Senate Medicaid Plan Relies on Competition | Eastern North Carolina Now

    Publisher's note: The author of this post is Dan Way, who is an associate editor for the Carolina Journal, John Hood Publisher.

Bill faces uncertain fate with House, McCrory administration

    RALEIGH     The Senate on Wednesday rolled out an ambitious Medicaid reform plan with an aggressive timetable that health care provider organizations panned and other Medicaid experts applauded.

    "The No. 1 roadblock causing teacher pay to remain so low for so long is Medicaid," Senate leader Phil Berger, R-Rockingham, said in a written release. Medicaid has overspent its budget by nearly $2 billion the past four years.

    "This plan should allow the General Assembly to finally focus state resources on other areas of critical importance to the people of this state," Berger said.

    The proposed legislation would sever Medicaid and North Carolina Health Choice from the state Department of Health and Human Services. It would create a Department of Medical Benefits to administer those programs.

    As the General Assembly's short session nears its close, it's unclear whether the full Senate will adopt the plan or if so, whether the House would go along. Gov. Pat McCrory recently has pitched a different Medicaid reform plan, and Rep. Nelson Dollar, R-Wake, is among its sponsors. Dollar did not respond to a request for a response to the Senate plan.

    The Senate bill would make Medicaid health plans fully capitated — offering a fixed subsidy per patient annually, adjusted to reflect the patient's health status — requiring plan administrators, rather than taxpayers, to cover budget overruns.

    Under the bill, unveiled at a Senate Rules Committee meeting, the state would be split into several regions. Each region would be served by health care plans chosen through competitive bidding.

    Accountable care organizations — networks formed by doctors and hospitals — would compete with managed care organizations that typically are administered by large insurance companies. The ACOs would have until July 1, 2018, to become fully capitated. The MCOs would be capitated upon the July 1, 2016, startup of the new agency.

    The reform's health plan mix is patterned after a Florida model. The federal Centers for Medicare and Medicaid Services approved Florida's request to expand its five-county pilot project to a statewide system as a result of cost savings and improved health outcomes.

    "We've had some consultation with Florida about what worked and what didn't," said Sen. Ralph Hise, R-Mitchell, co-chairman of the Senate Appropriations Committee on Health and Human Services.

    Competing not only for state contracts, but also for Medicaid patients within a region "is what we believe will hold costs down and increase quality," Hise said.

    The regional model "is not something unique," Hise said. McCrory initially advanced that as part of his 2013 managed care Medicaid reform plan before reversing course. "We think it had a lot of merit." It is also one of the pillars of Florida's reform plan.

    A full-time board comprising seven members earning $8,000 a month would be appointed by the end of September to run the Medical Benefits Department under legislative oversight.

    That board would decide the number of regions, Hise said. One option for dividing the state's 100 counties would be to use the geographic template of the 14 networks established by Community Care of North Carolina, the state's current, nonprofit Medicaid administrator.

    Every region would be required to have one provider-led plan, which would get priority status in that region, Hise said.

    But Adam Sholar, a DHHS lobbyist, said department executives "do have some concerns with this version of the bill" after spending 16 months working with consultants and DHHS staff to develop the McCrory plan.

    Among the objections is carving out Medicaid and NC Health Choice, which provides state insurance for low-income children who don't qualify for Medicaid but whose family income is too low to purchase private insurance.

    "We would ask that [the Senate plan] be studied rather than voting now," Sholar said. He declined to discuss DHHS objections in greater detail after the Senate committee meeting.

    Chip Baggett, spokesman for the North Carolina Medical Society, said physicians have been working diligently the past three years to craft a system that moves away from fee-for-service payments. That system would reward providers for delivering healthy outcomes rather than merely paying them for every patient visit and service administered.

    Allowing managed care organizations to compete for Medicaid patients "sets up the state to send money to somebody other than North Carolina citizens that is not going to be reinvested in the state, is not going to be used to solve [budget problems], is not going to be used to pay taxes in North Carolina, or buy gas, or buy groceries, or pay home mortgage loans in North Carolina," Baggett said.

    Cody Hand, a lobbyist for the North Carolina Hospitals Association, told lawmakers that providers "can do a much better job of managing the Medicaid population and dollars" than either the state or managed care entities.

    He said physicians and hospitals can create health metrics to determine desired outcomes, and "we have skin in this game more than anybody else."

    Companies with a profit motive "really don't have a vested interest in the patient outcome," he said of allowing managed care competition. "Give ACOs a chance to prove that we can do it before you do anything else."

    "It's a typical kind of bogeyman argument [and] completely inaccurate" for providers to accuse managed care organizations of seeking profit over patient interests, and harboring a willingness to cut services and provider reimbursement rates in order to cut costs, said Jeff Myers, president and CEO of the Washington, D.C.-based Medicaid Health Plans of America.

    "The Senate is on the right path, and ... they have been very firm that for the North Carolina Medicaid system, and most importantly for the beneficiaries that need it, it really does make sense to move to an MCO, fully capitated risk model," Myers said.

    "One of the reasons that 37 states have moved to a capitated risk model is not only the integrated care they provide, and a visibility of what the state is going to spend, and some budget predictability, but the fact that MCOs have by contract and by requirement at CMS significant program integrity and significant quality measures," Myers said.

    Those healthy-outcome measures allow a state to determine objectively how well the plan is performing, "which you can't get in a fee-for-service model. Maybe that applies to ACOs, maybe it doesn't," Myers said.

    Jonathan Ingram, director of research at the Naples, Fla.-based Foundation for Government Accountability, said when Florida's Medicaid reform pilot plan went statewide last year, "We actually got a lot more interest than there were open slots" for plan providers.

    "I would imagine North Carolina would be the same. You guys have over 1 million people to cover, so there's going to be significant interest in that from the plan providers looking to bid for those contracts," said Ingram, who has done extensive research on North Carolina's Medicaid system, including a study for the John Locke Foundation.

    "We're seeing improved health outcomes compared to before reform ... and we're seeing higher satisfaction among patients," Ingram said of Florida's reformed Medicaid system.

    "Costs are significantly lower, and because we're doing the competitive bidding process we're getting a lot more bang for our buck," Ingram said.