NC General Assembly building
Lawmakers return to Jones St. this week for the short legislative session. Photo credit Rose Hoban

By Rose Hoban

Members of the North Carolina House and Senate are a few steps closer to finding a way forward on Medicaid after a key committee meeting late Thursday afternoon.

In a meeting of the House Health and Human Services Committee, co-chair Rep. Nelson Dollar (R-Cary) presented an update to an earlier Medicaid reform plan that moves the federal- and state-funded program closer to the managed care model favored by Senate leaders.

In May, House leaders submitted a 10-page bill that detailed steps to get from the current fee-for-service way of paying doctors and hospitals for Medicaid services to forming Medicaid accountable care organizations, networks in which doctors, clinics and hospitals would share both financial risks and rewards in exchange for having more leeway over how they manage the care of their patients.

That plan received enthusiastic support from Gov. Pat McCrory, leaders of the state Department of Health and Human Services, the House and members of the health care community.

But the revised bill represents a departure from the original version: It is a three-page document with sweeping principles for Medicaid reform to be completed by 2020 and little in the way of detail.

“If you look at the proposal as it came from the administration, they had accountable care organizations as a backbone component,” Dollar told the committee as he presented the revised bill. “This plan allows for the continued development of accountable care organizations in the state of North Carolina.”

But the bill as it now stands calls for Medicaid to “transition into fully-capitated health plans,” where doctors and hospitals are given a set amount of money to care for patients, no matter how complicated. This type of arrangement is closer to what existed in the 1990s, when private managed care organizations predominated in the health care market and doctors complained that insurance bureaucrats tied their hands.

Whose plan is it?

In the new version of the bill, the state would pay for the total number of people covered under Medicaid – currently, about 1.6 million beneficiaries – but providers would be tasked with keeping within the budget.

“This is a substantial move and a substantial commitment on behalf of providers … giving them the opportunity to move away from fee for service, to get the incentives right consistently and to be able to be a partner with the state in saving money in the Medicaid system,” Dollar said.

But despite Dollar’s assurances that the new plan continues on the path of forming ACOs, members of the health care community expressed only tepid enthusiasm about straying from the earlier reform plan.

“The bill that you’re considering today is one that we generally support,” said Chip Baggett, a lobbyist from the North Carolina Medical Society. “While we still have significant concerns about moving to full capitation, this plan sets a glide path for physicians and other providers to systematically transition to a new system of care delivery.”

Some commented that the new plan looks a lot more like what the Senate wanted out of Medicaid reform than what the House wanted.

“They want whole-person care, they want capitation…. This looks like what they want,” said Cody Hand, vice president for governmental affairs at the North Carolina Hospital Association. “I don’t see how this isn’t closer to what [senators] want.”

Outside observers noted with surprise the evolution of the House plan.

“These guys have controlled the General Assembly for three and a half years and they still don’t know what the heck they want to do with Medicaid,” said Don Taylor, a health-policy researcher at Duke’s Sanford School of Public Policy.

Taylor has written extensively on the Medicaid plan featuring ACOs that came out of this past winter’s Medicaid Reform Advisory Group process.

“I’m surprised that at this late stage it’s written this vaguely,” he said.

House and Senate at impasse

The changes to the House plan for Medicaid are likely a reflection of the impasse over the $14 billion program that has been building between members of the House and Senate. North Carolina’s share of Medicaid runs to just under $4 billion, while the federal government pays for the rest.

In their budget, members of the Senate made it clear that they want to move to managed care, calling for DHHS to “cease any activities related to implementing Medicaid reform based on its proposed accountable care organization model.”

Earlier Thursday, members of the Senate Appropriations Committee harshly criticized the House’s projections of Medicaid’s budget needs for next year. Senate leaders asked staff from the legislative Fiscal Research Division to make projections based on the “worst-case scenarios” for Medicaid overruns in the budget, citing difficulty in getting accurate data on enrollment and spending out of the troubled NCTracks information management system.

“We have not known all year how many people actually are enrolled in Medicaid,” said Steve Owen, an analyst from Fiscal Research. ”We don’t know how it breaks down between aged, blind, disabled, children, etc. And that’s important, because a child, for instance, in Medicaid spends about $208 a month, a disabled individual about $1,400 a month.”

Owen said projections indicate that the House and Senate estimates of this year’s Medicaid overrun are more than $100 million apart. They’re closer than earlier projected differences, but not close enough for Senate leadership.

“Our feeling is that we need to reach some understanding on the Medicaid number before we can realistically start talking about most of the other things,” like giving raises to teachers, said Senate leader Phil Berger (R-Rockingham).

“We don’t want any surprises next year this time with regards to Medicaid. We’ve had that three years in a row,” he said.

Section 10

One of the most significant concerns expressed by lobbyists and advocates at the House committee meeting was over provisions in the bill that would allow the mental health management agency Concord-based Cardinal Innovations to run a pilot program to manage all of the health care – both behavioral and physical – for about 4,000 people with intellectual disabilities.

Currently, Medicaid beneficiaries with mental health or developmental disabilities have their behavioral needs addressed by mental health agencies, called local management entities/managed care organizations, that have been set up by the state, while their physical health needs are provided separately.

“This pilot would take a year or so to get up and probably take another couple of years to see how it operates, and we will learn from that,” Dollar explained. “Future General Assemblies will be able to evaluate that information.”

But the proposal met with immediate pushback from advocates for people with developmental and intellectual disabilities.

“Many groups of stakeholders, parents, individuals who have intellectual disabilities and developmental disabilities, provider groups across the state and other LME/MCOs have been working together on multiple projects to create an integrated health model for the intellectual and developmentally disabled population,” said Julia Adams, lobbyist for the Arc of North Carolina.

“[This plan] hands the pilot to one organization … and that is a significant concern,” she said.

Adams said it would be a more transparent process if the state would open a request for proposals to other LME/MCOs to choose the best one.

Currently, there is a waiting list of about 10,000 people and seven years for openings in the state’s comprehensive service program for people with developmental disabilities. Adams wondered aloud if those people would be forced to wait longer still as a result of this proposal.

She also pointed out that the pilot did not address the needs of people with mental health issues and that it was unclear who would be eligible.

Other advocates expressed concern because of Cardinal’s history with denying care for beneficiaries. The advocacy organization Disability Rights North Carolina has successfully sued Cardinal several times over delivery of care and their grievance processes.

“It is not clear that Cardinal, or any MCO, is equipped to take on the proposed pilot given the history of problems with due process on the behavioral health side,” said Corye Dunn, DRNC’s director of public policy.

“Successful managed care has to be concerned not only with improved budget outcomes but also with improved health outcomes,” she said.

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