State Politics

NC legislature approves Medicaid privatization

The state began moving toward managed care for Medicaid recipients Tuesday despite a persistent group of dissenters who argue that the plan rejects a system run by doctors that for years has helped hold down costs.

The Senate passed House Bill 372, which overhauls Medicaid, in a 33-15 vote. There was less than five minutes of debate, though the topic has been the subject of months of discussion in Raleigh and beyond.

The House then debated the bill for more than an hour before approving it 65-40. The bill now goes to Gov. Pat McCrory for his signature.

“We are finally going to put some controls in the Medicaid system,” said Sen. Ralph Hise, a Spruce Pine Republican. “I think it’s an exciting day for our state and future budgets.”

Under the bill, the state would enter into contracts with three companies that would offer statewide health insurance plans for Medicaid recipients, as well as up to 10 contracts with “provider-led entities” – networks of doctors and hospitals that would offer regional plans.

The state would stop paying for each Medicaid patient’s medical procedure and doctor visit. Under the new contracts, the state would make up-front, per-patient payments. The insurers or provider networks would be responsible for any cost overruns.

For years, the state has used a network of providers, known as Community Care of North Carolina, to provide “medical homes” for most Medicaid patients and coordinate care for chronically ill recipients. The state contract with CCNC would end with the beginning of per-capita payment contracts.

Rep. Nelson Dollar, a Cary Republican, said arguments that Medicaid costs were out of control are wrong, and that it is a mistake to invite into the state commercial HMOs, which “have failed repeatedly in North Carolina.”

“We need reform in North Carolina that is based on caring for our citizens, not for a group of stockholders,” Dollar said.

Budget shortfalls

Legislators were frustrated by a string of Medicaid budget shortfalls from 2010 to 2013 ranging from $335 million to $600 million. One of the problems had been estimating how much the federal government would kick in each year.

Donald Taylor, a professor at Duke University’s Sanford School of Public Policy, said in an interview that complaints about Medicaid budget overruns – the rationale for moving to managed care – were overstated. Much of the reason the state missed the mark on Medicaid spending is that the legislature didn’t budget enough money, Taylor said.

“The problem was never as bad as they said it was,” he said. “That doesn’t mean there were no problems.”

Dollar said Medicaid costs per enrollee are dropping, while enrollment has increased by more than 200,000.

The conversion to managed care and the new payment system will take years.

Medicaid is administered by the state, but the federal government pays about two-thirds of the $15 billion annual cost.

The federal government must approve the legislature’s changes, and the bill requires the state send the detailed request to Washington by June 2016. Winning approval will probably take another year or more. The managed care contracts would begin 18 months after federal approval.

About 1.8 million poor children, some of their parents, disabled people and elderly people in the state use Medicaid.

Rep. Donny Lambeth, a Winston-Salem Republican, said the new arrangements would lead to better health through better care coordination. Health care quality for Medicaid beneficiaries is not uniform across the state, he said.

“We can do better by these patients,” Lambeth said. “They deserve better.”

Some Democrats argued that it did not make sense to overhaul Medicaid without also expanding it to more people, as allowed under the Affordable Care Act. An estimated 300,000 to 500,000 people would be added to the Medicaid rolls in a state expansion.

The lack of expansion and added pressure from commercial insurers will further squeeze rural hospitals, said Rep. Joe Sam Queen, a Waynesville Democrat.

“This is a real step backwards for North Carolina,” he said.

Supporters of the overhaul want recipients to be able to choose their health plans. Other changes for beneficiaries will depend on the contracts the state strikes with companies and on new federal regulations on Medicaid managed care now in the works.

National trend

Managed care is playing a bigger role in Medicaid nationwide, according to the federal Centers for Medicare and Medicaid Services, and the new regulations will cover “beneficiary experience,” including the accessibility of services, and will establish a quality rating system.

CMS noted that in 2011, 58 percent of the nation’s Medicaid beneficiaries in 39 states and Washington, D.C., received some or all of their medical care through health plans with per-patient payment contracts.

Managed care is not inherently good or bad, said Joan Alker, executive director of the Center for Children and Families at Georgetown University. “Different states have different experiences with it,” she said.

Alker said, however, that it is “a real shame” that the state is moving away from CCNC.

“There’s no compelling reason to move to Medicaid managed care,” she said in an interview. “We don’t know that managed care saves money at the end of the day. North Carolina has been a leader for decades. It’s been admired around the country.”

A recent state audit reported that CCNC saved about $300 per year for each patient enrolled in its networks from 2003-2012.

Staff writer Taylor Knopf contributed.

Lynn Bonner: 919-829-4821, @Lynn_Bonner