Medicaid in North Carolina has some profound strengths and also some glaring weaknesses. In the second of a two-part story, we examine the question, how broken is Medicaid?

By Rose Hoban

Earlier this month, Gov. Pat McCrory proposed a complete revamping of North Carolina’s Medicaid program. A big part of his rationale is the argument that the program that serves the 1.8 million aged, disabled and poor beneficiaries in North Carolina is broken and in need of overhaul.

During an interview with North Carolina Health News last week, Health and Human Services Sec. Aldona Wos and Medicaid head Carol Steckel also maintained that the state’s – and other – Medicaid programs are “broken.”

“At the national level, there is not a Medicaid director or a governor who will tell you that the Medicaid program in and of itself is not broken,” Steckel said.

Few commentators, health policy experts or even Medicaid beneficiaries would argue that the North Carolina program isn’t in need of improvement, in particular for beneficiaries with mental health problems. The program has multiple administrative problems, including an antiquated information system and a lack of qualified staff.

On the other hand, the state’s medical home program is a national model, and that program, Community Care of North Carolina, has some of the highest levels of participation from primary care providers in the country.

And according to figures from the Kaiser Family Foundation, North Carolina Medicaid, as a whole, has the slowest rate of year-over-year cost increases in the nation (see chart).

“The basic premise that Medicaid spending is going out of control and we have to curb spending because there’s a crisis is just wrong,” said John Oberlander, a health policy researcher from the UNC School of Medicine.

Oberlander agrees that there are problems with the program that require improvement, but cautions against painting Medicaid’s problems with too broad a brush.

Mental health disorder

Few in North Carolina would disagree that the mental health system has been a mess since the implementation of a reform effort in 2001, which closed psychiatric hospitals and promised community-based services that never materialized.

“It’s a very confused process, very convoluted – where you could get help, who you get it from, how do you get it, who provides it, who pays for it, this kind of stuff,” Wos said.

Traditionally, the state’s mental health programs have been managed separately from services that provide medical care, leading to duplication of treatments and poor health outcomes for people with mental health problems. Often, neither the money nor the incentive for coordination of care has been there.

“The governor is completely right, we need a more coordinated system to focus on the whole person, no question,” said former HHS Sec. Lanier Cansler. “The question is how you accomplish that.”

For the past two years, mental health provider agencies, called local management entities, have been mandated by the state to become small insurers, bearing all the risk for providing mental health care for their recipients using a set pot of money each month.

But with the failure of Asheville-based Western Highlands Network and financial problems at other LMEs, Steckel said that was probably not the way to go. She said those agencies originally might have been good at providing mental health care, but not so good at the new task of managing costs.

“We took them out of their core competency by saying, ‘You’ve got to become a financial institution and pay bills,’” Steckel said. “Well, that’s not what they’re good at.”

And those LMEs are, for the most part, still not providing coordination of care for physical health problems.

“You have to give them credit, at least they’re saying something” about mental health coordination,” said Don Taylor, a Duke University health economist. But he warned that the problem with rolling all mental health patients into one big Medicaid program for everyone is that these patients have complicated problems, and are therefore expensive.

“When they’re talking about a broken system, they’re really talking about people with mental health problems, substance-abuse problems and dual eligibles,” those eligible for both Medicaid and Medicare, Taylor said. “With these people, you’re trying to control diseases that devastate people.

“For many severe and persistent mental illnesses, there are not a lot of therapies that work that well. And you’re covering people for decades.”

Community Care of North Carolina

Both Wos and Steckel have said that one way to accomplish coordination of care for mental health patients would be to move them into a program like Community Care of North Carolina (CCNC).

CCNC is a not-for-profit management organization built slowly over the past decade by doctors from around the state. According to the DHHS website, “The objective of CCNC is to create community health networks to achieve long-term quality, cost, access and utilization objectives.”

Fourteen networks of doctors around the state manage about 1.3 million patients, coordinated by a main network in Raleigh. The networks create standards of care for common conditions, such as asthma, and provide case managers to help doctors coordinate care for complex patients.

CCNC doesn’t manage all of the state’s Medicaid patients – primarily, pregnant women and low-income children and their parents. Those patients cost the state and federal government a total of about $5.5 billion last year.

In recent years, the General Assembly has been pushing program leaders to enroll more aged and disabled patients.

According to CCNC spokesman Paul Mahoney, CCNC received $106 million last year for the contract, about 1.9 percent of the budget.

“The $106 million figure is inclusive of all costs for CCNC’s 14 network operations and all Central Office staff and functions, including an Informatics Center,” Mahoney wrote in an email. “It also includes about 800 care managers working in networks, doctor’s offices, and hospitals, and local health departments.”

Mahoney said CCNC has never done a provider satisfaction survey, but more than 90 percent of the state’s primary care doctors take part in the system.

“They’re voting with their feet by staying in the program,” Mahoney said. Doctors are involved in the governance of CCNC, they write the practice guidelines and they encourage other doctors to follow best practices.

The program involves “[p]eople who are actually delivering care, who are writing the rules, not an insurance executive, not a consultant,” he said. “There’s a practicality to that.”

And medical providers have been quick to defend CCNC since McCrory announced plans to overhaul Medicaid.

“Doctors like it because it has proven to be a mechanism to get coordinated care to patients around the state,” said Bob Seligson, head of the North Carolina Medical Society. “It’s not perfect, but it’s damned good.”

Other states have taken note of the savings generated by CCNC. An actuarial report done by the consulting firm Milliman found CCNC saved North Carolina taxpayers about $1 billion between 2007 and 2011.

Milliman has performed actuarial reviews for governments in dozens of states.

But in her January report, the state auditor questioned the amount of money that the report said CCNC was saving. Wood noted legislators planned on at least $72 million in additional savings in fiscal year 2012 because of changes to the state Medicaid program. But the program only saved $34 million, in part because it took time for federal officials to approve state-plan changes, delaying savings.

“State plans can be changed, but they can’t be changed instantly,” said Jim Verdier, explaining that amendments to a state’s Medicaid plan have to be submitted to federal officials before being implemented.

“The fed can take it’s own sweet time in terms of approving state-plan amendments,” he said. “They have 90 days to review [the amendment], and then if they come back and ask questions, the 90-day clock starts running again. It can take a long time to get [an amendment] approved, even one that’s not controversial.”

In 2011, Cansler warned lawmakers of these delays by federal administrators, saying they would impact how much money CCNC could save the state during that budget year.

Lawmakers also strongly support CCNC, including House Health and Human Services chair, Nelson Dollar.

“They have done an outstanding job,” Dollar said in an interview.

But as reported in the News & Observer earlier this month, Dollar was more pointed in his defense of the program in an email to other lawmakers.

“There continues to be misconceptions as to the role of CCNC as well as the nature of the problems we’ve addressed in the last two years,” Dollar wrote. “We have the foundation to do something truly innovative, I hope we don’t opt for the failures and traps of commercial managed care.”

“It would be irresponsible to take a system that’s seen as state-of-the-art and a very good baseline system and not build on it,” Steckel told legislators at a committee meeting in February.”

“The goal is to build on what exists,” she said.

But last week, Steckel said she doesn’t see CCNC as being the only mechanism for improving Medicaid.

“There is nothing in our plan that doesn’t build on the success of CCNC, but the one concept that we feel very strongly about is that you have to have competition,” she said. “We would not be serving the citizens of North Carolina well if we vested every bit of the Medicaid program into CCNC.”

Trust me … really

One issue Wos has stressed on a number of occasions is a history of mistrust between her department and the General Assembly.

“There has not been a history of the trust factor … that the product that has come out of DHHS is a usable product,” Wos said last week. “Whether it is the accuracy of the number, whether it is the accuracy of the report, the timeliness of the report, whatever it is.”

She maintains that the department lacked accountability, playing fast and loose with rules and regulations, and that lawmakers would react “by making more rules, more regulations, putting a backlog on more and more work, and asking for more.”

“It was an unsustainable internal interplay between department and legislature and the executive branch,” Wos said.

An issue that contributed to that distrust was DHHS’ handling of the Medicaid management information system project, a multi-year initiative to replace a 30-year-old computer system that has tracked Medicaid expenditures, utilization and billing.

Another audit by Wood, presented in late 2011, found the project more than $300 million over budget and at least two years behind schedule.

At the time, Cansler argued that many of the additional costs and delays were a function of legislative changes at the state and federal level, along with changes at the federal Centers for Medicare and Medicaid Services.

“If you have any state or federal laws change, you have to work around them,” he said recently. “That delayed things.”

Wos said the type of rancor between Cansler’s DHHS and the legislature over that project is the kind of thing she’s trying to overcome.

“And I think we have done a pretty good job in this last four months, where the legislature is actually kind of surprised,” Wos said. “They will call up here, they call [Steckel] here, they have a question, they get an answer.”

“They are kind of surprised that we are actually producing a product that is usable for them based on what they are requesting,” she said.

Bad data

Cansler said the antiquated information system has been another factor holding North Carolina’s Medicaid program back from being as efficient as it could be, in large part because it was created as a bill-payment system.

Without the data needed to make important planning and resource decisions, state officials have often been stymied.

“If you don’t have good data, you can’t decide, ‘Wow, that’s a program we really need to fund,’” said DHHS spokeswoman Julie Henry.

Cansler pointed to an experience he had when he visited New York’s data center. Just before his trip, he had been looking for information about dentists in North Carolina, and had difficulty getting an answer from the old computer system.

“I asked the same question of the folks in New York, and within 10 minutes they were able to print out an answer, with a map of where all the dentists were who accepted Medicaid in the state,” he said. “That really impressed me.”

“We could get data out of MMIS, but it depended on how you wrote the query,” Cansler said. “Two different people could program a query to get information out of the system, and you couldn’t get the same answer twice.”

The new system is due to go live on July 1, but Wos’ newly hired chief information officer has warned that there will be months of fixes and workarounds after the new system is up and running.

“I came in where I came in,” Wos said about the project, throwing up her hands. “There is no option; just get it over the finish line.

“We are going to get this done. We are going to push it over July 1, and we are going to pull it over to July 2, and by January we will be kind of okay.”

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