North Carolina Gov. Pat McCrory's health agency on Wednesday proposed holding down rising Medicaid
costs by adapting and expanding current networks of physicians or hospitals into agreements allowing them to keep a portion of savings they generate while meeting treatment goals but sharing the losses if patient costs are too high.
The plan backs away from initial proposals last year to stop annual multimillion-dollar Medicaid cost overruns by paying a handful of statewide managed-care providers fixed amounts to deliver medical, mental and dental care to about 1.7 million poor and disabled people. The managed-care companies would have shouldered the risk if caring for patients outstripped contracted amounts but keep the profits when it was able to restrict costs.
The state Department of Health and Human Services presented a framework for revamping the state's $13 billion Medicaid program in line with demands by the state's doctors and hospitals to an advisory group set up by McCrory. About $3.5 billion of the shared state and federal program's cost is paid by state taxpayers.
The health agency now proposes to expand the roughly two dozen "accountable care organizations" operating statewide. They would treat physical ailments but not dental, behavioral, substance-abuse or long-term care needs.
"The adoption of the ACO model will ensure that the state no longer just pays for someone to do something. Rather, the state will incentivize providers to render quality care efficiently," said Mardy Peal, an adviser to state Health and Human Services secretary Dr. Aldona Wos. "Losses will be shared when costs exceed target budgets."
The federal health care overhaul law included language to accelerate the networks of physicians or hospitals for Medicare. Groups representing North Carolina doctors and hospitals have spent months pushing for expanding the organizations instead of turning to outside managed-care organizations.
"We are confident that with the right flexibility in the system and the latitude necessary to serve our patients to the best of our ability, the state will soon achieve its goals of cost predictability and long-term sustainability for Medicaid," North Carolina Medical Society CEO Robert Seligson said.
Advisory board member Sen. Louis Pate, R-Wayne, noted that the savings lawmakers have sought from Medicaid will be slower to materialize than with managed care.
But the change is sustainable and more likely to get providers involved with finding savings, said Robert Atlas, an outside consultant hired by DHHS to advise the agency on Medicaid reform. Since providers wanted ACOs instead of managed care "we're very hopeful that the provider community will frankly put their actions where their mouth is" and form organizations that cover the state's Medicaid population, Atlas said.
The Medicaid revamp, which state lawmakers and federal officials must approve, could begin taking effect as early as July 2015, the health agency said.
The organizations would continue to be paid through the current fee-for-service system, in which they're reimbursed by Medicaid for each procedure they perform. Organizations that save money on treating patients while also meeting quality goals could pocket 60 percent of the savings, DHHS said. Networks that see cost overruns and fail to maintain quality could be held liable for part of the losses.
McCrory and Republican legislative leaders have blamed spiraling Medicaid costs left by preceding Democratic administrations for not providing teachers and state workers with raises last year. But Medicaid has also proved tough to manage under the GOP's watch.
A group of North Carolina doctors filed a class-action lawsuit last month after flawed computer programs severely delayed payments they were due for treating Medicaid patients. The lawsuit alleges that managers at DHHS and its contractors were negligent in launching NCTracks, a nearly $500 million computer system intended to streamline the process of filing Medicaid claims and issuing payments.
The lawsuit alleged NCTracks's software was riddled with thousands of errors that led to delays of weeks and sometimes months before doctors and hospitals received payment. That forced some medical practices to borrow money to meet payroll and others to stop treating Medicaid patients, the lawsuit said.