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Medicaid Reform Plan Rules Out Privatization


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A long-awaited plan for reforming the state’s Medicaid system has been announced.

By Rose Hoban

After a nearly yearlong effort, state health officials presented their plan for overhauling the North Carolina Medicaid program, revealing a retreat from plans to offer the $13 billion program out to bid to private managed care companies.

Over the course of a three-hour meeting of the Medicaid Reform Advisory Group held on Wednesday in Raleigh, officials from the Department of Health and Human Services presented a plan that would, however, put Medicaid providers at more financial risk in the program.

Instead of asking for-profit managed care companies to come in and run Medicaid, as is the case in many other states, DHHS officials tweaked their original proposal in the face of opposition from numerous members of the health care provider community.

Members of the Medicaid Reform Advisory Group listen to speakers during the meeting Wednesday. L to R: Sen. Louis Pate, Richard Gilbert, MD, Dennis Barry (chair), Peggy Terhune, PhD, Rep. Nelson Dollar. Photo credit: Rose Hoban

Members of the Medicaid Reform Advisory Group listen to speakers during their January meeting (L to R): Sen. Louis Pate, Richard Gilbert, Dennis Barry (chair), Peggy Terhune and Rep. Nelson Dollar. Photo credit: Rose Hoban

“We’re pleased they listened to what we had to say,” said Cody Hand, a vice-president and lobbyist for the North Carolina Hospital Association.

But even as providers were breathing a sigh of relief that Medicaid would not be privatized, many were looking for more clarity in the proposal. The phrase “the devil is in the details” was on the lips of advocates, health officials and even members of the five-member advisory group.

Accountable care

At the center of the proposal made Wednesday was the idea of using so-called accountable care organizations (ACOs) as the mechanism for providing care given to people who receive Medicaid, the federal- and state-funded program that covers more than 1.4 million of North Carolina’s low-income, disabled and pregnant patients, young and old.

In the current fee-for-service health care system, providers such as doctors, hospitals and clinics get paid based on how many tasks they perform, with little consideration of the necessity or quality of the care. But as proposed by Dartmouth University researcher Elliot Fisher in a 2007 article, ACOs would pay health care providers based on the quality of the care and have some measure of financial accountability for that quality and how well patients do.

ACOs were written into the Affordable Care Act as a way of holding down the growth of costs. They’re made up of local hospitals and a network of many specialties, including physicians, therapists and other health care providers, all of whom provide patient care. The performance of the ACOs on quality measures and patient outcomes determines the amount of reimbursement they get for providing care.

If the organization is successful in improving efficiency along with the health of patients, it keeps extra reimbursement from federal programs such as Medicaid and Medicare. If the organization is not successful at meeting its goals, it could face financial penalties and need to pay back some of the money received by the federal programs.

In effect, the arrangement puts doctors’ groups and hospitals at more “risk,” in that they have to prove what they’re doing is efficient and effective in order to get paid more. But it does not put providers at as much risk as they would be if they were receiving flat monthly fees for their patients, as is common under managed care programs.

Ben Money, who heads the North Carolina Community Health Center Association said he hoped the General Assembly would find the plan acceptable enough to declare Medicaid “fixed.”.

“From what we’ve seen thus far, this plan could work well for community health centers, but really only if we expanded Medicaid,” Money said.

ACOs in NC

Currently, North Carolina has 14 ACOs, all providing care for patients in the federal Medicare program, which serves seniors and people with long-term disabilities.

Few other states, if any, have applied the ACO model to their Medicaid programs. According to state Rep. Nelson Dollar (R-Cary), who is part of the advisory group, applying the ACO model to Medicaid puts North Carolina on the “cutting edge.”

But even as providers were pleased with the concept of ACOs over for-profit managed care, many had questions about the timeline and what the system would look like.

“Just getting requests for proposals written and responses from organizations that want to come to the table could take until mid-2015,” said Steve Shore, head of the North Carolina Pediatric Society.

One thing Shore worried about was the idea that primary care providers, such as family doctors and pediatricians, would only be able to be part of one ACO.

“Here in Wake County, we’ve got the WakeMed system and we’ve got the UNC/Rex system,” he said. “Are they all going to be in the same ACO? There are just a lot of details that we have to see how they’re going to come together.”

“ACOs have generated favorable results [and] some not so favorable,” DHHS consultant Bob Atlas told the gathering. “The jury is still out. We’re hopeful.”

When asked by advisory panel member Sen. Louis Pate (R-Mt. Olive) whether the plan would save the state Medicaid dollars, Atlas responded that he anticipated Medicaid expenditures would continue to grow but at a slower rate.

“ACOs are as yet not fully proven, and I want to be fairly conservative in offering savings projections,” he said.

“You do get improved stability with the ACO arrangement relative to the current fee-for-service arrangement,” Atlas said. “If you have an overrun, you have someone there to manage the overrun. That reduces the peaks and valleys in terms of financial outcomes.”

But Atlas also said that “true stability” could only come from a managed care model of payment that seems to be off the table for now.

DHHS Recommendations for Reforming Medicaid

  • Services for physical health coordinated through ACOs that share savings and losses with the state and are responsible for quality. Initial contracts with ACOs would begin in July 2015.
  • ACOs’ coverage of the population and financial accountability will phase in over a five-year period.
  • Consolidate to four mental health management organizations, with standardized processes.
  • Create needs assessment and care-planning process for long-term care patients.
  • Decisions on payment plan for Medicaid long-term care put off for now. Continue working on what the future of long-term care and payment for those services would look like in the future.

Coordinating care of minds and bodies

One hallmark of DHHS Sec. Aldona Wos’ original proposal to reform Medicaid would have altered the system for providing care to people with mental health disabilities, placing those patients into Medicaid organizations that would coordinate care for both physical and mental health problems.

However, the plan proposed Wednesday leaves the current mental health system of state-based not-for-profit managed care organizations relatively intact. The plan calls for the current system of 10 mental health managed care organizations to consolidate down to four providers and calls on those organizations to better coordinate care with the ACOs.

But even with the current bifurcation of mental health and physical health services, DHHS mental health planner Courtney Cantrell said that the Medicaid reform plan created the “opportunity for integrated whole-person care.”

“Integrated care is currently not supported by fee-for-service. Providers offer mental health services at a loss because it’s good for patients,” said Cantrell, who argued that the payment incentives did not line up for providing both kinds of care in primary care settings. “And there are barriers to integrating physical care into behavioral health service delivery.”

Cantrell said the so-called “medical home” for behavioral health patients would be at an ACO and those organizations would have referral resources for mental health services.

But many sticking points remain in determining who will pay for what between ACOs and the state’s mental health managed care organizations.

“A large part of prescription drug spend is for psychoactive drugs,” Atlas said during his presentation. “But it turns out primary care physicians are writing them.

“We have to come up with a sharing formula for ACOs and non-ACOs to participate in the drug-spend equation.”

Panel member Peggy Terhune, who heads Monarch, a large behavioral health care provider, said she was excited about the plan, but she also worried about how well primary care offices would cope with people with behavioral health problems.

“I still have concerns about the [intellectually and developmentally disabled] and [severely mentally ill] populations,” Terhune said. “They take more time in a primary care physician’s office, and the primary care doc may have difficulty working with someone like this.”

She said she was concerned that ACOs might try to not serve people with disabilities or severe and persistent mental illness or “might not serve them as appropriately as they need to be served.”

But Terhune also said she was pleased the plan left the current mental health system intact instead of subjecting it to more change.

“We’re letting [mental health agencies] do what they need to do to stabilize,” Terhune said. “I appreciate that.”

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4 Comments

  1. Privatization off table for N.C. Medicaid program | The Progressive PulseFeb 27, 2014 at 11:30 am

    […] the News & Observer (click here) and N.C. Health News (click here) also have more on yesterday’s […]

  2. State Highlights: N.C. Medicaid Reform Plan Unveiled; Cutting Back Medicaid Estate Recoveries | Health Insurance ExchangeFeb 28, 2014 at 9:55 am

    […] North Carolina Health News: Medicaid Reform Plan Rules Out Privatization After a nearly yearlong effort, state health officials presented their plan for overhauling the North Carolina Medicaid program, revealing a retreat from plans to offer the $13 billion program out to bid to private managed care companies. Over the course of a three-hour meeting of the Medicaid Reform Advisory Group held on Wednesday in Raleigh, officials from the Department of Health and Human Services presented a plan that would, however, put Medicaid providers at more financial risk in the program (Hoban, 2/27). […]

  3. State Highlights: N.C. Medicaid Reform Plan Unveiled | Health CareFeb 28, 2014 at 6:30 pm

    […] North Carolina Health News: Medicaid Reform Plan Rules Out Privatization After a nearly yearlong effort, state health officials presented their plan for overhauling the North Carolina Medicaid program, revealing a retreat from plans to offer the $13 billion program out to bid to private managed care companies. Over the course of a three-hour meeting of the Medicaid Reform Advisory Group held on Wednesday in Raleigh, officials from the Department of Health and Human Services presented a plan that would, however, put Medicaid providers at more financial risk in the program (Hoban, 2/27). […]

  4. Bebe SmithMar 1, 2014 at 10:37 am

    I hope this change will enable us to start looking at what it really takes to coordinate care for people with complex needs — it’s more than a data system. It takes a high-touch, high skill, and flexible service that will engage people in preventive treatment, and intervene to prevent crises. I also hope that we will be able to address the psychosocial needs that often drive up costs.

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