Point of View

Accountable Care Organizations are one approach NC should try in reforming Medicaid

October 21, 2013 

Spending on North Carolina’s Medicaid program continues to take money away from other statewide priorities. Policymakers are finding it increasingly difficult to justify the size of this essential line item in the state budget when it continually threatens to crowd out education, transportation and agriculture.

So North Carolina is in the midst of planning a controversial Medicaid redesign. After a laudable effort seeking direction from stakeholders, Gov. Pat McCrory and Department of Health and Human Services officials have begun to take their plan public. It involves contracting with a small number of Comprehensive Care Entities – likely to be managed care companies – to administer the Medicaid benefit. Running over-budget would become the problem of these entities, not the state.

Most agree there’s room to improve North Carolina’s approach to Medicaid. On its own, the idea of controlling rising costs doesn’t strike anyone as terrible. Concerns begin to surface when weighing whether the managed care approach, if taken, would preserve access and quality of care for the state’s low-income patients.

Managed care struggled to gain traction when first introduced in the 1990s. In a few places, costs did seem to be successfully restrained. But some patients worried that providers were “skimping on care.” Others were upset by restrictions on the doctors they were able to visit. Public backlash was significant.

But what if there were a way to lower costs while simultaneously improving – or at least maintaining – quality and access? Wouldn’t this be a great thing for the state? Something we could all get behind?

Policymakers and health care professionals have had nearly 20 years since the introduction of managed care to come up with improved models for spending less money on health care. Accountable Care Organizations, or ACOs, are one new idea. An ACO is a group of health care providers who band together, agreeing to be held collectively responsible for the cost and quality of care delivered to patients. In return for this commitment, these providers get a cut of the savings they achieve.


Patients in an ACO aren’t forced to see any set of providers, although they are sometimes given financial incentives to visit better, lower-cost doctors. This lack of “ring-fencing” addresses some access concerns.

And the ACO has added another critical ingredient to the managed-care formula: measuring and rewarding providers on the basis of not just reducing costs, but also on maintaining or increasing the quality of care. The organization accomplishes this by measuring provider performance on a set of doctor-defined metrics meant to determine whether thorough, appropriate care is being delivered for a patient’s specific condition.

ACOs have become poster children for out-of-the-box thinking. The organizations receive incentives for catching problems before they get big and costly, so investment in health information technology to identify at-risk patients has been universal. Some have created new roles such as the “health coach” to teach patients good eating habits and to make sure medication is taken properly. Others have rolled out programs that give patients who can’t drive free rides to the grocery store and the doctor’s office. Perhaps most impressively, doctors have actually started to talk to one another in an attempt to coordinate care for their patients.

With the ACO model’s having racked up early successes, both in the private sector and Medicare-run demonstrations, many states are now beginning to apply it to their Medicaid programs. Oregon has rolled out Coordinated Care Organizations – the state’s own-branded Medicaid ACOs – in an attempt to generate $11 billion in savings over the next decade. Maine, Massachusetts, Minnesota, New Jersey and Texas are also experimenting with the concept.

North Carolina would be wise to consider the ACO as one – if not the primary – component of its Medicaid reform package. By creating the right incentives for providers, the state could realize the cost savings that the Republican governor and legislature are intent on achieving. Balancing this with an intentioned focus on quality, access and patient safety would be a commonsense check to cost containment efforts and should sit well with the largely Democratic objections to the current reform plan.

Better health for the state’s most vulnerable doesn’t have to be the highly partisan, polarizing mission it has recently become. Medicaid ACOs might just have something to like for everyone.

Paul Shorkey of Charlotte, a UNC-Chapel Hill graduate, is finishing a degree at the University of Oxford on a Rhodes Scholarship.

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