McCrory needs to change course on Medicaid

February 15, 2014 

Gov. Pat McCrory has another three years in office and possibly another four after that, but what may determine his success as governor is the issue that arose early in his tenure and continues to shape it: Medicaid reform.

The state-federal health insurance program serving low-income families, the disabled and the aged spends $13 billion annually in North Carolina, with about two thirds of the cost paid by the federal government. It is the state’s biggest expense after education.

From the outset of his administration, McCrory declared Medicaid “broken.” He said that there were bloated management costs and chronic budget overruns. It was so broken, he said, he could not in good conscience accept federal money to expand it under the Affordable Care Act until the program was overhauled. That decision has left hundreds of thousands of low-income North Carolinians without insurance even as North Carolina hospitals are losing the federal payments they previously received for treating the indigent.

The ACA anticipated universal expansion of Medicaid and provided no private insurance subsidies for many who would have qualified for Medicaid. But the U.S. Supreme Court ruled the expansion optional, and as of this month 23 states have no plans to expand Medicaid. That has left people in those states who would have gained coverage – mostly poor, childless adults – locked out of Medicaid and too poor for a subsidy that would help them buy private insurance. Nationally, nearly 5 million people ages 18 to 64 are caught in this gap, according to the Kaiser Family Foundation. In North Carolina, the number is 319,000.

Leaving so many trapped in North Carolina might have been easier to justify if the McCrory administration had spent the past year improving Medicaid operations and shaping a legislative consensus around structural changes.

That has not happened. Instead, the governor has stood behind Dr. Aldona Wos, his secretary of the Department of Health and Human Services, as she has made a hash of the current Medicaid operation. She approved a computer program for paying providers that the state auditor flagged as potentially flawed, and it has proven so. Some providers have sued to get properly paid.

Carol Steckel, whose hiring as state Medicaid director was touted as a coup by Wos and McCrory, left after eight months. Before she left, Steckel requested a waiver from federal Medicaid eligibility rules that will cost the state at least $2.8 million and possibly more than $10 million, according to state Rep. Nelson Dollar, chairman of the House Appropriations Committee. Steckel made the request despite a requirement that it be approved first by the legislature. Wos said she didn’t know about it.

Meanwhile, Wos’ management style has driven off key DHHS staff members who know how to run the Medicaid program. To offset the lost expertise, Wos has brought in consultants on a no-bid $3 million contract that no doubt will grow in cost.

An administration that can’t effectively run the current Medicaid program is unlikely to be one that ushers in a better one. That is the case here. McCrory committed to “fixing” Medicaid despite evidence that the program was actually more efficient and effective than most in the nation. His solution is still taking shape, but it appears likely to rely on a shift to private managed care entities.

The first problem with McCrory’s push for Medicaid changes is that it may not win support in the legislature. Beyond that, he will have difficulty gaining federal approval for sweeping changes, given the Medicaid administration follies and his resistance to Medicaid expansion.

The governor has misplayed Medicaid from the start, and uninsured poor people and the hospitals that care for them are paying the price. If McCrory doesn’t change course soon, it is his political prospects – much more than Medicaid’s functions – that will be truly broken.

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