State officials say Medicaid proposal will slow spending, but a key legislator says it’s not enough

lbonner@newsobserver.comMarch 17, 2014 

Gov. Pat McCrory and DHHS Secretary Aldona Wos


  • Medicaid basics

    Q. What system does the state currently use for Medicaid?

    A. The state has networks of mostly primary care physicians, called Community Care of North Carolina, that provide “medical homes” for Medicaid patients and receive money to coordinate their care. But the state does not set firm Medicaid budgets for most doctors and hospitals.

    Q. How do accountable care organizations differ from managed care?

    A. Under managed care, insurance companies are given a set amount of Medicaid dollars and must make their profit by getting doctors and hospitals to provide services at a cost below that amount.

    Accountable care organizations are networks of health care providers that are given a target amount of money to spend on their patients. If they keep the cost of care below that amount while showing that they are properly caring for patients, the network keeps some of the savings. If the network spends more than projected, it is responsible for covering part of the cost. Accountable care organizations could be run by a hospital system or large medical practice.

    Q. What happens to the state’s Community Care program under the proposal?

    A. Community Care of North Carolina would continue under ACOs, and the Community Care networks could form their foundations.

    Q. Are mental health providers included in the ACO plan?

    A. There would still be a separate Medicaid payment system for mental health patients. Local government offices would continue to provide Medicaid patients with mental health care under a managed-care system, where they get a set amount of money to pay for treatment. State officials said mental health and physical health would be better integrated than they are now, but questions remain about coordination and running two systems side by side.

    Q. Are other health care providers not included in the ACO proposal?

    A. Yes, dentists do not have to join an Accountable Care Organization to serve Medicaid patients.

    Q. Will all doctors and hospitals have to join ACOs?

    A. No. The program is voluntary. But the proposal floats the idea of lowering payments to providers who don’t join ACOs as an incentive to make them sign up.

    Staff writer Lynn Bonner

A signature proposal from Gov. Pat McCrory’s administration for changes in the state’s $13 billion Medicaid program is running into opposition in the state Senate, with a key legislator criticizing the plan and recommending it be reworked.

Sen. Louis Pate, a member of the advisory committee that helped guide creation of the proposal, said in a letter to the head of the state health agency that it fails to offer predictable Medicaid spending and doesn’t ease the administrative burdens or properly integrate physical and mental health care for patients.

“Instead of providing a comprehensive plan, the proposal presents a list of tentative steps that may move us in a new direction, but collectively falls short of the vision and goals of true reform this group was tasked with developing,” the Mount Olive Republican wrote.

Pate’s dissent came as state health leaders sent their proposal to move to Accountable Care Organizations to legislative leaders. Lawmakers are expected to debate the plan when they meet in May and can accept it, reject it or change it.

The ACOs are touted by state health officials as a way to hold down costs in the government health insurance program for poor children, their parents, the elderly and the disabled. But word is circulating among legislators that the proposed Medicaid changes won’t control costs the way they want, based on experiences in other states.

McCrory has made changing Medicaid a priority. The federal government picks up about two-thirds of the program’s cost, but expenses have been hard to predict in recent years, sending governors, legislators and state health officials scrambling to shift money to fill Medicaid budget holes.

Savings projected

Medicaid costs have grown over the years.

In North Carolina, Medicaid claims and premiums in 2004 totaled $7.4 billion, $10.4 billion in 2013, according to the state Department of Health and Human Services, for an average annual growth rate of 3.9 percent. Medicaid pays for more than direct health care costs, which is why claims paid are less than total costs.

Medicaid is about $3.5 billion of the state’s $20.6 billion budget. Legislators say the state can’t keep spending more and more on Medicaid and still afford things such as comprehensive teacher raises.

The state has added Medicaid beneficiaries over the past decade, with about 2 million enrolled in 2013 versus 1.5 million in 2004. That represents an average year over year increase of 3.4 percent, according to the state health agency.

Under Accountable Care Organizations, or ACOs as they’re called, doctors and hospitals treating Medicaid beneficiaries would band together to more efficiently treat patients, in theory lowering expenses while improving patient health. The ACOs would agree to health quality measures for patients and to spending limits. If they spend less than projected and patients get healthier, the organizations would keep some of the money they save. If ACOs spend more than budgeted, the organizations would have to cover some of the costs. The goal is to have 90 percent of state Medicaid beneficiaries in ACOs in five years.

The state would end up spending $987 million less on Medicaid over five years than it would without the changes, according to estimates in the report to legislators. The ACOs would keep part of the money saved, the federal government would keep some of the money, and the state would save $326.3 million over five years, the report states.

“There’s more budget predictability than there is in the current system,” said Bob Atlas, a state consultant. “If there are overruns, providers will share in those, so it’s not all taxpayer burden.”

An ‘achievable’ plan

Doctors and hospitals have endorsed this idea, and DHHS officials in a news conference Monday repeatedly described the plan as “realistic and achievable.”

DHHS stepped back from its proposal of last year to convert Medicaid to managed care after health care providers roundly criticized it.

Dr. Aldona Wos, DHHS chief, said Medicaid reform would not work without the cooperation of doctors and hospitals.

“If it is not acceptable to the providers, then how can they possibly provide the proper medical care?” she said. “As a physician, I truly know firsthand that we must have the backing of the providers for any reform to be successful.”

ACOs are relatively new; a handful of states are experimenting with them for Medicaid beneficiaries. The organizations have a longer history with Medicare patients.

WakeMed has a new ACO for Medicare, the government insurance program for the elderly. Donald Gintzig, interim WakeMed president and CEO, said Medicaid beneficiaries would benefit from a similar arrangement.

“Most hospitals exist to keep people healthy,” he said. “For us, it really gives us the opportunity to fulfill our mission, which is how can we improve health care for a given population within our community.”

Patients benefit from consistent communication between doctors and hospitals, and from home visits from care coordinators that work for ACOs, he said. North Carolina has the chance to be an example to other states, Gintzig said, and he’s eager to work with government leaders to develop the program.

The federal government would have to approve changes before they’re implemented.

Bonner: 919-829-4821; Twitter: @Lynn_Bonner

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