Politics & Government

North Carolina to privatize Medicaid

Rep. Donny Lambeth, left, and Rep. Nelson Dollar, center, are the House’s lead negotiators with the Senate on reshaping the state’s Medicaid program.
Rep. Donny Lambeth, left, and Rep. Nelson Dollar, center, are the House’s lead negotiators with the Senate on reshaping the state’s Medicaid program. cseward@newsobserver.com

Legislators have agreed to privatize North Carolina’s $15 billion Medicaid program, a change that doctors and hospitals have been fighting for months, but which some Republican legislators have championed as a remedy for unpredictable spending.

Under House bill 372, three insurers would be given contracts to offer statewide Medicaid managed care plans. The state would have up to 10 contracts with “provider-led entities,” or groups of doctors and hospitals, that would enroll patients in regional managed care networks.

Rather than pay for each hospital visit or medical procedure as it does now, Medicaid would give the companies a fee for each patient when they enroll. The government would not be liable for cost overruns.

Under the contracts, increased costs for enrollees must be at least 2 percentage points below national Medicaid spending growth. Companies will be required to spend at least 88 percent of the money on medical care.

Sen. Ralph Hise, a Spruce Pine Republican and a lead negotiator on the bill, said the changes will allow the state to control Medicaid growth and provide an avenue for patients to get better care.

“Recipients choose which plan they want to be under,” Hise said.

Medicaid is the government health insurance program for the poor, elderly and disabled. The federal government and the state share the costs, with the federal government picking up about two-thirds of the expenses.

The state will have to get approval from the federal government for these sweeping changes to the insurance program. About 1.8 million people in the state – roughly 18 percent of the population – use Medicaid.

Votes on the bill are expected next week.

For years, the state has used a network of doctors called Community Care of North Carolina to manage health care for most Medicaid patients. Those networks pay particular attention to patients with chronic diseases and work to help them avoid expensive trips to hospital emergency rooms.

A string of years when legislators had to find money to cover unexpected Medicaid costs helped fuel talk of change.

Medicaid budget shortfalls ranged from $335 million to more than $600 million between 2010 and 2013. One of the problems had been estimating how much the federal government would kick in each year.

The state began to talk seriously about privatization more than two years ago. Former state Health and Human Services secretary Aldona Wos floated the idea in early 2013. But faced with fierce opposition from doctors and hospitals, she backed away from proposing statewide Medicaid managed care contracts that likely would have gone to insurance companies. Instead, Gov. Pat McCrory’s administration backed “provider-led” health management where the state would, initially, share the financial risks with medical providers.

While the House backed the “provider-led” option, Senate Republicans said they were not convinced that approach would yield the budget predictability they wanted. Whether to open the state’s Medicaid business to commercial managed care has preoccupied legislators for more than a year. The McCrory administration talked with legislators as they crafted this new proposal.

Bob Seligson, CEO of the N.C. Medical Society, has been one of the most vocal opponents of commercial insurers entering the state Medicaid business. He has highlighted other states’ struggles with managed care – increased expenses and companies leaving states when they say they can’t make money.

“Obviously, we have a lot of concerns,” Seligson said Thursday. He would be looking to see if provider protections ended up in the bill.

Hospitals had proposed having a three- to five-year phase-in after the changes receive federal approval. They wanted to give state health-care providers who form their own networks time to adapt to a system where they would be responsible for medical costs that exceed the per-patient payments.

Cody Hand, a lobbyist for the N.C. Hospital Association, said he was still evaluating the bill, but was worried because it allows less time for providers to prepare. Under the bill, per-patient payment contracts would begin 18 months after the federal government approves the Medicaid program changes.

Administrative changes will come over time. In about four to five years – a year after the per-patient contracts begin – the state will eliminate the state Medicaid office. A new division within the state Department of Health and Human Services –called the Division of Health Benefits – will administer the Medicaid program. Beginning in 2021, the legislature will confirm the person the governor appoints to run the new division. Directors will serve four-year terms.

Employees within the new division will be exempt from the State Personnel Act, meaning they will work “at will” and without the protections of state personnel law. The state pays for about 400 jobs in the Medicaid office.

Lynn Bonner: 919-829-4821, @Lynn_Bonner

Questions and answers

Who is covered?

Nearly all who use Medicaid and all children covered under a government subsidized insurance plan called N.C. Health Choice. Poor, elderly people who use both Medicaid and Medicare are excluded, but the Division of Health Benefits must develop a strategy for getting them covered under the per-patient payment contracts.

How long will it take?

The changes will likely take several years. The state must submit its plans for changes to the federal government by June 1, 2016. It is uncertain how long the federal approval process will take, but Hise estimated about 18 months. Eighteen months after federal approval, contracts with per-patient payments begin.

Are all medical specialties included?

Everything is included, except dental care. The state’s regional mental health offices, which already operate under managed care, are excluded from the new per-person payment contracts for the first four years.

What will happen to Community Care of North Carolina?

By July 2016, the state will renegotiate its contract with CCNC to reduce payments for administration. The new contract will also include performance measures and consequences for failing to meet them. The state will continue to use CCNC until the new per-person payment contracts begin.