AN ACT Relating to health care cost control; adding a new section to chapter 43.41 RCW; adding a new chapter to Title 70 RCW; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that rising health care costs are a vital concern to the people of this state because of the danger that such costs will place health care beyond the reach of a large segment of our population. The legislature further finds that existing methods of providing health care services may be contributing to the rapid rise in costs. It is therefore essential that effective cost control programs be established. It is the legislature's intent, in furtherance of this policy, that cost control procedures be implemented by all state agencies that purchase or provide health care.

NEW SECTION. Sec. 2. The following state agencies are directed to cooperate with the office of financial management in order to establish appropriate health care information systems in their programs: The department of social and health services, the department of labor and industries, the state employees' insurance board, the department of veterans affairs, and the department of corrections.

The office of financial management, in conjunction with such agencies, shall determine:

(1) Definitions of health care services;

(2) Health care data elements common to all agencies;

(3) Health care data elements unique to each agency;

(4) A mechanism for program and budget review of health care data; and

(5) Executive review of health care data.

NEW SECTION. Sec. 3. Each of the agencies listed in section 2 of this act, with the exception of the department of labor and industries, which expends more than five hundred thousand dollars annually of state funds for purchase of health care shall identify the availability and costs of nonfee for service providers of health care, including preferred provider organizations, health maintenance organizations, managed health care or case management systems, or other nonfee for service alternatives. In each case where feasible in which an alternative health care provider arrangement, of similar scope and quality, is available at lower cost than fee for service providers, such state agencies shall make the services of the alternative provider available to clients, consumers, or employees for whom state dollars are spent to purchase health care. As consistent with other state and federal law, requirements for copayments, deductibles, the scope of available services, or other incentives shall be used to encourage clients, consumers, or employees to use the lowest cost providers, except that copayments or deductibles shall not be required where they might have the impact of denying access to necessary health care in a timely manner.

NEW SECTION. Sec. 4. The department of labor and industries shall review the feasibility of establishing a managed health care system approach for the provision of their health care services, which would include making available to injured workers preferred provider arrangements, health maintenance organizations, or other managed health care or case management systems. The review shall include an analysis of the constraints of establishing the system under Title 51 RCW and shall also consider incentives to encourage injured workers to utilize the system.

NEW SECTION. Sec. 5. Plans for establishing or improving utilization review procedures for purchased health care services shall be developed by each agency listed in section 2 of this act. The plans shall specifically address such utilization review procedures as prior authorization of services, hospital inpatient length of stay review, requirements for use of outpatient surgeries and the obtaining of second opinions for surgeries, review of invoices or claims submitted by service providers, and performance audit of providers.

NEW SECTION. Sec. 6. The state agencies listed in section 2 of this act shall review the feasibility of establishing prospective payment approaches within their health care programs. Work plans or timetables shall be prepared for the development of prospective rates. The agencies shall identify legislative actions that may be necessary to facilitate the adoption of prospective rate setting methods.

NEW SECTION. Sec. 7. (1) Each agency listed in section 2 of this act shall individually or in cooperation with other agencies take any necessary actions to control costs without reducing the quality of care when reimbursing for or purchasing drugs. To accomplish this purpose, each agency shall investigate the feasibility of and may establish a drug formulary designating which drugs may be paid for through their health care programs. For purposes of this section, a drug formulary means a list of drugs, either inclusive or exclusive, that defines which drugs are eligible for reimbursement by the agency.

(2) In developing the drug formulary authorized by this section, agencies:

(a) Shall prohibit reimbursement for drugs that are determined to be ineffective by the United States food and drug administration;

(b) Shall adopt rules in order to ensure that less expensive generic drugs will be substituted for brand name drugs in those instances where the quality of care is not diminished;

(d) May limit the prices paid for drugs by such means as central purchasing, volume contracting, or setting maximum prices to be paid;

(e) Shall consider the approval of drugs with lower abuse potential in substitution for drugs with significant abuse potential; and

(f) May take other necessary measures to control costs of drugs without reducing the quality of care.

(3) Agencies may provide for reasonable exceptions to the drug formulary required by this section.

(4) Agencies may establish medical advisory committees, or utilize committees already established, to assist in the development of the drug formulary required by this section.

NEW SECTION. Sec. 8. A new section is added to chapter 43.41 RCW to read as follows:

(1) It is the purpose of this section to ensure implementation and coordination of chapter 70.--!sc ,1RCW (sections 1 through 7 of this act) as well as other legislative and executive policies designed to contain the cost of health care that is purchased or provided by the state. In order to achieve that purpose, the director may:

(a) Establish within the office of financial management a health care cost containment program in cooperation with all state agencies;

(b) Implement lawful health care cost containment policies that have been adopted by the legislature or the governor, including appropriation provisos;

(d) Study and make recommendations on health care cost containment policies;

(e) Monitor and report on the implementation of health care cost containment policies;

(f) Appoint a health care cost containment technical advisory committee that represents state agencies that are involved in the direct purchase, funding, or provision of health care; and

(g) Engage in other activities necessary to achieve the purposes of this section.

(2) All state agencies shall cooperate with the director in carrying out the purpose of this section.

NEW SECTION. Sec. 9. Sections 1 through 7 of this act shall constitute a new chapter in Title 70 RCW.

NEW SECTION. Sec. 10. This act is necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions, and shall take effect immediately.