shows a red cross with the word Medicaid printed on it, in front of a pile of dollar bills. For Medicaid transformation

By Sarah Ovaska-Few

North Carolina’s Medicaid overhaul cleared a major hurdle this week with the federal government giving an official nod to plans to switch to a managed-care system.

Approval by the federal Centers for Medicare and Medicaid Services in what’s known as a Section 1115 Demonstration Waiver means the N.C. Department of Health and Human Services is on track with its Medicaid reform plan. The department will begin transitioning three-quarters of the state’s 2.1 million Medicaid patients next November to managed care and away from the current fee-for-service system.

The approval came after the state already collected applications from eight managed-care companies and provider-led groups who want to be involved. A decision on who wins those bids is expected to come in February. The first patients will migrate to the new system next November.

The approval (a copy can be read here) also gave a green light for pilot programs to look at alternative ways to improve health, making North Carolina the first state to receive permission to use Medicaid dollars for enhanced case management tools to target what are referred to as social determinants of health such as homelessness, family violence, toxic stress, transportation issues and food insecurity.

shows Cohen standing at a podium with a presentation displayed on a screen behind her.
HHS Secretary Mandy Cohen spoke to the crowd of more than 250 at the Medicaid reform listening session in 2017. Dozens of speakers talked about Medicaid expansion, children’s health, opioid abuse and the burden of Medicaid paperwork, among other topics. Photo credit: Rose Hoban

“The entire healthcare industry is going to do more in this space,” N.C. Health and Human Services Secretary Mandy Cohen said in an interview Wednesday, about the pilot program. “It really makes us a national leader with this.”

Cohen gave the example of a program in Greensboro that looked at repeat emergency room visits by children with asthma or breathing problems. Program analysis showed that replacing an old carpet and placing an air filter in the children’s homes dramatically reduced the costly ER visits.

Pilot program specifics – like who will take part and what it will try to do – haven’t been decided, but Cohen said the goal is to have flexibility in how health outcomes are addressed and to inject more preventative measures into health care approaches.

Big deal for North Carolina

The ongoing switch to managed care has huge implications, with roughly one-in-five North Carolinians depending on the federally mandated but state-managed Medicaid program for health care. The state will eventually contract out an estimated $6 billion a year, or $30 billion over five years, to managed-care groups, sums that will make it among the largest contracts the state has ever signed.

North Carolina’s DHHS got the final word about what is, and isn’t approved for its Medicaid reform:


  • Move to managed care plans for 1.6 million on Medicaid.
  • Targeted plans for high-needs behavioral health patients, intellectual or developmental disability patients
  • Pilot programs to address housing, transportation, food access, family violence and toxic stress issues that undermine health outcomes
  • Foster care children under specialized plan, including coverage up to age 26 for those who age out of system
  • Funding for opioid and substance abuse treatment in short-term facilities

Not approved

  • Behavioral health crisis services for those in nonhospital, inpatient settings
  • Assessment and incentives to address gaps in state’s healthcare workforce
  • Endorsement of Carolina Cares, a Medicaid expansion proposal with work requirement that for yet to clear the N.C. legislature
  • Funding for telemedicine initiatives
  • Money to cover uninsured patients treated by the Eastern Band of Cherokee Indians’  medical system

(Source: Oct. 19 Letter from CMS to DHHS)

North Carolina was also the biggest state in the nation to hold out on managed care for its $14 billion per year Medicaid program which covers health care costs for low-income children, seniors and disabled persons. It’s funded through a mix of federal and state dollars, with the state picking up about a third of the bill. The Republican-led state legislature made the switch away from a fee-for-service model in 2015 in hopes managed care would bring more stability to the state budget and allow for more savings.

“The train has left the station on managed care” for Medicaid populations, said Matt Salo, the executive director of the National Association of Medicaid Directors, who described the switch as more of a public-private partnership than direct privatization. “It’s where it’s going and where it’s going to be.”

The state will pay managed care companies a yet-to-be-determined rate per person instead of its current model, where the state oversaw the care of patients across the state and essentially cut checks for every flu shot, operation and emergency room visit for people on Medicaid’s rolls.

Other proposals approved by CMS as part of the waiver include using federal matching dollars to treat addictions, including opioids, and a tailored plan for those with significant disabilities and complex behavioral health needs. The state also plans on developing a specialized plan to cover children in the foster care system and provide coverage up to age 26 for those who have aged out of the foster care system, according to the CMS approval letter.

Cost was one issue that was debated in the negotiation process, after the state made its initial request to CMS for the waiver in June 2016.

The two agencies eventually agreed on a rough number, with North Carolina cleared to spend up to $60 billion in state and federal dollars over the next five years on the various services included under the waiver, said Dave Richard, DHHS’ deputy secretary for Medicaid. That figure includes the anticipated increase in administrative costs the state will have in order to get the managed care program off the ground, he said.

Obtaining the waiver is a big deal, but most of the hard work is ahead to ensure health outcomes and savings can be obtained, said state Rep. Nelson Dollar, an Apex Republican and major driver of health policy for the state legislature.

Many states have tripped up when switching to managed care and he doesn’t want to add the Old North State to that list.

“That is where we truly want to be the exception to the rule,” he said. “Our goal in North Carolina is to have the smoothest transition possible.”

Still on the wishlist

CMS didn’t give North Carolina health officials everything they wanted, though.

Among things the state asked for was the ability to use Medicaid funding to cover uncompensated medical costs the Eastern Band of Cherokee Indians’ medical system takes on for 13,000 of its tribal members.Cohen said she was disappointed with that denial under the Trump administration and noted that similar allowances had been given under past administrations.

Also denied was a request to provide short-term behavioral crisis services in non-hospital inpatient facilities, funding for a telemedicine program and Medicaid dollars to address gaps in the state’s health care workforce, Cohen said.

Cohen said she hopes to come back to most of these issues.

“It doesn’t mean it’s a hard no, it just means we couldn’t get to yes yet,” Cohen said.

Expansion still a no-go

Also getting a thumbs down from CMS was a proposed program, Carolina Cares, that would have been an alternate way of expanding the Medicaid program to cover the hundreds of thousands of North Carolina adults who are without health care and earn too little to qualify for a subsidy.

shows a man in a John Deere hat with a beard and wearing work clothes standing at a podium and speaking about Medicaid while lawmakers dressed in suits look on
Alamance County farmer Alex Hitt speaks at the 2017 press conference that rolled out Carolina Cares, a bill that would expand Medicaid for many of the working poor, as Republican lawmakers look on. The bill would have required beneficiaries to pay small premiums, participate in preventive care and perform 20 hours per week of work in order to be eligible. Photo credit: Rose Hoban

Carolina Cares was conceived as a backdoor of sorts to Medicaid expansion – it proposed to have low-income adults in the workforce pay into a health care plan without contributions from state coffers. But it couldn’t get enough support from the Republican-led state legislature, which has joined other Republican legislatures around the country in opposing the Medicaid expansion that became an optional piece of the Affordable Care Act after a Supreme Court ruling.

That’s why CMS didn’t give it the green light, advising that the state need the support of its own legislature before coming to CMS for permission.

Holding out hope for Carolina Cares is state Rep. Donny Lambeth, a Winston-Salem Republican and co-sponsor of the Carolina Cares bill.

Though it didn’t get backing last year, he’s planning on re-introducing it and hopes to persuade more of his colleagues this go-around.

“We’re not giving up on it,” he said about the proposal.

Neither is Cohen, who served in the Obama administration as CMS’ chief operating officer.

“I’ve been very clear that it’s a necessary part of building a healthier North Carolina,” Cohen said. “I want to bring those $4 billion waiting in DC to North Carolina.”

But Sen. Ralph Hise (R-Spruce Pine), a leading Republican lawmaker on health care issues, said many lawmakers he’s talked with aren’t on board.

“With the current legislature there hasn’t been the support to move that forward,” he said, adding that he wished CMS would be more flexible in their consideration of expansion proposals.

Things could change with the results of the Nov. 6 election, in which the entire state legislature is up for re-election.

Learn more: NC DHHS Medicaid resources are here.

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Sarah Ovaska

Sarah Ovaska is a freelance writer based in Orange County, who has called North Carolina home for well over a decade. She’s reported on criminal justice, education, health and government issues at publications...

2 replies on “Medicaid Changes Get Thumbs Up, as State Pushes Forward with Managed Care”

  1. . . . but our citizens deserve quality services and ease of access. Our state doesn’t even invest in outcomes, but in productivity! It may now be a dream more elusive than ever–high-value health and mental health care for our citizens.

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