Medicaid plan shifts cost overruns to medical care providers

lbonner@newsobserver.com jneff@newsobserver.comJune 19, 2014 

The McCrory administration, House Republicans, doctors and hospitals took a major step toward significant changes in the state’s $13 billion Medicaid program by agreeing to move toward a system where providers would be responsible for nearly all overspending in the program.

Under a proposal endorsed by the House health committee Thursday, the state would move away from paying doctors, hospitals and other medical professionals for each procedure. Instead, networks of providers would be paid set amounts to cover patient care. By 2020, the provider networks would be responsible if they bust their budgets. The state wouldn’t pay more if the cost of medical services was higher than expected.

The proposal moves McCrory, the House and health care providers closer to the position of Senate Republicans, who want to shift Medicaid to managed care entities that would take all responsibility for budget overruns.

Under the House plan, the Medicaid health networks would be “provider-led” said Rep. Nelson Dollar, a House budget writer from Cary who specializes in health care issues. The networks would be built on the foundation of the state’s Community Care of North Carolina networks, which coordinate care for most Medicaid patients.

“We know this transition will take time to make sure that we do it right,” Dollar said. “This is a substantial move and a substantial commitment on the part of providers” to shift from getting paid for every procedure and helping “lead the way to get to where we need to be.”

The provider-led groups would be able to work with insurance companies if they wanted to, Dollar said.

The state Department of Health and Human Services would be responsible for working out the details and getting permission from the federal government to make the changes.

But Senate Republicans say they are tired of missteps in the chronically dysfunctional state Medicaid office. They want to remove Medicaid from the auspices of the state Department of Health and Human Services in order to have a new set of people oversee the transition to managed care.

Senate leader Phil Berger said the House proposal has “some elements within it that look to be positive,” even though stretching the transition out to 2020 “is a bit too long.”

Berger still wants a new department to be responsible for Medicaid.

“The thing that most concerns me is they want to leave it up to DHHS to implement reforms,” he said. “We have some reservations about that. We think a new department is the way to go.”

Budget overruns are routine in the Medicaid program, the government insurance for about 1.8 million low-income children and families, and disabled and elderly people. The federal government picks up about two-thirds of the cost and the state pays one-third. State predictions on how much Medicaid will cost each year are often wrong, and legislators are left scrambling every spring to make up the difference.

Legislators say they crave “budget predictability,” but there’s been little agreement on how to meet that goal.

DHHS last year floated the idea of the state bringing in three or so statewide managed care organizations that would be responsible for physical, mental and dental health. The administration abandoned that idea after an outcry from medical providers, and DHHS pitched a proposal for Accountable Care Organizations. These would be run by providers, which would get budget and health-quality targets for their patients. But under that plan, providers would still be paid for each procedure. The organizations would keep any savings if they hit their targets and be responsible for some of the losses if they didn’t. The plan put limits on both the rewards and the penalties.

The new House plan would have the providers responsible for most cost overruns.

“We are very pleased with the House bill,” said DHHS Secretary Aldona Wos. “It does not box someone into a ready-made product.”

The N.C. Hospital Association and the N.C. Medical Society, which fought the first managed care plan, said they endorsed the core of the new House idea.

Chip Baggett, lobbyist for the N.C. Medical Society, said the organization “generally” supports the House proposal.

While there are still concerns about providers being responsible for all service-cost overruns, he said, “this plan sets a glide path for physicians and other providers to systematically transition to a new system of care delivery, and gives us the time to make something like that work.”

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

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