BUDGET COMMITTEE ON HEALTH CARE

The Budget Committee on Health Care was assigned the following study responsibilities:

1. Section 14 of 2003 House Bill No. 1004 directed a study of the nursing home survey process, including a review of federal, state, and local agency procedures and requirements that result in additional costs, duplicated procedures, and added regulations for nursing homes, and the potential for mitigating the impact of new mandated federal rules through collaboration between the State Department of Health and the Department of Human Services and the submission of waiver requests.
2. Section 11 of 2003 House Bill No. 1430 directed a study of the value of medical assistance program use of benefit purchasing pools, preferred drug lists, and other pharmacy benefit management concepts, including the fiscal impact of the appeals and grievance process on existing programs.
3. Section 16 of 2003 Senate Bill No. 2012 directed a study of the feasibility and desirability of establishing an advisory council for the medical assistance (Medicaid) program of the Department of Human Services. The committee received approval from the chairman of the Legislative Council to expand the study to include a review of Medicaid payments, access to services, and utilization.
4. Recommend a private entity, after receiving a recommendation from the Insurance Commissioner, for the Legislative Council to contract with to provide a cost-benefit analysis for legislative measures mandating health insurance coverage of services or payment for specified providers of services, or an amendment that mandates such coverage or payment, pursuant to North Dakota Century Code (NDCC) Section 54-03-28.

The committee was also assigned the responsibility to receive reports from:

• The State Health Officer regarding the implementation of the community health grant program, pursuant to NDCC Section 23-38-02.
• The State Board of Nursing on its study of the nursing educational requirements in this state and the nursing shortage in this state and its implications for rural communities, pursuant to NDCC Section 43-12.1-08.2.
• The Department of Human Services describing enrollment statistics and costs associated with the children's health insurance program state plan, pursuant to NDCC Section 50-29-02.

Committee members were Senators Judy Lee (Chairman), Robert S. Erbele, Tom Fischer, Ralph L. Kilzer, Tim Mathern, and Russell T. Thane and Representatives David Drovdal, Joyce Kingsbury, Gary Kreidt, Ralph Metcalf, Carol A. Niemeier, Vonnie Pietsch, Todd Porter, Jo Ann Rodenbiker, Sally M. Sandvig, Dale C. Severson (until his death on November 4, 2003), Gerald Uglem, and Don Vigesaa.

The committee submitted this report to the Legislative Council at the biennial meeting of the Council in November 2004. The Council accepted the report for submission to the 59th Legislative Assembly.

NURSING HOME SURVEY PROCESS

Section 14 of 2003 House Bill No. 1004, the appropriations bill for the State Department of Health, directed a study of the nursing home survey process, including a review of federal, state, and local agency procedures and requirements that result in additional costs, duplicated procedures, and added regulations for nursing homes. In addition, the committee was directed to study the potential for mitigating the impact of new mandated federal rules through collaboration between the State Department of Health and the Department of Human Services and the submission of waiver requests. The committee studied the potential for mitigating the impact of all mandated federal rules, state licensing, and other governmental requirements.

Nursing Home Certification and State Licensure

Nursing homes that provide services to residents for reimbursement under Medicare or Medicaid must be certified as meeting certain federal minimum requirements established by Congress. Certification is achieved through routine facility surveys performed by states under contract with the Centers for Medicare and Medicaid Services. There are two types of federally required nursing home surveys conducted, commonly referred to as health and life safety code surveys. The State Department of Health is the agency responsible for conducting both types of nursing home surveys.

North Dakota Administrative Code Section 33-07-03.2-03 requires nursing homes to obtain a license from the State Department of Health to operate in North Dakota. The State Department of Health issues renewal licenses to nursing homes found to be in compliance with licensing requirements, as determined by periodic unannounced health and life safety code surveys conducted by the department. Nursing homes are not subject to federal survey requirements if they do not participate in the Medicaid or Medicare program; however, all facilities must meet the state licensing requirements.

The Department of Human Services has an agreement with the State Department of Health to complete the survey process for nursing homes that wish to participate in the Medicaid program. The Department of Human Services pays the survey costs relating to the Medicaid program. The Department of Human Services appropriation for the 2003-05 biennium includes approximately $1.6 million, of which approximately $400,000 is from the general fund, for nursing home survey costs.

Health Surveys

The committee learned the State Department of Health survey protocol includes interviewing a sample of residents and family members about the residents' life within the nursing home, interviewing caregivers and administrative staff, and reviewing clinical records. Title 42 of the Code of Federal Regulations, Part 483, provides detailed federal regulatory standards that nursing homes must meet. Health surveys examine various areas of service provided by nursing homes, including administration, quality of care, residents' rights, and dietary services.

The committee learned there are 84 state-licensed skilled nursing homes in North Dakota--81 of which are certified for both Medicare and Medicaid and 3 are certified for Medicare only. The State Department of Health health program survey teams conduct both state licensure and federal certification surveys during the same visit. The team spends approximately 10 percent of its time on state licensure requirements and 90 percent on federal certification requirements. Nursing homes may apply to the Centers for Medicare and Medicaid Services for waivers from federal regulatory standards. However, North Dakota does not have any approved temporary waivers relating to the health survey standards.

Life Safety Code Surveys

The committee learned the State Department of Health is the only entity in North Dakota which conducts Life Safety Code compliance surveys in nursing homes. Life Safety Code surveys follow the National Fire Protection Association Standard 101, which sets minimum building design, construction, operation, and maintenance requirements necessary to protect building occupants from dangers caused by fire, smoke, and toxic fumes. Section 483.70 of Title 42 of the Code of Federal Regulations requires nursing homes to meet the provisions of the Life Safety Code. The committee received information from representatives of the State Fire Marshal's office, State Department of Health, Department of Human Services, and the State Building Code function of the Department of Commerce regarding ways to improve communication and collaboration among agencies with Life Safety Code inspection responsibilities associated with nursing home construction projects.

The committee learned prior to 1995 the State Fire Marshal's office conducted Life Safety Code surveys under contract with the State Department of Health. The contract with the State Department of Health was discontinued because of funding and staffing concerns that prevented the State Fire Marshal from conducting the surveys.

The committee learned that state licensing rules for nursing homes require the State Department of Health to review and provide prior approval for plans and specifications for all construction, modifications, and alterations of nursing homes to ensure that all applicable standards are met, including the Life Safety Code, Americans with Disabilities Act, and electrical and plumbing standards. The department reviews construction plans submitted by each facility and relies on the facility, its architect, and contractors to construct each project in accordance with the reviewed plan.

The committee learned the State Department of Health has not identified any cases in which a Life Safety Code violation was overlooked during the planning review. Representatives of the State Department of Health indicated a nursing home's architect is responsible for quality assurance and should have an understanding of Life Safety Code regulations. The nursing home's architect would most likely be responsible for costs incurred to correct Life Safety Code violations if such provisions are addressed in the contract.

The committee learned the State Department of Health employs two Life Safety Code surveyors who conduct approximately 200 onsite, unannounced surveys per year. The department indicated it does not have sufficient staff to inspect construction prior to occupancy of a building. The committee learned the State Department of Health had proposed in its 2003-05 biennium budget request adding one full-time equivalent position and $84,568 in special funds from increases in hospital licensing fees to conduct Life Safety Code reviews during the construction process, which was not approved.

The committee learned that the State Department of Health does not "track" the annual number of construction projects undertaken by North Dakota nursing homes. Representatives of the State Department of Health indicated approximately 75 to 100 plans for nursing home construction projects of various sizes have been approved by the department during the first eight months of 2004. However, the number of projects that will exceed $250,000 in cost was not available. Members of the committee indicated that the State Department of Health should be able to provide Life Safety Code construction inspections within its budget for the most expensive nursing home projects undertaken each year.

The committee heard testimony from a representative of the North Dakota Long Term Care Association regarding the value of Life Safety Code inspections during the construction process. Additional inspections prior to completion or "signing off" on a construction project would make it easier for nursing homes to hold contractors and architects responsible for correcting Life Safety Code violations and allow the nursing homes to avoid additional unexpected costs. The association would support a per project inspection fee or a general fund appropriation to the State Department of Health to fund the additional inspections but would not support an increase in licensing fees. The State Department of Health does not have statutory authority to charge for the inspection of nursing homes during the construction process.

The committee learned the Department of Commerce role in the issue is maintaining, updating, and promoting the North Dakota State Building Code. The Life Safety Code, however, is not a building code and is not part of the State Building Code. Life Safety Code inspections are required annually, while the State Building Code inspections are only necessary for new construction or remodeled buildings. North Dakota Century Code Chapter 54-21.3 provides for a State Building Code but does not require cities, counties, and townships to enforce the code. The law permits cities, counties, and townships to amend the State Building Code to meet local needs. The committee learned most local governments do not have the capacity to enforce the State Building Code and thus the Life Safety Code survey may be the first onsite inspection that occurs at a nursing home.

Nursing Home Deficiency Citations

The committee received testimony from representatives of nursing homes regarding the nursing home survey process and the issuance of deficiency citations, including:

1. The survey process is an adversarial relationship between the State Department of Health and each nursing home, instead of a relationship with a team of professionals who have the same common goal.
2. The survey process sometimes generates unnecessary costs to a nursing home.
3. Nursing homes that have repeat citations within certain areas have experienced significant increases in general liability insurance rates.
4. Many nursing homes believe the informal dispute resolution process does not work.

When a State Department of Health survey team determines that a nursing home does not meet a specific regulation, the department issues a deficiency citation based on the scope and severity of the violation. The State Department of Health has 10 working days to send the deficiency citation to the nursing home and a nursing home has to respond with a written plan of deficiency correction to the State Department of Health within 10 calendar days.

If a plan of deficiency correction is not acceptable, the Centers for Medicare and Medicaid Services is consulted and must concur with survey findings before the Centers for Medicare and Medicaid Services will impose a remedy or action necessary for the nursing home to correct the deficiency. Depending on the nature of the deficiency citation, various remedies are enforced against the nursing home, ranging from Category 1 remedies, which include state monitoring, directed plans of correction, or directed inservice training to Category 2 remedies, which include civil penalties of $50 to $3,000 per day and deny Medicaid payment for new admissions or all residents. The State Department of Health follows up with the nursing home to verify that the concerns were corrected and once verified, the nursing home receives recertification. If problems are not corrected, the Centers for Medicare and Medicaid Services may terminate its agreement with the nursing home or assign additional penalties of up to $10,000 per day.

The committee learned the Centers for Medicare and Medicaid Services mandates a Category 2 remedy for a nursing home that for two consecutive years receives a Level G deficiency rating--an isolated case that results in a negative outcome that has negatively affected a resident's ability to achieve his or her highest functional status. The State Department of Health will notify the nursing home 15 days prior to the actual enforcement of the ban or denial of payment for new admissions. The nursing home may use that period to fill resident vacancies and if the deficiency is corrected during the period, the ban will be rescinded.

The committee learned the State Department of Health is required to follow federal regulations when conducting surveys of nursing homes and is subject to annual review by the regional office of the Centers for Medicare and Medicaid Services. Approximately 98 or 99 percent of deficiency citations are related to federal requirements. If the state surveyors do not follow federal regulations, the state survey team will receive a low review score and the state could possibly lose federal Medicaid funds. State surveyors are not allowed to make informal recommendations to health care facilities during the survey process.

Informal Dispute Resolution Process

The informal dispute resolution process provides an opportunity for nursing homes to present evidence to the State Department of Health that will refute deficiencies or correction orders. According to the state operations manual, which is based on a federal publication that defines the requirements for the informal dispute resolution process, the state survey agency makes the final decision. The Centers for Medicare and Medicaid Services has issued directives to state survey agencies providing that an independent, informal dispute resolution process may serve only as a recommendation to the state survey agency and the Centers for Medicare and Medicaid Services will not reimburse state agencies for costs associated with an outside review process.

Recommendations

The committee encourages the State Department of Health to review Life Safety Code inspection procedures and provide options, within available resources, to the 59th Legislative Assembly (2005) for the State Department of Health to provide for any construction inspections necessary to ensure compliance with the Life Safety Code upon completion of a construction project.

PHARMACY ASSISTANCE PROGRAM STUDY

The 58th Legislative Assembly (2003) approved House Bill No. 1430 which provided for the establishment of a medical assistance drug use review program and drug prior authorization program in the Department of Human Services and authorized the creation of a 15-member Drug Use Review Board. The board's duties include cooperating with the department to create and implement a prospective and retrospective drug use review program for outpatient prescription drugs for the medical assistance or Medicaid program. Section 11 of 2003 House Bill No. 1430 directed a study of the value of the medical assistance program's use of benefit purchasing pools, preferred drug lists, and other pharmacy benefit management concepts, including the fiscal impact of the appeals and grievance process on existing programs.

North Dakota's Medicaid Prescription Drug Costs

The 58th Legislative Assembly appropriated $95,207,239, which includes $25,712,069 from the general fund, for prescription drug costs in the Medicaid program. This represents an increase of $16,091,517, or 16.9 percent more than the 2001-03 biennium appropriation. The increase in Medicaid prescription drug costs is attributed to increased drug costs, the changing structure of health care, the development and use of more expensive drug treatments, and the increasing number of prescriptions.

The committee learned that as of January 2004, the average cost of a prescription paid for by the North Dakota Medicaid program was $55. The average cost of a brand name drug prescription was $95, compared to the average cost of a generic drug prescription of $19. Approximately $4.8 million is paid monthly for Medicaid prescription drugs, with approximately 22,000 Medicaid recipients having at least one prescription filled each month. Each recipient has an average of four prescriptions filled each month.

The North Dakota Medicaid program began requiring a $3 recipient copayment for brand name drugs in August 2002. A copayment is not required for generic drugs. Prior to the copayment requirement, 55 percent of Medicaid medication purchases were for brand name drugs and 45 percent were for generic drugs. In June 2004, 48 percent of medication purchases were brand name drugs and 52 percent were generic drugs. Every 1 percent increase in the use of generic drugs saves the Medicaid program approximately $850,000 a year, of which $269,000 is from the general fund.

North Dakota's Medicaid pharmaceutical reimbursement rates are based on the average wholesale price less 10 percent for brand name drugs and the maximum allowable cost for generic drugs. The dispensing fee rate paid pharmacies is $5.60 for generic drugs and $4.60 for brand name drugs.

North Dakota currently has over 300 Medicaid recipients on a "lock-in" or "coordinated care" program. These individuals are required to select one physician, one pharmacy, and one dentist to assume primary responsibility for their care. This program allows all providers of care to gain more insight into a patient's overall care and to prevent misutilization of medical services.

An applicant or enrollee has a right to appeal to the Department of Human Services if there is a reduction, termination, or denial of Medicaid benefits. A grievance is a process of appealing to the Department of Human Services a Medicaid-related decision other than coverage of health services or payment of benefits, including matters such as not including a drug on a preferred drug list or requiring prior authorization for a particular drug.

Drug Use Review Board

The Drug Use Review Board is an advisory board consisting of 15 members. The pharmacy administrator of the Department of Human Services and the medical consultant to the department are ex officio nonvoting members. The remaining 13 members of the board are appointed by the executive director of the Department of Human Services and include physicians and pharmacists residing in varying locations throughout North Dakota with various areas of expertise. The board members serve staggered three-year terms. The board meets at least quarterly and may meet at other times by teleconference or electronically.

The federal statutory authority for the Drug Use Review Board is contained in the Code of Federal Regulations. These regulations require states to establish a Drug Use Review Board and prescribe the professional makeup of the Drug Use Review Board. The Code of Federal Regulations provides that the state Medicaid agency is ultimately responsible for ensuring that the drug use review program is operational and conforms with the regulations. The state Medicaid agency has the authority to accept or reject the recommendations of the Drug Use Review Board.

Prior Authorization Program

Prior authorization is a process in which certain drugs cannot be prescribed until authorization is received from a Medicaid agency or insurer. The Department of Human Services provides related medical and clinical criteria, cost information, and utilization data to the Drug Use Review Board for review and consideration. The board considers the department's data and information from other sources in deciding whether to place a drug on the prior authorization list.

The committee learned there is very little difference between a preferred drug list and a prior authorization program. A preferred drug list is a newer term describing a broad prior authorization program. North Dakota's prior authorization program does not allow "supplemental rebates" or additional discounts from drug manufacturers in exchange for keeping medications off the prior authorization list, which is the primary difference between a preferred drug list and a prior authorization program. The committee heard testimony from representatives of the Department of Human Services indicating that additional Medicaid cost-savings could be realized if the state allowed supplemental rebates.

North Dakota's prior authorization program permits a pharmacy to issue a five-day supply for new prescriptions, which is intended to cover the time needed for the pharmacy to complete the prior authorization form, receive documentation from the physician, and submit the form to the Department of Human Services. The Department of Human Services is required to respond to the prior authorization request within 24 hours.

The committee learned that as of August 2004, the Drug Use Review Board has required prior authorization for two classes of drugs--antihistamines and proton pump inhibitors, used to treat acid reflux disease. Any medication within these drug classes that is not on the approved list requires authorization from the Department of Human Services before it can be prescribed to a Medicaid recipient. The savings per dose realized from the preapproved medications as compared to the medications that require prior authorization are $1.70 for the antihistamines and $3.58 for the proton pump inhibitors. The Medicaid program currently pays for more than one million doses per year in each of these two drug classes.

The 58th Legislative Assembly appropriated $1,450,000, of which $725,000 is from the general fund, for the Department of Human Services to contract with a vendor to provide prior authorization services for the 2003-05 biennium. The committee learned that because of the limited number of drug classes requiring prior authorization, the Department of Human Services was initially able to internally operate the prior authorization program. However, the Department of Human Services plans to issue a request for proposals for prior authorization services prior to December 31, 2004. The anticipated cost for a vendor to operate the prior authorization program for the 2005-07 biennium is approximately $1,450,000.

Prescription Connection for North Dakota Program

The committee received information on the Prescription Connection for North Dakota program administered by the Insurance Commissioner's office, pursuant to NDCC Section 26.1-01-11. Prescription Connection for North Dakota is a program that connects qualified, low-income people with discount prescription drugs direct from the pharmaceutical manufacturer. The goal of the program is to provide as much access to information on pharmaceutical assistance programs as possible to residents while also providing one-on-one assistance, if necessary. There are over 150 volunteers statewide providing program assistance to individuals. As of May 2004 approximately 5,000 North Dakota residents received assistance from the Prescription Connection for North Dakota Program, with total benefit savings realized of approximately $2.5 million. The web site address for the program is www.rxconnectnd.org.

Federal Medicare Prescription Drug, Improvement, and Modernization Act of 2003

The committee received information on the federal Medicare Prescription Drug, Improvement, and Modernization Act of 2003, including its impact on the state Medicaid program. Phase 1 of the federal program, in place from June 2004 to December 2005, provides for the issuance of a prescription drug card and an annual $600 drug credit to certain low-income Medicare beneficiaries. Eligible Medicare beneficiaries who do not have other prescription drug coverage may receive one of several cards offered by various entities which provide discounts of up to 25 percent for certain prescription drugs. The discount cards vary as to the types of drugs covered in each class and may cost up to $30. Medicaid recipients already receive drug coverage and thus will not be eligible for a discount card.

Phase 2 of the federal program, referred to as Medicare - Part D, begins in January 2006 and establishes a drug payment program for Medicare recipients. Phase 2 provides subsidies to pay for all or part of monthly insurance premiums, deductibles, cost-sharing, and coverage limits based on an individual's income and assets. The Medicare program will be required to pay for dual-eligible recipients, or individuals who receive Medicare and also some form of Medicaid assistance, enrolled in Medicare - Part D. However, state Medicaid programs are required to pay a portion of related Medicaid savings to the federal government. This "clawback" provision requires states to originally pay 90 percent of the estimated state savings back to the federal government, which is gradually reduced to 75 percent of savings by 2014.

Other information and Testimony

The committee received information from Dr. Randy Seifert, PharmD, Seifert and Associates, Santa Barbara, California, on prescription drug cost containment programs. The committee learned there has been an increase in the use of tiered pharmacy benefit programs, with three-tiered programs being the most common. A tiered program requires varying copayments based on the drug utilized. A three-tiered program consists of generic drugs, preferred brand name drugs, and nonpreferred brand name drugs, with generic drugs having the smallest percentage copayment and nonpreferred brand name drugs the largest. Increases in copayments generally result in reduced utilization of prescription drugs, with the greatest impact on individuals who make less than $25,000 per year.

The committee learned advertising by pharmaceutical companies provides consumers with a better awareness of disorder treatment; however, it may also increase unnecessary drug utilization. It is estimated 13 percent of adults in the United States have received a specific prescription in response to a drug advertisement.

Several factors have been identified that increase prescription drug utilization and costs, including:

• Greater public perception of the value of pharmacies.
• Increase in disease identification.
• Changes in treatment options.
• Changes in demographic - An older population.
• Increases in direct consumer advertising.
• Changes in physician practice patterns.
• Increases in outpatient treatment, made possible by drug treatments.
• Increases in new pharmaceuticals.

Private insurers are able to negotiate significant discounts with pharmaceutical manufacturers for certain classes of drugs based on the insurer's volume of purchases or "market share." Private insurers do not negotiate for discounts on other types of drugs, such as antipsychotic medications, in which the Medicaid program has a large "market share." Because price rebates received by states are often based on the private insurer's negotiations with drug manufacturers, states have formed purchasing pools to negotiate additional volume discounts.

Dr. Seifert informed the committee pharmacies commonly purchase drugs in bulk, repackage the drugs, and receive a new National Drug Code number for the repackaged product. Each National Drug Code number is assigned a new average wholesale price, which may result in the pharmacy receiving a larger Medicaid reimbursement than provided by the original or "innovator" National Drug Code. The committee learned a state Medicaid program could limit reimbursement to pharmacies based on the average wholesale price provided by the "innovator" National Drug Code, rather than the repackaged product.

The committee received information from a representative of Outcomes Pharmaceutical Health Care regarding Outcomes medication therapy management services, a prescription drug cost containment program. The program is a health care benefit offered in Florida, Iowa, and other states which provides covered members with services from specially trained local pharmacists. These services include comprehensive medication review, medication cost management, drug dosage and compliance monitoring, drug information, and over-the-counter medication consultation. Fees for the program are based on a per member per month basis. The fees collected are placed in a "risk pool" to pay pharmacists for providing covered services and for administrative costs. Cost-avoidance savings, based on a cost-avoidance model, are guaranteed by Outcomes Pharmaceutical Health Care to exceed the annual program costs or the company will refund the difference.

The committee learned that the Department of Human Services is evaluating alternatives for a quality assurance program to be recommended for possible implementation during the 2005-07 biennium. The department will recommend a program that will achieve the most desired results within available resources.

Recommendations

The committee makes no recommendations relating to its pharmacy assistance program study.

MEDICAID PROGRAM STUDY

Section 16 of 2003 Senate Bill No. 2012 directed a study of the feasibility and desirability of establishing an advisory council for the Medicaid program of the Department of Human Services. The committee received approval from the chairman of the Legislative Council to expand the study to include a review of Medicaid payments, access to services, and utilization.

Medical Assistance Program Advisory Council

The North Dakota Medicaid program was authorized in 1966, pursuant to NDCC Section 50-24.1-01, for the purpose of strengthening and extending the provisions of medical care and services to people whose resources are insufficient to meet such costs. Pursuant to Title 42, Code of Federal Regulations, Section 431.12, the Department of Human Services is required to have a Medical Care Advisory Committee for the purpose of advising the department about health and medical services, including participating in policy development and program administration.

The Medical Care Advisory Committee reviews and makes recommendations regarding any major changes the department intends to implement in the Medicaid program. The committee consists of both providers and recipient members who are appointed for either two-year or three-year terms.

Medicaid Program

Medicaid is a joint state/federal program established by Congress in 1965 and designed to pay for the health care of certain low-income citizens. The program is optional; however, states that decide to participate must abide by federal laws and regulations. Participating states are required to maintain a state plan that describes the groups covered, types of services provided, the method of payment used for each type of service, and other administrative aspects of the program. The Medicaid program must include certain services, while other services can be provided at the state's option. Coverage of certain categories of recipients are also mandatory.

The federal government shares in the cost of providing services to recipients based on the federal medical assistance percentage for each state. The federal medical assistance percentage is a complicated formula that uses a three-year average of per capita income in each state compared to the national average. North Dakota received an enhanced federal medical assistance percentage as federal temporary fiscal relief to states, from April 1, 2003, through June 30, 2004. The Department of Human Services received $19.6 million as a result of the enhanced federal medical assistance percentage. North Dakota's federal medical assistance percentage rate, however, decreased from 71.31 to 68.31 percent on July 1, 2004, and is projected to decrease to 67.49 percent on October 1, 2004, and 65.85 percent on October 1, 2005. The potential impact of this reduction is an estimated reduction of $34 million for the 2005-07 biennium.

The total 2003-05 Department of Human Services appropriation for medical assistance services is $902.6 million, of which $265.4 million is from the general fund. The 2003-05 appropriation for long-term care services, including nursing home services, is $358 million, of which $122.4 million is from the general fund.

States are required to provide Medicaid services to certain categorically eligible recipients, including:

• Children and adult caretakers if deprivation exists because of parental absence, incapacity, unemployment, or underemployment.
• Individuals eligible for supplemental security income because they are either aged, blind, or disabled.
• Children eligible for foster care or subsidized adoption.
• Poverty level children and pregnant women.

The committee learned the Department of Human Services adjusted its fee schedules for the service payments for elderly and disabled to conform to an Attorney General's opinion providing that the use of estimated prescription drug costs in determining income levels was not the intent of the 58th Legislative Assembly. The department reviewed each client's income and actual prescription drug costs for retroactive adjustments necessary to conform with the Attorney General's opinion. Approximately 225 people received a service fee reduction based on the revised fee schedules.

Managed Care Program

The committee learned the Department of Human Services Medicaid program has operated a managed care program in Grand Forks County since 1997. In January 2004 the program was expanded to include Walsh and Pembina Counties. Adult caretakers and most children are eligible to enroll in the managed care program. The program does not cover the aged, blind, or disabled, which are considered high-risk groups. Federal regulations require that Medicaid recipients have a choice of enrolling in the managed care plan or opting for the primary care provider program. Approximately 818 individuals are enrolled in the managed care plan. Under the managed care program, monthly payments are provided to a managed care service provider based on the age and gender of each recipient. The managed care provider is responsible for all necessary medical services outlined in the contract and is at risk if costs exceed payments. The objective of the managed care plan is to ensure that recipients receive preventive and other appropriate services and to reduce overall health care costs. The 2003-05 biennium managed care program cost is approximately $2.9 million, of which $900,000 is from the general fund. The Department of Human Services realizes an estimated 2 to 3 percent savings from the managed care program.

Methamphetamine Addiction Issues

The Budget Committee on Health Care met with the Budget Committee on Human Services to receive testimony regarding issues relating to methamphetamine addiction and treatment. The committee learned that studies have found that prison drug treatment services are most effective when provided just prior to an inmate's release. An individual needs to be drug-free prior to receiving drug addiction treatment or it is not effective.

The committee learned the Department of Corrections and Rehabilitation collaborates with human service centers in providing treatment services to inmates following the inmates' release from prison. The type of treatment services provided is primarily based on the severity of the addiction, rather than the type of drug used. The physical effects of methamphetamine use include high blood pressure, strokes, seizures, irregular heartbeat, and impaired regulation of body heat. The mental effects of the drug include euphoria, irritability, paranoia, hallucinations, and depression.

The committee learned the Department of Human Services will develop protocols for interventions with families when parental use of methamphetamine or other chemicals is a risk or safety concern for children. Approximately 15 percent of foster care cases are the result of methamphetamine manufacturing, use, or selling. Child welfare cases require significantly more staff time when the case involves a family member who uses methamphetamine. Counties have incurred significant costs relating to the testing, decontamination, and medical evaluation of children exposed to methamphetamine.

Medicaid Management Information System

The 58th Legislative Assembly appropriated $1.6 million, of which $160,000 is from the general fund, for the Department of Human Services to complete the planning phase for replacing the 25-year-old Medicaid management information system. The committee learned that Fox Systems, Inc., was hired to assist in determining the cost of a Medicaid management information system replacement system, produce a cost-benefit analysis of replacement options, and document current and future needs of the system. Final project reports are scheduled to be completed in fall 2004. In addition, Fox Systems, Inc., will conduct a cost-benefit analysis to determine if it is feasible to modify the Workforce Safety and Insurance system to meet the Department of Human Services Medicaid management information system certification standards. A new Medicaid management information system is estimated to cost $29 million, of which $2.9 million, or 10 percent, is from the general fund.

The committee learned that changes were made to the Medicaid management information system in April 2003 relating to third-party payer requirements of the Health Insurance Portability and Accountability Act (HIPAA). The changes caused problems to the system and resulted in a large number of "suspended" claims. Prior to April 2003 the "suspense" inventory averaged approximately 18,200 claims. Beginning in April 2003 the number of claims increased dramatically and reached a peak of almost 62,000 in October 2003. The Medicaid claims processing staff worked many hours of overtime to complete programming changes necessary to process the claims more efficiently. As of July 31, 2004, the number of "suspended" claims had been reduced to 25,591.

Recommendations

The committee makes no recommendations as a result of its study of the Medical Assistance Program Advisory Council and the Medicaid program.

MANDATED HEALTH INSURANCE COVERAGE

North Dakota Century Code Section 54-03-28 provides that the Legislative Council is to contract with a private entity, after receiving one or more recommendations from the Insurance Commissioner, to provide a cost-benefit analysis of every legislative measure or amendment mandating health insurance coverage of services or payment for specified providers of services. The committee was assigned the responsibility to make a recommendation regarding this contract.

Pursuant to NDCC Section 54-03-28, a legislative measure mandating health insurance coverage may not be acted on by any committee of the Legislative Assembly unless accompanied by a cost-benefit analysis. The Insurance Commissioner is to pay the cost of the contracted services, and the cost-benefit analysis must include:

1. The extent to which the proposed mandate would increase or decrease the cost of services.
2. The extent to which the proposed mandate would increase the use of services.
3. The extent to which the proposed mandate would increase or decrease administrative expenses of insurers and the premium and administrative expenses of insureds.
4. The impact of the proposed mandate on the total cost of health care.

58th Legislative Assembly Cost-Benefit Analyses

During the 2003 legislative session, a total of $24,316 was paid to Milliman USA for conducting cost-benefit analyses relating to three separate bills--Senate Bill No. 2210 ($7,867) and House Bill Nos. 1247 and 1349 ($16,449). Senate Bill No. 2210, providing coverage for substance abuse treatment, was approved by the 58th Legislative Assembly. House Bill No. 1247, providing for outpatient prescription drugs, and House Bill No. 1349, providing for colorectal cancer screenings, were not approved by the 58th Legislative Assembly. The 58th Legislative Assembly authorized $55,000 from the insurance regulatory trust fund, the same as the 2001-03 biennium appropriation, for payment of cost-benefit analyses of the 59th Legislative Assembly measures mandating health insurance coverage.

Insurance Commissioner Recommendations

The Insurance Commissioner recommended that based on the work done during the 58th Legislative Assembly, the Legislative Council contract with Milliman USA for the 59th Legislative Assembly.

Recommendations

The committee recommends that the Legislative Council contract with Milliman USA for cost-benefit analyses of future legislative measures mandating health insurance coverage pursuant to NDCC Section 54-03-28.

COMMUNITY HEALTH GRANT PROGRAM

Pursuant to NDCC Section 23-38-02, the State Health Officer is to provide reports to the Legislative Council regarding the implementation of the community health grant program no later than September 30, 2004. The Legislative Council assigned this responsibility to the Budget Committee on Health Care.

Community Health Trust Fund

The 56th Legislative Assembly passed House Bill No. 1475, which created a tobacco settlement trust fund for the deposit of all tobacco settlement money received by the state. Through August 31, 2004, North Dakota has received tobacco settlement trust fund collections totaling $129,775,775, 10 percent or $12,977,577 of which has been transferred to the community health trust fund.

House Bill No. 1004 (2003) appropriated $4.7 million from the community health trust fund for the community health grant program for the 2003-05 biennium, which is allocated pursuant to NDCC Section 23-38-01 to student tobacco programs (40 percent), county tobacco programs (40 percent), and state aid (20 percent) and appropriated $680,000 from the community health trust fund for a tobacco "quit line." Senate Bill No. 2297 (2003) appropriated $600,000 from the community health trust fund--$100,000 for funding the Community Health Grant Program Advisory Committee and $500,000 for grants for city, county, and state employee tobacco cessation programs. Senate Bill No. 2297 provides that any unspent 2001-03 biennium funds for city and county tobacco cessation programs may be continued into the 2003-05 biennium. A total of $204,053 of 2001-03 biennium unspent funds for the city and county employee tobacco cessation program was continued into the 2003-05 biennium.

Tobacco Programs

The primary purpose of the community health grant program is to prevent or reduce tobacco usage by strengthening North Dakota's community-based public health programs. The community health grant program addresses four broad goals:

1. Preventing initiation of tobacco use among youth.
2. Promoting quitting among youth and adults.
3. Reducing nonsmokers' exposure to secondhand smoke.
4. Identifying and eliminating disparities in tobacco use among specific population groups.

The committee received information regarding tobacco cessation efforts in North Dakota. Typically, it takes many years for a tobacco program to achieve reductions in the number of people using tobacco or to result in a reduction in illness and death from tobacco use; however, North Dakota has some very encouraging trends. Based on the 2003 youth risk behavior survey for grades 9 through 12, the percentage of students identified as smokers decreased to 30 percent, as compared to 35 percent in 2001 and 41 percent in 1999. The percentage of students who use smokeless tobacco has decreased to 10 percent, as compared to 13 percent in 2001 and 15 percent in 1999. The percentage of students who were younger than 13 when they smoked their first cigarette has decreased to 37 percent, as compared to 44 percent in 2001.

The committee learned the State Department of Health will "track" outcomes of the city, county, and state employees in tobacco cessation programs for 3, 6, 9, and 12 months after participation in the program. Local public health units have established cessation programs in 69 locations in 42 counties in North Dakota. Data from cessation programs that have been in existence for more than one year indicate 12-month quit rates ranging from 33 to 58 percent. Research has indicated that a high percentage of individuals who have quit smoking for more than one year tend not to start smoking again.

The North Dakota Public Employees Retirement System smoking cessation program is designed to help state employees and family members to stop using tobacco. The members who participate in the program are enrolled in tobacco cessation counseling at local agencies or public health units. The program provides reimbursement for eight weeks of counseling services and medication to facilitate smoking cessation. A total of 26 members, including 18 employees and 8 family members, participated in the program from January to June 2004. Participants had used tobacco an average of 25.9 years before entering the program.

The committee learned all county jails in North Dakota except the county jail in Rolette County are smoke-free. Also, the State Penitentiary, Youth Correctional Center in Mandan, county detention centers for youth, and youth group homes and residential treatment centers are smoke-free.

The tobacco "quit line" was implemented on September 20, 2004. It is a collaborative effort with the University of North Dakota Department of Community Medicine and the Mayo Clinic tobacco "quit line." The Mayo Clinic tobacco "quit line" staff will oversee the training of the North Dakota staff.

The committee learned the State Department of Health anticipates the entire $4.7 million in grants for the community health grant program will be spent by local public health units. Approximately $1.68 million, or 44.8 percent, of the $3.76 million appropriated for county and student tobacco programs was spent during the first year of the 2003-05 biennium.

Recommendations

The committee makes no recommendations regarding the implementation of the community health grant program.

STATE BOARD OF NURSING REPORT

North Dakota Century Code Section 43-12.1-08.2, which is effective through September 30, 2006, provides that the State Board of Nursing may review and study the nursing educational requirements and the nursing shortage in this state and the implications for rural communities. The State Board of Nursing is to report annually on the progress of the study, if undertaken, to the Legislative Council. The Legislative Council assigned this responsibility to the Budget Committee on Health Care.

Nursing Shortage Study

The committee learned that the State Board of Nursing contracted with the University of North Dakota Center for Rural Health in 2002 for a two-year study of the nursing educational requirements and the nursing shortage in North Dakota and the implications for rural communities. The study concluded:

1. Salary and benefits for both clinical nurses and nursing faculty should be increased to reflect training and experience.
2. The number of students admitted to nursing education programs should be increased and distance learning or alternative programs should be offered.
3. The work environment for nurses should be improved by increasing nurses' representation in decisionmaking.
4. Staffing levels should be adjusted to allow nurses to provide more direct patient care and a less stressful work environment.
5. Recruitment efforts should be increased to develop more interest in the nursing field.

The committee learned that based on reports from nursing education programs, the number of nursing students in North Dakota has remained stable or increased. There are approximately 11,000 licensed nurses in North Dakota. However, a large number of nurse retirements are expected in the next few years. The greatest shortage of nurses is in rural areas and approximately 63 percent of North Dakota nurses are located in the eight most populous counties.

The committee learned that, as part of the study, surveys were conducted of public health agencies, nursing students, licensed nurses, public health agencies, hospitals, and other health care facilities. Nursing students attending North Dakota nursing programs; Northland Community College in East Grand Forks, Minnesota; Minnesota State University - Moorhead, Minnesota; and Concordia College in Moorhead, Minnesota, were included in the study. North Dakota residents attending other nursing programs located near the North Dakota border were not included in the survey.

Nursing Education Requirements

The committee learned that as of June 2004, there are 11 nursing programs in North Dakota--6 in North Dakota University System institutions, 3 in private colleges, and 2 in tribal colleges. Collectively these programs have a total enrollment of 298 licensed practical nurse (LPN) students, 881 registered nurse (RN) students, and 153 master's level students. Most of the programs do not maintain waiting lists, but because some students apply to more than one college, there may be waiting lists between the time admission decisions are made and classes start. The waiting lists are primarily at the LPN program level. Most programs have increased entering class size over the past two years.

The 58th Legislative Assembly approved House Bill No. 1245, which reduced the educational requirements for RN and LPN programs in North Dakota. The committee learned the State Board of Nursing finalized rules for RN and LPN programs to comply with the new law in April 2004. The State Board of Nursing received a proposal for approval in May 2004 from four state colleges that have formed a consortium (the Dakota Nurse program) and plan to begin offering RN and LPN degrees. Those colleges include Williston State College, Minot State University - Bottineau, Lake Region State College, and Bismarck State College. The final site review for the colleges was completed on June 22, 2004.

The committee learned that immediately after the final site review was completed, the State Board of Nursing provided an informal recommendation to the Dakota Nurse program that the curriculum for both the RN and LPN programs needed to be reworked. Representatives of the State Board of Nursing testified that the curriculum did not include all the components necessary for the nursing students to become safe practitioners. Members of the committee encouraged the State Board of Nursing and college representatives to work cooperatively in order to refine the curricula model.

In July 2004 the State Board of Nursing granted initial approval to the Dakota Nurse practical nurse program through July 2005 with an interim report due by January 1, 2005, addressing the areas of partial compliance.

During a September 15, 2004, meeting, the board granted initial approval to the Dakota Nurse associate degree registered nursing program through March 2006. The colleges will be required to verify or address areas of concerns within the next year relating to faculty qualifications, clinical facilities, program and student policies, student satisfaction, and revisions to program evaluation. The Dakota Nurse associate degree registered nursing program is scheduled to start in fall 2005.

The committee learned the State College of Science will continue to offer an associate in applied science degree in licensed practical nursing and has plans for adding a transitional associate degree registered nursing program.

Recommendations

The committee makes no recommendations regarding the State Board of Nursing study of the nursing educational requirements or the nursing shortage.

CHILDREN'S HEALTH INSURANCE PROGRAM REPORT

North Dakota Century Code Section 50-29-02 requires the Department of Human Services to report annually to the Legislative Council and describe enrollment statistics and costs associated with the Healthy Steps program (children's health insurance program). The Legislative Council assigned this responsibility to the Budget Committee on Health Care.

The committee learned that during the federal fiscal year ended September 30, 2003, the Department of Human Services spent $3,455,539 for premium payments to Noridian Mutual Insurance Company, of which $765,403 was from the general fund. The administrative costs for the Healthy Steps program during the same period was $79,677, of which $17,648 was from the general fund.

Phase III of the Healthy Steps program, which provides coverage to those children who were previously ineligible for Medicaid because of excess income, was implemented in January 2002. The Healthy Steps program provides coverage for the children of families whose income does not exceed 140 percent of the poverty level based on net income. Medicaid considers a child to be from birth to 21 years of age. The total expenditures incurred during the federal fiscal year ended September 30, 2003, for Phase III of the program was $3,016,734, of which $668,205 was from the general fund.

The unduplicated number of children enrolled in Medicaid or Healthy Steps since the 1999 federal fiscal year is:

Fiscal Year Ending	Combined Total
September 30, 1999	29,783
September 30, 2000	31,938
September 30, 2001	31,534
September 30, 2002	35,155
September 30, 2003	40,313

The number of children enrolled in the Healthy Steps program as of June 1, 2004, compared to the total population for each region is:

Region (Service Area)	Population of Children Per 2000 Census	Children Enrolled June 1, 2004	Percentage Enrolled
Region 1 (Northwest human service area)	7,869	212	2.7%
Region 2 (North Central human service area)	23,952	298	1.2%
Region 3 (Lake Region human service area)	13,760	230	1.7%
Region 4 (Northeast human service area)	23,555	165	0.7%
Region 5 (Southeast human service area)	41,322	312	0.8%
Region 6 (South Central human service area)	15,089	298	2.0%
Region 7 (West Central human service area)	35,794	556	1.6%
Region 8 (Badlands human service area)	10,437	282	2.7%
Total	171,778	2,353	1.4%

Recommendations

The committee makes no recommendations regarding the children's health insurance program state plan.

BUDGET TOURS

During the interim, the Budget Committee on Health Care functioned as a budget tour group of the Budget Section and visited the Southeast Human Service Center, Fort Abercrombie, and the Veterans Home. In addition, the committee received a budget report on the Northeast Human Service Center. The committee received testimony regarding facility programs, overviews of clients or individuals served, and problems that facilities may be encountering during the interim. The tour group minutes are available in the Legislative Council office and will be submitted in report form to the Appropriations Committees during the 59th Legislative Assembly.

The committee learned that the Veterans Home is considering requesting approval from the Legislative Assembly to add skilled care beds for dementia and aggressive behavior. The Veterans Administration will pay 65 percent of the cost to operate the units. Because existing staff will be used, it is estimated that a general fund savings of $500,000 per biennium could be realized. Approximately 12 to 14 skilled beds would be added for a dementia unit and 3 to 5 beds for an aggressive behavior unit. Efficiencies would result from a larger unit allowing for more effective staffing patterns.

The 58th Legislative Assembly approved House Bill No. 1007, which authorized the Department of Human Services to purchase eight skilled care nursing beds after April 14, 2003, from funding available from the bed reduction incentive program, pursuant to Section 23 of 2001 House Bill No. 1196, and transfer the purchased beds to the Veterans Home. The committee learned that the Veterans Home would have had to move 17 basic care beds to add the 8 skilled care beds. In addition, there were several Life Safety Code and funding issues that prevented the plan from being financially "viable."

The committee learned the eight skilled care bed addition was estimated to generate an additional $250,000 in special funds revenues for the Veterans Home. The 58th Legislative Assembly reduced the Veterans Home general fund appropriation by $250,000 in anticipation of the additional revenues, which will not be received resulting in a potential general fund deficiency appropriation request for consideration by the 59th Legislative Assembly. Representatives of the Veterans Home indicated that the 2005-07 biennium "hold-even" base budget request does not replace the $250,000 of revenues which would have been received from the skilled care nursing bed addition.

Recommendations

The committee encourages the Veterans Home to present information to the Appropriations Committees during the 59th Legislative Assembly on the cost and feasibility of developing a dementia skilled care unit at the Veterans Home and on the budget adjustments necessary for the 2005-07 biennium to restore funding reductions made in anticipation that eight skilled care beds would be added to the Veterans Home during the 2003-05 biennium.

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