the record, which would say that the costs will be far greater ..."

Kelly: I guess it is fair to state that I and AARP are often on different sides of the political spectrum. I think it has become an organization much different from when it first started out, with the folks coming out of the World War II generation that were essentially focused a little more on individual responsibility and not so much on "what can the government give me?" So it doesn't surprise me that occasionally my view is different from theirs. As to the cost increases, I am clearly, as we said at the beginning of the interview here, interested in access and quality and cost all moving in a positive direction on this scale, which would mean that costs would actually stabilize or come down from the current levels.

I guess I would throw out that if they think that a government-run system, Obamacare, is going to be less costly than a more carefully crafted, less focused on government but more on doctors and patients and choices at that level, then they are ignoring the record which would say that the costs will be far greater and the difficulties certainly -- of recruiting doctors and getting some sort of a reasonable control over the cost of some of these bankrupt federal systems -- then it would be if my bill passes and the people of Alaska say, "Thanks for your concern, but we want to maintain the choice with the individuals."

AHPR: It sounds like you may not garner the support of AARP in Alaska for this. What Alaska organizations do you think will support your efforts in this regard?

Kelly: We are targeting the individual citizens of Alaska. We have seen quite a lot of play in the field, as the bills at the national level have moved forward, and they've been all over the map. It's really kind of hard to keep track, but one could imagine that AARP may have, among some of their membership, strong support for this, and some of their membership may not. We have seen unions be in favor of some elements, and having difficulty with others. We've seen the doctors move closer toward Obamacare, and then step back somewhat. We have seen Democrats in the House and the Senate, that seem to be on the bus, wide open throttle, and then fall off along the way.

So I don't think you can tell me, nor I you, exactly where some of these players are going to end up in the end. I think if they focus on the fact that this bill, and this vote, is all about maintaining individual freedom in the health care arena, then I think that we may pick people up. As we've seen from the different states that have jumped on the bandwagon, I think that when you focus on what we are really trying to do when you talk about preserving choice, individual choice, and certainly, keeping the federal government from just completely turning the system over in dramatic change rather than careful, deliberate, thoughtful, slow movement to do the right thing -- I think we will pick up more people as we go along.

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

Kelly: I would just like to tell them that we've got prime cosponsors on the bill, and we are picking up more as we go along it sounds like. I would just encourage them to realize that this is not a dramatic move away from the position that would say, "Cover what we have now," because we now have something that we want to protect, and that is choice -- the ability to deal with our doctors, the ability to have the final say and to not have a government rationing health care, and to keep the patient as much as possible, in control of this extremely critical and personal and private part of their lives.

This is not a radical approach; this is a very careful approach that says, "Hey, federal government, we're going to maintain the choice here." If you put something out there that our people are happy with, and they want to choose it, okay. But you have to come in with the persuader, not the stick. Because that's not what we're about here in Alaska, is having you, and something that isn't even mentioned in the federal constitution, that you're going to completely take it over and have a dramatic impact on our lives and a dramatic change from the system that, like I say, the statistics would say it's a good system, but it needs improvements and in cost, access, and quality.

I'd like to say, too, that so often, you hear it every day that we've got 47 million uninsured, and that is just not accurate when you break it down and you pull out the categories of people. You know, it comes way, way down to somewhere near, as I understand, somewhere near three percent of the population that are actually uninsured. They break the categories down to show that whether you take out illegal aliens, or people who could be covered but don't sign up, or folks who are in that 18 to 34 year-old group which are very healthy and require just a small, like five percent of our health care dollars.

If you take all the noise out of this thing, it isn't really 47 million. And then another thing is, the confusion between whatever that number is, far below the 47 million that are uncovered, they may not have insurance but if they have a car accident, or faint in the street, or heart attack or stroke, or whatever, it doesn't mean they are not treated. So I think the distinction and the inaccurate information that goes out around this uninsured thing, is disturbing to me. It is absolutely not my desire, in the name of this number of uninsured, false information that we would just completely flip over the health care system in America.

[I am] not interested in that, and I think we'll find out that, if we can get this in front of the Alaska voters, they'd like to retain the choice. One last thing, Larry, is they say that this could cause a clash between the federal government and state government. We could have lawsuits over it, and I say that that is possible, absolutely recognize that that could be the case. If that's what it takes, I think Alaskans would be ready to have our attorney general engage and defend if this passes.

AHPR: Well, I greatly appreciate the time with you, and I appreciate your comments. I just would like to get clarification of one question, though. I was under the impression that what Obama is interested in, and what the current legislation that seems to be working its way down, allows people to keep the health insurance that they have, and there is only the possibility of some public option, which would be a choice, not a mandate. So I'm a little unclear about what it is that seems so, I don't know, overwhelming, or somehow such a huge takeover by the legislation that seems to be coming out of the feds right now, in your mind. I'm just not really clear on that.

Kelly: I guess I fully expect them, because they've stepped into a real snake pit here, to put the prettiest dress on this thing that they can. But I don't think that is going to be the way that this comes out, anymore than the huge fraud associated with the Social Security system, which was not insured. The money was taken out of the fund. There aren't dollars there to do the job. I don't trust them, Larry. I like the power up close to the people and our state, where I can get my hands on them. It's just I, simply said, I don't trust them.

AHPR: If you'll indulge me, I do have, honestly, one last question. Our state, as are all states in the union, is responsible for regulating the commercial health insurance industry. Do you feel that this state adequately regulates the commercial health insurance industry, or could there be improvements? What is your take on that?

Kelly: Well, I think there could be improvements, but I am not really directly involved, or knowledgeable about that in enough detail, Larry. Other folks could do better at planning on that. But I think that they do a reasonable job, and we are always working on trying to reduce costs in Alaska, whether it's workers compensation or it's the insurance industry, because we are in a limited market up here. But I can't give you a good critical analysis of that at this time.

AHPR: Thank you so much for the time, and I really appreciate your discussion.

Kelly: Okay, Larry. I enjoyed talking with you.

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