Officials Mum on Whether Medicaid Scandal Will Lead To Criminal Charges | Eastern North Carolina Now

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

Audit points to potential lawbreaking, suggests move to managed care

    RALEIGH     State officials will not say whether anyone will be charged in a Medicaid spending scandal uncovered by the state auditor's office.

    "That would be a question best addressed by the auditor's office," Julie Henry, Department of Health and Human Services spokeswoman, said when asked whether legal action might be expected after the audit revealed more than $1 billion annually in overspending. It also found missing and incomplete contracts, shoddy bookkeeping, and possible violations of state law.

    Bill Holmes, a spokesman for Auditor Beth Wood, referred the same question about possible charges to DHHS for an answer. He said the Medicaid program was so chaotic and problems so diffuse it might be challenging to pin the blame on any one person.

    Crystal Feldman, press secretary for Gov. Pat McCrory, said "stay tuned" when asked whether charges were expected and whether Medicaid might be shifted from its current fee-for-service design to a managed care model.

    A second audit of the Medicaid program is under way by Wood's office. Neither she nor McCrory would say what its focus is, though Wood did say it is investigative in nature.

    Meanwhile, DHHS on Monday issued a request for information from the public and the state health care community on how to make significant reforms in the Medicaid delivery system.

    Under the signature of DHHS Secretary Dr. Aldona Wos, the letter said DHHS "is interested in receiving information, recommendations, and suggested approaches regarding innovative system and payment reforms to the Medicaid program that are ... market-based and utilize N.C. community-based providers," among other provisions.

    The letter is the most recent in a series of events some observers believe could lead the state in the direction of a market-oriented, capitated, managed care model through which providers would compete for service contracts and assume full risk for cost overruns.

    Another came in the audit, which recommended a change in the Medicaid culture to pursue "cost containment."

    The recent appointment of Carol Steckel to head the state's Medicaid program is a signal market-oriented reform may be forthcoming. A former commissioner of Alabama's Medicaid office, she is doing a "systemic review" of the current system including noncompliance issues and audit findings.

    North Carolina's current monopolistic, fee-for-service system puts state taxpayers on the hook for the massive overspending by what a state audit found to be a Medicaid program in disarray.

    Under fee-for-service, Medicaid pays for all visits to doctors and hospitals. By giving each Medicaid recipient a "medical home" with a primary care physician, the goal is to reduce costs of hospital admissions and emergency room visits. Critics say that has not happened because recipients often use their free services more often.

    "There are states that are demonstrating success ... with capitation (under managed care). It certainly deserves an impartial, credible look," said Marty Rowan, a Wilmington attorney and supporter of the managed care model. Capitation is a system giving a health provider gets a set amount of money per person enrolled. The burden is on the provider to contain costs or pick up cost overruns.

    A former president and CEO of Health Management Corp., a disease management company, Rowan has studied the state's Medicaid situation, criticizing its present design and several state-sponsored studies that have shown large savings. She has met with state lawmakers in recent years to voice her concerns.

    She believes the state audit affirms criticisms of the Medicaid program's spending woes. She is optimistic the audit findings might spur action among legislators and DHHS to revamp the Medicaid system.

    "They want to take a complete look from top to bottom, which would include managed care options and capitation options, so that's great," Rowan said after reviewing recommendations in the state audit.

    Wos' request for information includes provisions that Medicaid place more responsibility on recipients for their care by encouraging "use of co-pays, deductibles and other allowable financial incentives."

    Another provision directs respondents to describe how their ideas "will create more appropriate care, at lower costs and with better outcomes versus the fee-for-service system."

    "It's about time. It's terrific. I'm sorry it took so much time," Rowan said of the change in focus coming through DHHS.

    "It's hard for a legislator who hasn't worked in health care for 25 years to know what to do," Rowan said, and it was hard to gain traction when urging lawmakers to reform Medicaid.

    "We didn't find people who disagreed with us, we just found a lot of people who wouldn't focus on it," she said. "It's a lot easier to do sound bite work in Raleigh than it is to tackle health care."

    Rowan suggests the deep troubles in the current Medicaid system may torpedo expansion of Medicaid rolls under Obamacare.

    "I'm a supporter of health care reform, but even I wouldn't say expand this model," she said.

    But former DHHS secretary Lanier Cansler, a defender of the current Medicaid system, has said he is wary of managed care.

    "The deal becomes if the managed care company's making money off it and the state's saving money off it, then where's the savings coming from?" he asked. Paying doctors and other medical providers less, and reduced quality of care could be undesired outcomes of the switch, he said.

    "The full-risk companies are going to take 15 to 20 percent right off the top to fuel their own businesses, and that's money that's going to go out of state that's not going to create a single job in North Carolina, it's not going to serve a single patient in this state," said Don Dalton, vice president for public relations at the N.C. Hospital Association.

    "We're very passionate about our support for CCNC. We think it's improved itself, it has a great track record," Dalton said of Community Care of North Carolina, the nonprofit agency that oversees most of the Medicaid program in the state.

    But Mark Trail, former Medicaid director for the state of Georgia who now works for a health care consulting firm, insists that much of the fear of full-risk managed care is based on outdated examples.

    "You look at the contracts now and they're much more comprehensive," with states dictating to the managed care companies exactly what they expect covered, Trail said. "You expect them to actually improve care such as well care and things like that."

    Georgia moved away from a system with similarities to North Carolina's to one under Trail's leadership with managed care options. He agrees if a full-risk managed care company did not treat providers or provider groups well, doctors would leave the program.

    But that is an incentive for the management company to work with them, he said, because the company is at a disadvantage in the next round of contract bidding against competitors if providers won't work with it.

    Similarly, states can use contracts to penalize the management companies, usually financially, if they cut back on negotiated services, an additional disincentive for the company to pursue that route, Trail said.