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Senate | August 10, 2015 | Committee Room | Appropriations - Base Budget

Full MP3 Audio File

Good afternoon and welcome to senate appropriations. Thank you everyone for being here today, we are going to get ahead and get started we do have a quorum now and it's just a couple of minutes after three so there's no reason to wait. First I would like to introduce sergeant at arms and thank them for being here Larry Hancock, Charles Jefferies, Terry Bernhardt and Dale [xx] thank you. With that we have two bills on the calendar today senator Brown is going to explain the complete Act and I will remind committee members that the finance portion of this bill has been discussed in forums previously, so today we will be keeping our questions strictly to the appropriations portion if you do have further questions regarding the finance that you discuss that with the bill sponsor or the finance committee senator [xx] Thank you madam chairman. I guess I'll start part one which is the JDIG modifications piece, and what the bill does is increase the current year statutory cup 15 million to 20 million on an own more basis, and extends the program from two years to three years allowing JD[sp?] commitments through January of 19. The amount of business received via JD will change in two ways the first income tax recordings generated by the eligible creative positions to a tear maximum percentage of with holdings, 80% of with holdings if the project is in a one and 75% for all other areas. The second part of that is the portion of the award diverted to the utility account in tear[sp?] two areas it has changed from 15% to 10%. Job creation requirements would increase from 20 jobs 50 jobs for tear three. The bill would also create a component for improvement of mega size for high yield projects for a business that invests 750 million and creates at least 2, 000 jobs. When a high yield project is landed, the annual JDIG commitment cap for that year increases from 20 million to 35 million. The bill would address concerns that commerce consumed JDIG availability too quickly each calendar year by splitting the single year 20 million basis for commitment caps into two equal semi-annual installments of $10 million, the amounts not utilized in the period would roll over to the next period. A few miscellaneous changes to JDIG, I'll just mention a few. One, it strengthens the recapture provision for failure to maintain operations for 150% of the grant term. It modifies the relevant time period against which increases of unemployment are measured, and it adds to the annual reporting requirement, which is I think a key piece to get more a information that we can take a look at moving forward. Part two of the bill deals with One North Carolina modifications. It would change or modify the local match requirement of the One North Carolina Fund to a tiered requirement, $3 State for for $1 local dollar for Tier 1 two state dollars for one local dollar for tier two and even local mass for tier three. Part three of the bill with phase in single sales fact apportionment over three years, that puts us in line with South Carolina and Georgia and also Tennessee and Virginia have a same reprise as well that will allow us to be a whole of more competitive, in that particular arena. Part four of the bill would create an additional sales tax exception, for data center equipment and electricity. I think most of you know in Cleveland and Down county in particular there's been a lot of talk and some opportunities there. Part five of the bill would exempt aviation gasoline and jet fuel sold to an interstate air business for use in a commercial aircraft. This exemptions borrowed in the current refund provision and it would help all airlines, not just one. It would help all airports, not just one. Also in that there is in section 5.2c, there's an exemption for sales tax, or service contracts on qualified aircraft, or qualified jet engines. This is to help with Hunterjet in Greensburrow, certain provision we've been working on. Also in this section the State sales tax would increase to the general rate on boats and aircraft. Currently they're at 3%, this would raise that to 4.75%. Also the cap on the sales tax on aircraft will go to $2500.

That's pretty much the highlights of the appropriation piece of this I'll try to answer any questions.  Thank you senator Brown. Questions or comments from committee? Senator Ford. Thank you Madam Chair a question for stuff as it relates to to the the sales tax aviation who's exception is there any physical impact to any part of this that will be impacted with this change. I'm look alright yes please. There is always fiscal research yes there is. Can you speak up please? Yes there is physical impact on the sell tax exception I think that the physical memo.   I'm not sure if you microphone is working. Okay can you hear me now? No? I think you have fiscal note in your pocket again running business with fiscal research that indicates the state sales tax loss from this exemption would be about 15 million and there would also be a local sell tax fall so about seven million follow up can you go into a little more details about who directly will be impacted by that and by much? we just have a state wide estimate we don't have a county by county or municipal impact but that's the state wide local impact. Thank you, now Chair let's follow up. I'd like to request that from staff to get the county by county breakdown on the impact, it's my understanding you've got some revenues that are being pledged with this aviation field tax and it be important for us to know what that fiscal impact is going to be on those municipals. Alright, thank you Senator, Ford staff is going to work on that further questions or comments from committee?  Madam Chair  Senator Ford I have another one as relates to JDIG are represented by everybody else who has questions while I make sure that I get it. It has to do with tier 1 and tier 2 impacts has related to incentives that will be given tier 2 or tier 21 versus tier 3, while I'm thinking about it Madam. Chairman if I might. Senator Brown, I sent you an email it relates to the potential impact for a company looking to relocate from a tier 3 to tier 2 or tier 21 and [xx] advantage take and it is of a senator programs that outline, in this particular piece registration, and I wanted to if you can recall get your take on and see if you see that as an issue or something that you can work with as well. Senator Brown? Senator Ford, what I did say a provision, I appreciate you send it to me and I I'm doing a little research, to try to figure that piece out, okay? Thank you. Further questions or comments from committee Seeing none at all, entertain the motion. Madam Chairman. Chairman Jackson. Thank you Madam Chairman. Senator Brown thank you for bringing forth this bill, and if they will be no further questions I move for a favorable report. Motion be made, all those in favor say aye? Aye. Opposed? Bill passes. Thank you. [ BLANK ] Chair welcomes Senator Hyse, to discuss Medicaid transformation. Thank you Madam Chairman, as you'll see, before we begin, I do have an amendment that may put on a technical nature I'd like to send forth We have it, do members have copies? It's being distributed now, we'll hold for just a moment Alright, thank you, senator Hise, I

believe members have copies, if you'll go ahead and explain your amendment. Thank you madam chair, the two points of  this you'll see and it doesn't [xx] the language of filling vacancy position that was coming and you'll see the the remaining section are conforming this to other states laws something has brought me by staff and doesn't make any substantive changes to the bill. Sarah Wayn make the motion to approve the amendment, those to approve say Aye. Aye [all]  Opposed.    Alright amendment passes. Madam chair Yes, senator [xx] I'd like the senator Hise to answer a question on that amendment. Senator Hise, Is there a difference between a council of State position verses the secretary opposition and just like before I believe all of those saying the staff [xx] Staff. Madam chair, the counsel state members are and I'd like to state why so they are elected officials. The cabinet level secretaries are appointed by the governor, so if there's a vacancy in a state wide elected position I'd have to check the statute and see how those are filled but I believe they would have to be filled in what the constitution provides for successors which I don't think it does. The council state are handled differently than the secretaries. Thank you. That's Miss Cosna alright. Further questions on. Senator Hise, would you go ahead and explain the bill. Thank you. Okay. Thank you madam chairman as we've gone through several areas I want to focus. This is a reform of the medicare system from my current fee for service [xx] member per month capitated payment systems that will have a lot of impact on how appropriations will do the budget, the risk that applies to the state at this point will be limited to population growth or changes in the medicaid population. We will pay entities whether they'll be provider led entity or manage care organizations. We will pay them a risk-adjusted amount per month to provide all the services under Medicaid. This bill is unique as it is, all the services that are covered under Medicaid, the mental help LME/MCO services are a pass through funding, so for the entire first contract they're guaranteed, the rates that they receive at the beginning so that as they're capitated already those will just be pass-through funds for what expected to be a five year contract as we begin this process. As we go through there're few other appropriations that are part of this bill as well, I wanted to highlight the transition, we've put in $5 million in recurring funds to deal with the Medicaid transmission that as most things that Medicaid do on the administrative side receives a 50-50 match from the federal government, that would be a total budget for them of 10 million. From that we will start up the new department, operate the department as well as for those who remain in the department and are deemed as central by their secretary we offer a 5% increase to their salary in order to keep the new to the old department functioning and running so we can continue to make those payments, as well as a bonus that is equal to all the bonuses they've received in this system at the time that DMA will cease to exist, because they will no longer be making  no longer be making payments unfit for service. We also, for the healith information exchange, in here we have a reoccurring appropriation of $8million dollars to implement and build out the State wide exchange to the deal with those operational costs, and others for the department coming forward and then cc NC. Obviously, it was we terminate the contract that does coordinated care management in the State, moving to manage care in this, there are savings that are associated with that in each year about 10.8 million, but then we turn around, and we preserve the pasture that goes to the health departments now from the funds, then the vast majority of the remaining funds go to increase rates for primary care providers, and ob-gyns under the service with the expectation that both in the interment once rates are set, that they'll takes care of their patients, and that will be placed for the primary care physician as is most appropriate in these operations.

I'll be happy to answer any other questions you may have about parts of the bill that are appropriate for this format. Thank you Senator Hise. Also, as a reminder to committee, we were limiting our discussion to the appropriations proportions of the bill. Questions or comment s from committee. Senator Ford. Thank you madam. Sure Hise, I'm trying to understand two questions. One has to deal with the current model in terms of the way we service citizens in North Carolina versus the model that you are proposing. Can you summarize that for me? I heard you but I'm not understanding the significance between the two and then I have a follow up question with that. Sir Hayes. The best example I would give is that right now when a Medicaid patient presents themselves to a doctor and say has an X Ray, the State would be billed for that X Ray. Now if we get into hospitals it's a much more complicated system, but we receive a bill for the X Ray and we would pay for every X Ray the individual receives. It's an entitlement, so if they have 500 X Rays we pay for 500 X Rays within a month, and don't really have any controls on that utilization or operation. Under the new system we would, similar to what you see with the insurance, we would have either provider line entities or, managed care entities whether regional or statewide that we would pay $400 a month to take care of a patient. Out of those funds they are responsible for all the services, to pay for all the services they negotiate contracts with providers that are both in that work as well as different coverages for out of network services, and they will manage the person's health care within the money they receive as a whole. It is a risk adjusted rate, so if a person had a particular identified diagnosis or was aged-blind disabled the rate we pay per month for them would be higher than it would be for a newborn that was coming in, but as we actuarilly determined those rates and go into contracts with those providers. We would set those rates by contract, and then that would be the cost borne by the State, what we would be working for in fluctuations would be if more individuals enrolled in Medicaid next year then we would have more monthly payments to make, but if flu season hits and more individuals go to the emergency room, managing that cost would go to the providers whether they be private entities or managed care companies Follow up. Follow up. Yes, do you have a projected savings on going to this new model? What we have aligned for in the bill is to contract at the Medicaid rate would grow at a 2% below the national average of non-expansion States, those who are coming in, so States that have not expanded Medicaid if they grow at 6%, with regard to this contract we would only grow at a 4% rate.  Did you have another follow up Senator [xx]? Yes.  What does that mean for North Carolina though? I think we may have, I don't know if anybody has got that fluctuations on those but 2% of the medicare budget running at about a third of that will be coming in another month [xx] Staff have further comment or clarification on that? Steve my report you have something quickly still on fiscal research The State savings on 2% of the medical spending for claims would be approximately $80 million for the 2% of the total savings the question a [xx] is that annually? Yes That is annual cry Follow up Alright, thank you Alright Senator Tillman Thank you madam chairman, Senator Hise. I think this $80 million saving is a projected saving of the 2% for the immediate future. However, if we are going to be 2% below what national average is then we are not sure of that figure down the road the national average might go up to eight and we will be at 6 and this projection is good only for short term because we have no idea what the feature course will be. I don't believe we can have a day to figure that Thank you senator Robinson.  Thank you madam chair. I had to step out and I don't know have for you guys but a couple of questions I have in general I have mentioned. First thing I hard you say startegies is there during the

interim from the CCNC, there's some money would be passed through so the health department will loose money so they could continue to operate and save those patients. What about money for the increase in the clientele because there's always growth the same growth that we see medicate in general, that growth ill be in the health department, so are there funds to accommodate the health that we'll see in the health department clientelle. Sir [xx]. The funds that we've placed to the health department were the projected amounts that they would have saved in the CCNC contract, that's currently so as those adjusted those who are accounted for and more would have passed through currently the health department of funds appropriated by the general assembly goes to the CCNC and then paid to the health department. We merely took that amount as it adjusts in the normal budgetary process and made it a direct appropriation to the health department.  Senator Robinson follow up? Yes and thank you for that the other question actually, madam chair, is we talked the other day about during the initial period with the new, and I don't know if you've gotten this far. If I'm too far here maybe you'll let me know and I'll wait. During the initial period or phase in Medicate reform for whoever be is, MCLs, PLEs etc. There will be a loss there would not actually be savings until later on, so what, and I think I asked the other day but couldn't get it, what would be the impact in terms of the loss, what kind of loss would we see and how will that impact some of the PLEs in terms of their ability to be at fore for the ritual contract. Senator Hayes? Thank you. Actually what the conversation of having laws has come from many single entities that have done this in multiple states and what they experience it's going forward. I have to admit it is not a loss to the state, the amount we contract with the employee is the amount of the contract in those operations but most of those fund, in order to get future savings that they have to make investments in bringing individuals in the primary care into service in order to for the diseases these individuals are dealing with to not have those increased hospitalizations or those increased doctor costs they have make those investments, so for most of them it is a short term loss, buy I will tell you from the 39 other states that have managed care in place regardless of the entity, it is not a long term losing operation for them, that they do actually sustain the operations and be able to equalize that going forward. Follow up madam chair. Senator Robinson, follow up? Yes and on the same note and I imagine for the larger institution can probably handle it. My concern is have we heard from in a state provider led entities that would probably encourage that kind of loss, or could not be it if they anticipate such a loss.  What we have right now in the state, there are no existing provider led entities in the state, there are some that have done some work in the medicare population but not in a fully capitated system as we have here, that is why we have required the insurance requirements and for them to meet the insurance requirements set by the department of insurance to be insured against such law suits, services are loss to individuals or others if they make miscalculations and that's true to any of the entities not just the provider led entities that are coming forward, but I think that it is something that provider led entities need to plan strongly for in putting in their capital base together to cover against risk, that they may not be seeing returns on their investments in the first year. Did you have another follow up? I do, I don't want to keep some other people from asking questions. Go ahead Senator Robinson. Since I don't see any hands I'll continue. I have one other person in the queue at the moment. OK, OK I'll hurry up and get this over with. In terms of whether MCOs provide a lot of entities is there any obligation, and I read some of the language in terms of their making sure that providers that now take care of Medicaid patients have an opportunity to be included in term, is there any obligation in here or in the legislation at all, or any thought on that? Senator Hise. None of the specific entities whether they be PLEs or managed care entities are required to make contracts if the reasons for that are quality of services are well as economic. So if they can't reach agreements

on those operations that they won't do it for what other providers in the area charge or if they fail to meet quality standards, they can choose not contract with specific providers. Alright, thank you. Senator Raven. Thank you Madam Chair. Senator Hayes. Thank you for all your work on this something that has been on my mind a long time and we can address my question is going to be are there MTUs PLE whom ever going to address this and that is the emergency room visit is this plan or is there plan and place that will help decrease the number of emergency room visits although all the MTAs is just going to have to absorb that cost e. T. C brought and I just think going forward we need some sort of directive or initiative to [xx] that problem that does a tremendous problem. Senator Hise yes sir one of the highest areas of cost savings that are available to MCOs and they are responsible for all of the costs and all the services is in hospitalization and ER visits and it is why we have felt so strongly to make sure that all services are covered under this plan. While long term care for example in this state is predominately paid already on per diem rate. There may not be a lot of cost savings to be found in long term care services, but you can find the cost savings in making sure those individuals don't wind up in the hospital, which will blow your cost stuff in a quick manner. So if you put in programs is that prevent patients from falling or prevent patients from doing other things. The entities that are doing that will see their patients not spending as much time in the ER and moving forward. One of the examples I've heard from other states is right now under our system if someone showed up to the emergency room 31 times in a month. It's an entitlement, you can't say they can't show up 32. That's where we are coming in, and as a specific subduing with what the individual really need it was air conditioning and they were showing up in the emergency room because it was the closest air conditioned area you can imagine when their base rates paying as much as $3000 a time that they show up to the emergency room how expensive they could be to us but because the air conditional doesn' t need any other codes in billing there's nothing the state can do about that. These entities, [xx] entities may find very well that providing someone window units in their house may be a cheaper cost of treatment than paying for them to go to the emergency room and bringing nurses into the home and seeing environment and cleaning up those environments may very well be aware that they can find the most savings for individuals.  Thank you, further questions or comments committee senator Davis.  Thank you madam chair and thank you senator Hise for you and your staff and your others senators for all the work you've spent on this. What kind of flexibility will the state have in determining a salary schedule for the director of the department of Medicaid? Senator Hise. As the department we've created is exempted from the State Personnel Act, they would have their full flexibility to determine that salary, and would not have to place it on any schedule. They may bring an individual in and set a salary commensurate with their experience that they are then accountable for and moving forward and that would apply for all positions within the new department. Thank you, Senator Hise. Further questions or comments from committee? Senator Ford. Thank you, Madam Chair. Senator Hise, quick question. Senator Davis triggered it for me the good looking one, triggered it for me as it relates to the procurement process. Would this new entity be required to follow state procurement process? Senator Hise. As I'm aware and I would check out there is not an exemption for state procurement in the operation so they would still procure goods particularly and services under the same manner as the state procurement process. Follow up, Senator Ford? Thank you, Ma'am. T Hank you, Senator Hise. Further questions or committee, Senator Robinson. Thank you, Madam Chair. Senator Hise, with the $5 million that's appropriated in recurrent fund, and the anticipated $5 million match, does that include any Medicaid shortfall? I know you anticipate we won't have it, but we always have people coming into the system. Does that anticipate certain percentage for Medicaid shortfall during that transition period, or what kind of cost are we looking at in that? Senator Hise. No, the five million that we

have on there is a direct appropriation from the General Assembly which can receive Medicaid match if it's expended on administrative functions. There is potential, and I say this and there's nobody, if it's in IT or other areas the max rate might be higher or different, but we've assumed it all under the administrative cost of 50/50 max and so that appropriation would be subject to anything in the General Assembly so if there is a short fall when we come back and have to fill a gap, we could choose what funds to utilize in that process and I want just Senator Ford real quick, what is the partisans in this bill that may apply to some of those contracts moving forward is the cooling off period that now exists in state government so an individual who is overseeing or utilizing the contract in procurement couldn't work for that company for a period of 6 months, and could not contract for the state to come by, so there maybe some changes in those types of contracting a procuring services, if an individual of that company was employed by the department who wrote the contract in which they will be part of those services. Thank you senator Hise, Senator Davies. Just wanted to come back to the bonus pay. Could you explain how we derive the 5%? Senator Hise. Is an operation, what we are looking for is an incentive for individuals in the DMI to stay DMI and not jobship to go to other departments, to other divisions or other jobs and the opportunities there, and we felt like this arbitrary map we felt like giving individual a 5% bonus in pay of essential personnel, and keeping the bonus they would receive if they stayed all the way through the transition of that same amount. So in effect they would receive 10% of their salary increase if they make sure this transition goes well stay on to the EN. We felt that was incentive to be put in place to make sure those occur.  Senator Tillman. Thank you chairman senator Hise that sounds good but you give that same bonus to whoever they are doing a good job or a bad one. Senator Hise. It is like like 5% banners as their position is determined as essential for moving that forward the same current DMA is not exempt or others will have the same abilities to remove someone from a position or to not individual but they could also, the one distinction they have would be to determine whether or not that person was essential to the process and whether or not they would receive that bonus. Follow up senator Tillman because I've used that one before and it didn't work. We're trying to pay teachers and I hope we'll get there based on merit and I just like to say the bonus available those people that are keeping at this because a position is essential, I don't mean the person occupying the percential the position is doing a great job, so guess what you're thinking we don't want to change it now but,  We'll be coming on that, the new department that we're creating will have the full flexibility to pay individuals based on their merit and based on the job performance that they are doing this 5% is to the old department as we transition at them. Thank you senator Hise, seeing no further questions from committee, the chair acknowledges senator Jackson for a motion. Thank you Madam Chairman, senator Hartsell I want to thank you and senator Pate and senator Tucker and others working great to work with In a long term in this charming and I know there a lot of things still working in progress and Madam Chairman, with that I make a motion that we Favorable as to the bill as amended with amendments to be rolled into a Committee Substitute. Alright members, there is a motion before us. Those in favor say Aye Aye. Those opposed Nay, the Ayes have it, meeting adjourned. Thank you Ma'am.