Medicaid Plan Likely to Face Tough Road Through General Assembly

After months of work, the Medicaid reform plan is complete. But the proposal is likely to have a hard time on Jones Street.

By Rose Hoban

Secretary of Health and Human Services Aldona Wos formally rolled out a plan to reform the state’s Medicaid program today, giving scant more detail to a blueprint unveiled several weeks ago. The plan moves Medicaid away from a traditional fee-for-service system to one that pays for higher quality in health care delivery.

Medicaid Reform Advisory Group chair Dennis Barry describes the proposal for updating the Medicaid system while HHS Secretary Aldona Wos looks on. — Medicaid Reform Advisory Group Chair Dennis Barry describes the proposal for updating the Medicaid system while DHHS Sec. Aldona Wos looks on. Photo credit: Rose Hoban

But the proposal is likely to face tough going in the General Assembly. Legislative members from the five-person Medicaid Reform Advisory Group expressed radically different reactions that portend trouble getting the plan through the legislature intact.

In a letter attached at the end of the Medicaid Reform Legislative Report, advisory group member Sen. Louis Pate (R-Mt. Olive) wrote that he feels the plan falls short of what Gov. Pat McCrory wanted from Medicaid reform.

“Instead of providing a comprehensive plan, the proposal presents a list of tentative steps that may move us in a new direction, but collectively fall short of the vision and goals of true reform this group was tasked with developing,” Pate wrote.

One of Pate’s primary objections is that the plan does not save enough. The plan projects that over five years, the new spending regimen will only save a total of $326 million in state dollars. Any other savings would go to providers and to the federal government.

In contrast, “using a 5.8 percent national growth rate estimate, [the legislative Fiscal Research Division] projects that the state’s Medicaid appropriation will grow by more than a billion dollars over the next five years,” Pate wrote.

However, Rep. Nelson Dollar (R-Cary), the advisory group appointee from the House of Representatives, expressed enthusiastic support of the plan.

“This proposal does represent an important and historic reform as we move away from paying only for quantity of services provided and move toward value-based purchasing that rewards health care providers for delivering high quality care in a cost-effective manner,” Dollar wrote in a letter attached to the plan.

When asked whether the plan had a chance of making it through both chambers of the legislature, Wos equivocated.

“Today is not the end of the process; today is part of the process and we’ll continue to work collaboratively with the General Assembly to make sure we provide the best plan,” Wos told those gathered for a press conference to unveil the plan.

“We feel the plan is very firm, very solid, that it is accountable. It is the right plan for the state,” she said. “We will continue to work together with the General Assembly until we get it right.”

Realistic expectations?

Members of the medical community, from hospital representatives to the state medical society, expressed their satisfaction with the proposal, which puts physician groups at the center of organizing how patients will get care under Medicaid.

The proposal centers around the creation of accountable care organizations (ACOs), a relatively new model of care in which physician groups affiliate with hospitals, public health clinics and others to manage care for groups of patients.

The physician groups hire care managers who target people with chronic health conditions, such as asthma or diabetes, and help them manage their health problems, preventing costly hospitalizations.

Under an ACO plan, physician groups can share in overall savings if the care they provide costs less. But if patients end up in the hospital frequently and the care costs more overall, the physician groups are penalized.

“One of the things that we like about this approach is that this already builds on what’s already happening,” said Hugh Tilson, vice-president at the North Carolina Hospital Association. “This is something that the providers are committed to doing because we know that we have to take costs out.”

“Providers are already doing this for Medicare, providers are already doing this for private payers, and so this builds on all that and can actually be accomplishable sooner than any other alternative,” he said.

Tilson argued that the budget predictability desired by state senators might not have been achievable, noting that Medicaid changes every year as the number of people enrolled fluctuates and federal officials adjust the portion of Medicaid costs they pay. He argued that these are factors that managed care systems can’t control.

Consultant Bob Atlas, who was hired by DHHS to help create the Medicaid plan, said the benefits of commercial managed care can be overblown. Under managed care, insurers are given a set annual amount to manage the care of a given number of beneficiaries.

“The savings that you can get from managed are not necessarily more dramatic than what we’re talking about,” Atlas said.

He also noted that under the Affordable Care Act, managed care companies have to contribute to subsidies being distributed by the federal government to people buying insurance in the federal insurance marketplace. He said insurers are asking states to cover some of that cost in their contracts.

“So the savings actually are less than what would otherwise be the case,” Atlas said. “About 2.5 percent extra has to be paid to the commercial managed care organizations so that they can then fulfill their requirements under the federal law.”