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

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By North Carolina Health News staff

What state health officials have hinted at for weeks happened officially on Tuesday.

The state Department of Health and Human Services announced that the long-awaited transformation of Medicaid to managed care from the existing fee-for-service system will not go live on Feb. 1 as planned. Nonetheless, Medicaid beneficiaries should not see any disruptions in their care under the stall, according to DHHS.

The indefinite delay comes amid a stand-off between Republican legislative leaders and Gov. Roy Cooper, a Democrat who vetoed the General Assembly’s $24 billion spending plan in late June. The veto came in large part because the lawmakers’ spending plan did not include funding to expand Medicaid eligibility to as many as 550,000 low-income adults who could qualify for assistance.

The General Assembly closed its session late last week without an end to the stalemate with the governor and with no funds dedicated to the transformation project.

“To date, we have been able to use other Medicaid funds to continue this work but at some point we need the new budget in order to keep going and so as of now, we have to suspend,”  DHHS Sec. Mandy Cohen said in a telephone interview.

Getting smart on Medicaid

Medicaid is the biggest program run by the state, but that doesn’t mean it’s easy to understand. Here are some quick definitions to help you digest just what’s going on.

Medicaid: This is a federal safety net program designed to provide health care for vulnerable residents. In North Carolina, it serves 2.1 million low-income seniors, people with disabilities, children and their families. It’s funded with $14 billion in federal and state dollars, with the federal government paying $2 for every $1 the state chips in.

Medicaid transformation: This is the shift underway to switch North Carolina’s Medicaid program to managed care, where the state will pay five managed-care companies $30 billion over the next five years to handle the health care needs of 1.6 million Medicaid patients. A half-million other Medicaid recipients with complex behavioral health needs will move to special, tailored managed care plans later on.

Medicaid expansion: This is a signature piece of the Obama Administration’s Affordable Care Act, where states can elect to use federal funds to expand Medicaid coverage to low-income adults. North Carolina is one of 14 states, largely in the Southeast, to reject Medicaid expansion so far. N.C. Gov. Roy Cooper, a Democrat, has made Medicaid expansion a must-have in budget negotiations, while Republican state lawmakers have so far resisted calls for expansion.

Republican lawmakers who have prioritized the move to managed care were able to muster enough votes to adopt a bill that would have released $502 million for the transformation project, but Cooper vetoed it, saying he had hoped for a larger discussion about health care that included Medicaid expansion.

Dueling interpretations

The sharp divide continued Tuesday as each side blamed the other for the delay.

Lauren Horsch, a spokeswoman for Sen. Phil Berger, an Eden Republican and longtime critic of Medicaid expansion, said the General Assembly already passed “a clean Medicaid transformation bill” with the funds Cohen needed.

“The bill removed cuts that were in the budget to accommodate Secretary Cohen’s requests during negotiations,” she said. “Nevertheless, despite his own DHHS secretary saying she needed the more than $500 million the legislature tried to provide to her, Governor Cooper vetoed the funding. He is the only one to blame for DHHS having to shut down its Medicaid Transformation efforts.”

Cooper countered with his own statement, calling Republicans irresponsible for “not moving health care forward.”

“By choosing gridlock instead of negotiating a compromise, they delayed Medicaid transformation and broke their promise to vote on expansion, leaving 500,000 North Carolinians without affordable, quality health care,” said Megan Thorpe, a Cooper spokeswoman.

DHHS officials also worried that the bill didn’t sufficiently protect the department from a possible cut of  more than $70 million over two years and a departmental move to Granville County should the legislature override the long-delayed budget.

NC Senate leader Phil Berger at a press conference in October to discuss the rest of this year’s legislative session. Photo credit: Rose Hoban

The move to Medicaid managed care has been anticipated for years, after the Republican-led General Assembly opted in 2015 to do away with the current fee-for-service system, where the state paid for every doctor bill, hospital stay and ambulance ride for the more than 2 million low-income seniors, persons with disabilities and children who depend on Medicaid for their health care needs.

Under the new system, the state would pay five managed-care companies a per-person rate to handle a person’s total care, a move that lawmakers and health leaders hoped would lead to better health outcomes and maybe even some savings well down the road.

North Carolina’s $14 billion Medicaid system is funded with a mix of federal and state dollars, with the federal government chipping in $2 for every $1 the state pays. It’s also the largest state not to have yet moved to managed care for its Medicaid system.

The Centers for Medicare and Medicaid Services approved North Carolina’s request to move to managed care last year and also gave a green light to the ambitious Healthy Opportunities pilot to begin using Medicaid dollars to address what are called social determinants of health – the housing, transportation and nutrition challenges that can often undermine a person’s health outcomes.

But the road leading up to what was supposed to be the Feb. 1, 2020 start date has been rocky.

What’s next?

Because of the budget impasse, Cohen already nixed a plan to roll-out a partial switch to managed care in part of North Carolina before moving to the statewide switch. Providers have also been slow to sign contracts, in part because of the ambiguity set in motion from the stalled state budget process and in part because of the pure complexities that come with signing detailed contracts.

In her announcement about the indefinite delay, Cohen stressed that the transformation delay should not bring changes for Medicaid beneficiaries. Health services will be provided to them as they currently are. They do not have to sign up for new providers while the delay is in place and providers will be paid under the existing fee-for-service system.

NC DHHS Sec. Mandy Cohen updates the House Health Committee on Medicaid transformation at a hearing in October. Also in the photo is NC Medicaid Deputy Sec. Dave Richard. Photo credit: Liora Engel-Smith.

The department will start winding down the transformation process on Wednesday and will stop taking new sign-ups then.  But the call center will remain open for beneficiary questions.

A new go-live date won’t be set until the General Assembly returns and there is more certainty about funding. Though much of the work will wind down, Cohen said, the department isn’t planning to lay off any of its employees.

Cohen did not know when the rollout could proceed or how long it will take once a budget passes.

“Because we have to wind down work, it doesn’t turn back on very quickly,” she said. “We actually have to rehire work and a lot of the timeline will depend on how long this interim period lasts. I think the longer it lasts, the more work that our federal regulators at CMS may ask us to repeat.”

Over the line?

Meanwhile, Republican lawmakers are questioning Cohen’s ability to make a call for a delay.

“Contracts are already awarded,” Sen. Joyce Krawiec, a Forsyth County Republican, said in a statement. “The federal government already approved a waiver and state legislation requires that everybody be enrolled and the rollout begin by April 2020. Secretary Cohen does not have the authority to unilaterally change the law and un-award the contracts.”

That’s not what will happen, Cohen responded.

“We are not suspending the contract with our managed care entities, we are suspending the work of implementation,” Cohen said. “The contracts are still in existence and work will continue but in very, very skeletal form. We will do some wind-down activities to make sure we don’t lose any of the good work that’s been done to date but those contracts are still in existence.”

N.C. Health News reporters Anne Blythe, Sarah Ovaska-Few, Liora Engel-Smith and Rose Hoban contributed to this report.

Anne Blythe

Anne Blythe, a reporter in North Carolina for more than three decades, writes about oral health care, children's health and other topics for North Carolina Health News.

4 replies on “NC’s Medicaid transformation suspended indefinitely”

  1. I would like to hear the response from the companies NC has contracted with. They also have hired employees and are setting up systems. Will NC have extra payouts to the do to the delay?

  2. I feel like the writing was on the wall, I work in a medical practice, and I have been screaming since August to delay because the infrastructure clearly was not in place, I had several concerns none of which were answered, so why would they have open enrollment starting before the practices actually enrolled and contracted with the PHPs is beyond me, plus why start a new program without the approval of the budget. Our patients were calling and I had to tell them to wait because it will be delayed. So all that money was spent, his now wasted.

  3. The governor has been very clear with the republican led legislature that he would not approve a budget without the expansion of Medicaid. It’s ridiculous how much money from North Carolina goes to other states to fund their expansion and we don’t have it here in NC. The expansion has been a huge success in every state that has it. There’s no reason why it wouldn’t be a success here as well.

  4. We as contracted workers have been laid off due to governmental B.S. We have families to feed and bills to pay !

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