By Rose Hoban
State lawmakers are poised to put in motion sweeping and profound changes to North Carolina’s Medicaid system with votes this week in the House and Senate. House Bill 372, which is in its seventh iteration, changes Medicaid from a program that pays doctors and hospitals per service provided to one with a privatized plan run by mostly for-profit managed care insurance companies.
The plan is the product of years of wrangling between the House, the Senate and Gov. Pat McCrory and his Department of Health and Human Services leadership team.
In the end, the plan is a political compromise.
“It’s what they could agree on in order to get out of town,” said Duke University health economist Don Taylor, a longtime observer of the Medicaid reform process.
“Five percent of the work is in that 14 pages and 95 percent of the work is yet to be done,” he said.
Evolution of a plan
When McCrory took office, he and his new Secretary of Health and Human Services, Aldona Wos, made a big push for converting Medicaid to managed care. But Wos got an earful from health care providers in hearings around the state during the summer of 2013.
The following winter, the legislature convened a review process, the Medicaid Reform Advisory Group, which held four public hearings. In February, the group rolled out its version of Medicaid reform, a plan that would allow providers and the state to share financial risk while limiting overall spending.
That plan would have had provider groups form accountable care organizations, whereby the providers would be given a set budget to deliver care. If they saved money, they could keep some of it. The plan would have made North Carolina one of the only states to try an ACO model of care for its Medicaid program. The plan would also have retained the central role of Community Care of North Carolina, a network of doctors and providers who have been using data to keep costs low.
Despite problems with budgeting for the program, for the past six years North Carolina has had lower than average growth in Medicaid compared to other states, a phenomenon that’s been largely credited to CCNC.
But Senate Republicans said they wanted private managed care companies to run the system. And they haven’t budged much from that position since. At the beginning of this session, Senate leader Phil Berger said he wouldn’t allow for the General Assembly to recess until there was a deal on Medicaid.
This stance, along with several other contentious policy issues, held up budget negotiations for months. This year’s budget came back close to 12 weeks after the state-mandated deadline of July 1.
Eventually, members of the House relented. The final proposal to be voted on this week combines both the Senate’s preferred managed care solution with remnants of the House’s preferred plan that allows providers to form their own managed care entities, which will be regional rather than statewide.
“My view is that North Carolina had a golden opportunity to be cutting edge with its Medicaid reform and to be able to put together a program that changed the incentives and met the goals that everyone here in the General Assembly supports,” Rep. Nelson Dollar (R-Cary), who championed the House plan, said last week.
Dollar expressed disappointment. “However, it’s a democratic process in the General Assembly and the majority view was to do a combination,” he said.
Dollar doesn’t have much choice about it though. The state budget bill passed last week contains a “poison pill” clause stipulating that if the Medicaid bill doesn’t pass by next March, then essential elements of the current Medicaid program, including CCNC, will be dismantled.
Indications from other states are that there’s no silver bullet for controlling Medicaid costs. Florida has been cited as an example.
That state ran a five-county pilot of Medicaid managed care starting in 2011, and in the summer of 2014 the entire state rolled over to managed care.
But by the spring of 2015, the managed care companies had lost $543 million and came back to the Florida Agency for Health Care Administration asking for a 6.4 percent rate increase.
In Kentucky, something similar happened in 2012, when companies asked for a rate increase only a couple of years into the state’s reform process. When Kentucky health care officials didn’t give companies the increase they wanted, one of the largest managed care companies, Centene, pulled out, throwing the system into an uproar.
Taylor said if the state is going to go down the managed care road, having the provider-led entities is probably a good safety net.
“This sets up the test,” he said. “Let’s say they get a waiver and implement this plan, and then a couple years later the insurance companies come back and say we need more money, like what happened in Florida.
“Then it could all fall apart, and the big insurers back out, but you’d have the [provider-led entities] to pick up the pieces.”
Also at issue is the future of dually eligible patients who qualify for both Medicaid and Medicare. They’re a population that’s pretty sick and pretty expensive. And they’ve been “carved out” of the Medicaid plan, meaning the state would remain responsible for their care.
“Once you carve them out, it makes the policy more doable, but you’ve also just thrown out the part of the system that’s the most expensive and in need of reform,” Taylor said. “You’re not changing things in the most expensive part of Medicaid.”
Lots of work to come
North Carolina can’t just change Medicaid on its own; it requires permission from federal regulators, who pay two out of every three dollars of the state’s Medicaid bill. The state must ask the federal government for a waiver to federal Medicaid rules, and, as Taylor said, writing a waiver is not an easy task.
“The waiver application is going to be hundreds of pages long; there are many uncertain things that have to be defined in there,” he said. Details included in the waiver range from minutiae such as what co-pays will be for different services to stipulating how insurance companies will be reimbursed and how to regulate prices.
Each time a draft document gets submitted to the federal Centers for Medicare and Medicaid Services, the agency has 90 days to review it before sending it back to North Carolina. If CMS drags its feet, that could mean the back and forth between state and federal planners could stretch out for more than a year.
And if Medicaid expansion is not part of the waiver application – something federal regulators dearly want and members of the state Senate have firmly resisted – the process could slow even more.
“People have postulated that North Carolina might have a little trouble getting a 1115 waiver done, and that there could be leverage points around [Medicaid expansion],” Brian Ingraham, CEO of the mental health managed care entity Smoky Mountain, said Monday at an Asheville Medicaid reform forum. “That’s not an unreasonable thought for anyone to have.”
“Expansion would smooth over all kinds of problems for the feds,” Taylor said.
He also said all the Medicaid bidders should push for expansion.
“For one thing, you’d be improving the Medicaid risk pool because most of the people added would be childless adults who aren’t that sick,” Taylor said.
Each of the people interviewed said getting to actual implementation of a new Medicaid regimen would doubtless be a process that takes years.
“I think that if you look at this process, reform will play out over six, seven, eight years,” Dollar said. “There are far more battles to fight; there are opportunities to influence how this reform will truly take shape.”