Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 544
                                        H.D. 1

Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii


     Your Committee on Health and Human Services, to which was
referred H.B. No. 544, H.D. 1, entitled: 


begs leave to report as follows:

     The purpose of this measure is to establish a safety net
health plan program for the distribution of QUEST funds.

     Your Committee received testimony in support of this measure
from the Hawaii State Primary Care Association, Hawaii Nurses'
Association, Waianae Coast Comprehensive Health Center, Health
Care for the Homeless Project, Aloha Care, and two private
individuals.  Testimony in opposition was received from the
Queen's Health Management and Kaiser Permanente.  Informational
testimony was provided by the Department of Human Services.

     Your Committee finds that Medicaid is the most important
insurer of low-income persons in Hawaii and the most important
revenue source for community health centers that contract with
the DHS for providing QUEST services.  However, your Committee
further finds that the current transition of the compensation
system from fee-for-service to managed care is threatening the
financial viability of community health centers, also referred to
as safety net providers for QUEST patients.  As a possible
solution, safety net providers have organized themselves into
their own managed care plans, known as "safety net health plans".

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                                   STAND. COM. REP. NO. 1016
                                   Page 2

     This measure is intended to provide a statutory framework
for safety net health plans to ensure their survival by providing
adequate compensation in accordance with risk factor adjustments
and accounting for other services provided, health status of
enrollees, and socio-demographic characteristics of enrollees.

     Your Committee is passing this measure to continue the
dialogue among interested stakeholders.

     As affirmed by the record of votes of the members of your
Committee on Health and Human Services that is attached to this
report, your Committee is in accord with the intent and purpose
of H.B. No. 544, H.D. 1, and recommends that it pass Second
Reading and be referred to the Committee on Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Health and Human

                                   SUZANNE CHUN OAKLAND, Chair

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