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The budgets of the two chambers of the N.C. General Assembly are a study in contrasts, especially when it comes to funding Health and Human Services. We take a first look at the Senate’s new budget, introduced Monday afternoon.

By Rose Hoban

In small, packed rooms around the General Assembly complex, senators rolled out a budget for the coming year that surprised health care advocates, even as many people knew what was coming.

The $21.47 billion budget, which almost matches Gov. Pat McCrory’s $21.5 billion plan in dollars spent, takes a far different approach from the governor’s budget, as well as the budget presented last month by House colleagues.

New Medicaid system

The centerpiece of the Senate budget is a complete overhaul of the state’s program to provide health care for low-income children, some adults, people with disabilities and poor elderly who live in nursing homes.

For several years, members of the Senate have made no secret of preferring a Medicaid system that takes control of the program away from the legislature and places it in the hands of managed care companies.

To that end, the plan calls for removing administration of Medicaid from the Department of Health and Human Services and creating a Health Benefits Authority with an independent board empowered to make all planning, policy and spending decisions.

Sen. Ralph Hise (R-Spruce Pine) noted that House budget writers ceded authority to make decisions about Medicaid to DHHS.

Sens. Tommy Tucker (R-Waxhaw) and Ralph Hise (R-Spruce Pine) take questions from the Senate Appropriations on Health and Human Services Committee Monday afternoon.
Sens. Tommy Tucker (R-Waxhaw) and Ralph Hise (R-Spruce Pine) take questions from the Senate Appropriations on Health and Human Services Committee Monday afternoon. Photo credit: Rose Hoban

“We agree with the concept; we just feel better about creating a new entity for that purpose,” Hise said, introducing the idea of the Health Benefits Authority, which would be comprised of three members appointed by the governor, two by the House and two by the Senate.

The plan also calls for creation of a legislative oversight committee to monitor the authority, which would be created and staffed within the next six months.

“The entire department will serve as at-will positions, within state government,” Hise told the committee.

Under the Senate plan, the state would be divided into six regions. In each of these regions, two provider-led organizations could bid to provide Medicaid services. The plan also allows for three statewide Medicaid plans, which could be administered by managed care companies or by provider-led organizations, all of which will be paid a monthly fee per patient rather than on a fee-for-service basis.

The plan would also require any organization managing Medicaid to cover the entire population, from low-cost children’s services to expensive nursing home patients with multiple problems, something few, if any, other states have asked of managed care Medicaid providers.

Mental health services would remain with the managed care entities created by the state in 2010.

Senators want the entire transformation to be complete by August 2017.

“We have an aggressive timeline,” Hise admitted.

“We’re taking our time; two years is a long time,” said Sen. Tommy Tucker (R-Waxhaw). “With the Medicaid growth that we’re seeing … we can’t fund that long term and fund the other things that are required by the state.”

Tucker said the commercial managed care companies are “OK” with the timeline and with the idea of covering every beneficiary.

“It’s unrealistic to think it could happen in two years,” retorted N.C. Hospital Association lobbyist Cody Hand.

“First of all, it’s going to take two years to get it drafted and approved” by the federal Center for Medicare and Medicaid Services, he said. “No other state has done it this fast – even as fast as we proposed, which was five years.”

But Tucker argued hospitals have been preparing for transition and are well along their way to being ready for managed care.

Certificate of need eliminated

Senators had another profound change for providers in their budget: elimination of the state’s certificate of need laws over a four-year period.

For years, the number and location of health care services in North Carolina has been dictated by a suite of laws, known as the certificate of need, which creates a centralized planning system for hospital services.

For example, if a hospital wants to add an MRI scanner or additional operating rooms, it has to apply to the state to determine if there is sufficient demand for the service.

The regimen, first adopted in the 1970s, was intended to reduce the amount of redundancy and overuse of health care services.

But for years, conservatives have called for the elimination of certificate of need laws in North Carolina, as has happened in several states.

“I looked at Ohio when CONs went away, and the world didn’t come down and it didn’t end,” Tucker said. “Ambulatory surgery centers and the more profitable surgeries are done, some of those at a higher utilization rate than with other hospitals.”

But he argued that in order for North Carolina to get more competitive costs in the future, “CON needs to go away.”

Computer services

The proposed budget introduces a number of information technology initiatives, including the creation of a statewide health information exchange that would require every Medicaid provider, including hospitals and individual physicians, to be part of the data exchange. The HIE would be used for paying Medicaid claims and would make data available to state regulators to assess the outcomes of treatment for Medicaid patients.

In recent years, DHHS has had well-publicized problems with the two large contract information systems: NCTracks, used for paying and tracking Medicaid reimbursements to health care providers, and NC FAST, which has been used to integrate applications for all kinds of social service programs, ranging from food stamps to home-heating grants to Medicaid applications to child-welfare services.

The Senate budget creates a new Department of Information Technology to monitor the two systems and also creates a subcommittee to manage further implementation of NCTracks and NC FAST.

The Senate budget would also create a new computerized tracking and case management system for children in the child-welfare system.

Other initiatives

Once again, the Senate budget calls for closure of the Wright School, a facility in Durham for school-aged children with severe behavioral problems.

“By its very nature – kids stay four nights a week, five nights a week, and then need to be able to go home on the weekends, and then coming back – it serves a limited geographical area of the state,” Hise said. “We pick one area where there’s services available at an extremely high cost, and then we have struggling to find services across the rest of the state.

“Do we continue to offer the program? Because at the very high level of cost it has, it serves a very small area when those services aren’t available in the rest of the state.”

Hise, however, did not suggest what would replace the Wright School in any area.

“I think that it’s tragic that it’s been eliminated,” said Sen Floyd McKissick (D-Durham). “It’s an excellent institution; it provides a high quality of service to a special-needs population. We need to continue to care for that population, and I’m afraid they now will have to travel hundreds of miles to receive this care or not receive care at all.”

McKissick and others speculated that the closure is an effective bargaining chip for budget negotiations with the House. Several House members, in particular House appropriations leader Nelson Dollar (R-Cary), have expressed ongoing support for the program.

The budget eliminates the state’s Office of Minority Health and the Division of Public Health’s Physical Activity and Nutrition branch, distributing the dollars to not-for-profits to do the work at a lower administrative cost.

“We have now taken those funds and put them into grants, so instead of paying 20 percent for administration we actually have them going to services to individuals,” Hise said. “We just felt like these were a better use of those funds regardless of whether or not having an office title on the top makes good political sense.”

The budget also creates a statewide strategic plan for addressing the rising rates of opioid overdoses, particularly heroin overdoses. It allocates $50,000 to provide the opiate antidote naloxone to law enforcement and to the North Carolina Harm Reduction Coalition for distribution around the state.

That section of the budget orders every health care provider in the state to complete continuing education hours on the abuse of controlled substances, and for the boards of nursing, dentistry, podiatry and mental health organizations to adopt the standards for narcotics prescribing adopted by the medical board.

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