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Current Medicaid Reform Debate Has Familiar Look

October 24, 2014 by Editor in Featured, Medicaid, State Health Policy


As lawmakers consider making changes to the state’s Medicaid program, legislators are staking out familiar positions from the past session.

By Rose Hoban

As lawmakers meet during the legislative interim this fall, one of the biggest topics under discussion is how Medicaid will look into the future. And as those talks take place, the debate looks very familiar.

At a subcommittee meeting this week, representatives from stakeholder organizations gave testimony similar to that given last winter to the Medicaid Reform Advisory Group.

At the same meeting, lawmakers from the House voiced support for a plan that moves Medicaid into a system delivered by accountable care organizations, which put providers at financial risk, but that keeps the Division of Medical Assistance as overseer of Medicaid.

DHHS Secretary Aldona Wos. Photo credit: Rose Hoban (file photo)

DHHS Secretary Aldona Wos. Photo credit: Rose Hoban (file photo)

Meanwhile, members of the Senate expressed comfort with moving delivery of Medicaid services to managed care organizations.

This very conflict is one of the sticking points that delayed the end of last summer’s legislative session, with the House and Senate taking polarized positions. The House supported last winter’s reform plan, while the Senate supported a move to a system that emphasizes corporate managed care and moves the Division of Medical Assistance out of the Department of Health and Human Services.

“Over the past 20 months, the Department of Health and Human Services, along with the DMA, has spent thousands of hours at this point, working with multiple stakeholders,” DHHS Sec. Aldona Wos told lawmakers.

“We have submitted a plan in March – again, in March – of this year. And we continue to strongly believe that the [accountable care organization] model is a realistic, achievable, responsible plan for North Carolina,” she continued.

“We respectfully ask to be allowed to continue to align the health care industry to meet our mutual goals and the goals of the citizens of the state.”

But determining the future structure and function of Medicaid and DHHS is largely out of Wos’ hands and in those of lawmakers who seem to have not moved significantly from the positions they took this summer.

Small movements

The people who deliver Medicaid-financed services are in the process of changing their positions, as evidenced by stakeholder testimony at the Medicaid Reform-DMA Reorganization Subcommittee of the Joint Legislative Oversight Committee on HHS.

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When Wos presented her Medicaid reform plan last spring, it called for provider groups to form themselves into accountable care organizations, which have predetermined quality measure and patient outcomes tied to reimbursement for care. If an ACO is successful in improving efficiency along with the care and health of patients, the organization keeps any leftover dollars. But in the original plan presented by Wos, ACOs would have shared financial risk with the state.

During the legislative battle over Medicaid that took place at the legislature this summer, stakeholders such as hospitals and doctors’ groups reluctantly agreed to take on even more financial risk in the future.

That risk will likely take the form of payment “capitation,” whereby providers are paid a set per patient, per month rate in return for providing all the care for all their patients, no matter the cost to the providers.

The net result is moving most, if not all, of the financial risk to the people who actually provide the care, not to the state, which up until now has paid for care on a fee-for-service basis.

“We promise to provide comprehensive care to the Medicaid population at a set cost to the taxpayers through the use of accountable care organizations,” said Cody Hand, vice president of the North Carolina Hospital Association, told the committee. “We have been working with the private sector to redesign the care and payment models. Our goal is to apply them to the Medicaid program.”

But Hand made it clear that hospitals would not be on board if the legislature chose to have commercial managed care organizations run by insurance companies in the mix, expressing what provider groups have been saying all year.

Rep. Nelson Dollar (R-Cary)

Rep. Nelson Dollar (R-Cary) Image courtesy of the NC General Assembly website

“MCOs manage by denial. Their claims to quality care are disingenuous, as they do not provide patient care,” he said, arguing that having the middle-man would only “siphon scarce dollars out of payment for care to administration and corporate profits.”

Hand’s comments were echoed by representatives from the N.C. Medical Society, the N.C. Pediatric Society and the Academy of Family Doctors, as well as by advocates for children and seniors.

The providers were supported in their statements by Rep. Nelson Dollar (R-Cary), who was a member of the original Medicaid Reform Advisory Group and has publicly supported the ACO model since it was formally proposed in March. Comments by other legislators implied that Dollar has also supported the ACO model in closed-door negotiations this summer.

“If you look at the costs, with the total claims north of $10 billion, just using rough numbers, the commercial managed companies would be taking a billion or a billion-two, and that would provide their profit margin, and that would have to go out of state,” Dollar said.

“Our providers can do this, and we can work with them and the department can work with them, and they can change the incentives in the system, because that’s what we really need to control costs,” he said.

Dollar also pointed to the fact that many commercial insurance companies, as well as the Medicare program, are already pushing health care providers to embrace the accountable care model.

Sen. Ralph Hise

Sen. Ralph Hise (R-Spruce Pine) Image courtesy of the NC General Assembly website

“I hope this General Assembly will build on the innovation in the private sector that is there,” he said.

But Sen. Ralph Hise (R-Spruce Pine) made it clear that he’s moved little from the position he maintained all summer – that contracting with commercial managed care is the preferable way to organize Medicaid. And he expressed distrust of having stakeholders at the table when discussing how those stakeholders would be paid.

“I just don’t feel that as a legislature, that’s not a decision that we need to be making. We don’t need to choose which one of those [stakeholders] to prioritize,” Hise said. “That’s why I’ve pushed from the beginning to open up the marketplace for Medicaid coverage.”

Two separate issues intertwined

The other issue being considered in the committee is the future organization of the state’s Medicaid program, which is currently managed from within DHHS.

But several lawmakers pointed out that doing both things – reshaping how care is delivered and paid for and reorganizing the oversight of the program – might be too much to bite off at once.

Former hospital president Rep. Donny Lambeth (R-Winston-Salem) said that at the last meeting, when lawmakers heard from Medicaid directors from other states, he got the sense that just doing one of those things would be a “massive undertaking.”

“Can we do both at the same time?” he asked. “I think we might be making this a lot more complicated than we need to make it.”

Lambeth suggested the legislature prioritize changing the payment structure and then reorganize the department as needed.

Rep. Donny Lambeth (R-Winston-Salem) Image courtesy of the NC General Assembly website

Rep. Donny Lambeth (R-Winston-Salem) Image courtesy of the NC General Assembly website

He got support in that position from both House and Senate, from both sides of the aisle.

“I think we have sort of proven the point that Medicaid needs to change,” said Sen. Louis Pate (R-Mt. Olive), the only member of the Medicaid Reform Advisory Group to object to last spring’s reform plan. He said now was the time for give and take between the House and Senate.

Despite the familiar positions staked out by lawmakers, subcommittee co-chair Rep. Justin Burr (R-Albemarle) expressed optimism that the two chambers could reach agreement before the session begins in January.

“We’re trying to do [that] by sitting down now and having some serious meetings with some substance to them and working through our differences versus throwing a bill together in 24 hours on something this important,” Burr said.

“I think we’re going to be able to get folks to a common place at the end of the day,” he said.

Pate concurred.

“Now we can put some of the best minds together in here and see what that change will look like,” Pate said.

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