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Alaska looks at some bold moves to cut medical bills

Administration proposal called 'dangerous' for some rural hospitals

Posted: July 15, 2012 - 12:09am

Cutting Alaska’s health care costs by sending employees out of state for cheaper treatment might work to trim budgets, but even so it may not be in the state’s best interest, say some who would have to deal with the proposals.

“I can understand why they want to control costs, but this is an approach that’s going to have an economic impact on our providers and our doctors, especially in Juneau where you’ve got so many state employees,” said Jim Duncan, business manager of the Alaska State Employees Association.

Parnell administration officials proposed taking steps to hold down medical costs for state employees and retirees that may include incentives to go to the Lower 48 for cheaper care and increasing use of preferred provider networks.

The state pays about $600 million a year for employee and retiree health care, according to Commissioner Becky Hultberg of the Department of Administration. That budget item has been growing at double-digit rates in recent years, increases Hultberg called “unsustainable.”

She’s proposed that the state should look at incentives for state employees to go south for medical procedures, saying it could provide big savings even after the cost of plane tickets, hotels, and other expenses.

It could also prompt Alaska providers to lower costs that are well above national averages, state officials said. That could save the state money even when Alaskans don’t take advantage of the incentives to get cheaper care outside Alaska.

The proposal was particularly worrying to some, including Karen Perdue, CEO of the Alaska State Hospital and Nursing Home Association.

She said she’d talked about it “conceptually” with Hultberg, but didn’t know the specifics of what the state might propose.

Losing state business could cause serious problems for the state’s rural hospitals, she said.

“They keep their doors open by taking the paying customers and having that volume because they also need to serve the non-paying customers, she said.

“If the customer mix become more of the people who really don’t have the choice to leave town, and the paying customers are leaving, that is a very dangerous situation for a rural hospital,” she said.

That could hurt both hospitals and communities, she said.

“Most of the hospitals in our association are community hospitals like Bartlett, or they are managed by some group and the facility is owned by the community or a non profit,” she said.

Perdue said hospital costs in Alaska are about 30-35 percent higher than in the Pacific Northwest. That’s about how much more food and other items cost in Alaska as well, she said.

“Physician fees are different, they are sometimes quite a bit higher, specialties in particular,” she said. “I think that’s where a lot of Commissioner Hultberg’s attention has been attracted.”

Alaska already pays for some employees to go south when care isn’t available locally, or and when they choose to if it is cheaper.

Dennis Geary, regional manager with the Alaska Public Employee Association, said Alaska’s costs can sometimes be dramatically higher.

“When a colonoscopy costs $6,000 in Juneau and $1,200 in Seattle and I’m paying the bills, why wouldn’t I want to pay the lesser amount,” he said.

Many of the unions representing public employees in Alaska have health trusts where the union makes the coverage decision with a set amount provided by the employer. Geary sits on a health care trust for the Juneau School district.

The unions understand the challenge facing the state, the leaders said.

What Hultberg is proposing is not new, Geary said.

“She’s new to the job, and when she came in she started saying ‘how do we find ways to reduce our cost if we can, but not reduce benefit or services,’” he said.

“It’s not a new concept, but she’s saying it out loud when previous commissioners didn’t,” he said.

Geary said he’d prefer public employees in Alaska be able to stay in Alaska for their health care if the costs were comparable.

“If it’s a wash, its much better to be able to stay here,” he said.

Duncan said he was worried that what starts out optional such as Hultberg has proposed might wind up with employees being penalized if they didn’t go down south for cheaper care.

“To require folks to be away from home, to be away from family members, that can be pretty traumatic,” Duncan said.

While his members are now in a union health care trust, after they retire the state will again provide their health care. Travel can be even harder for older people, he said.

• Contact reporter Pat Forgey at 523-2250, or at patrick.forgey@juneauempire.com.

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