A political and philosophical brawl among providers, insurers and policymakers in the Tar Heel State is reaching a possible resolution as North Carolina's Legislature attempts to coalesce around a bill that would overhaul the state's Medicaid program.
Republican Gov. Pat McCrory has made Medicaid reform one of his top priorities since he entered office in 2013. North Carolina's two Republican-led chambers have disagreed sharply over how to accomplish that, but legislators say they are close to nailing down a final, compromising pact.
“It's been a hot debate,” said Chip Baggett, the top lobbyist for the North Carolina Medical Society, which represents physicians.
North Carolina House Bill 372 lays the groundwork for the state's Medicaid reform. In an effort to “ensure budget predictability,” North Carolina's Medicaid program would move full-bore to managed care. The state currently relies on a program called Community Care of North Carolina, which is a group of 14 provider-based community networks that uses a patient-centered medical home model. The state reimburses CCNC providers on a fee-for-service basis, but it also pays the networks a monthly per-member fee to coordinate patient care.
CCNC covers a majority of the state's Medicaid population, and it has been recognized nationally for its patient-care methods. It also appears to save the state money, according to a report from North Carolina's Office of the State Auditor released Thursday. CCNC saved North Carolina $312 a year for every nonelderly Medicaid patient from 2003 to 2012, which equates to more than $400 million a year.
However, Republicans in North Carolina's senate want to terminate CCNC's contract and hand over all Medicaid operations to private health insurers, a decision that numerous other states have made. Iowa, for instance, just announced winners of its newly outsourced Medicaid program this week. Conversely, House members have supported “provider-led entities,” which are groups of hospitals and doctors that resemble accountable care organizations, to run all care aspects of Medicaid.
Hospitals and doctors say they want to take control of Medicaid instead of insurers because they are already accepting more risk-based payments for Medicare and private health insurance. “We'd prefer to have provider-led entities only, but we are kind of waiting to see what happens,” said Julie Henry, a spokeswoman at the North Carolina Hospital Association. “It does not appear that anything we say is changing (senate members') minds," although the group is still advocating for a provider-led Medicaid system, she said.
The most recent version of the House bill essentially combines the two camps. Insurers and provider groups would compete for Medicaid contracts, and they would accept full-risk, lump-sum payments for every Medicaid member instead of receiving money for every service provided. Further, all interested insurers and provider-based organizations would have to establish “appropriate networks of providers” and tie part of their capitated rates to clinical outcomes.
Discontinuing CCNC's contract is a controversial element, but lawmakers are hoping to soften the blow. Some of the care-coordination money that would have gone to CCNC would instead be routed to primary-care physicians and OB-GYNs, who would receive a rate increase to 100% of Medicare.
“We are appreciative of the rate increase,” Baggett of the North Carolina Medical Society said. “But at the same time, you got a program that was created by doctors to help them with the care coordination of their patients.”
North Carolina is the largest state that has not yet adopted Medicaid managed care, according to data from consulting firm Avalere Health. It also is one of the many Republican-led states that has refused to expand Medicaid eligibility under the Affordable Care Act to low-income people making up to 138% of the federal poverty level. About a half million people would gain coverage if North Carolina expanded Medicaid.
Because North Carolina is in the bottom third of poorest states in the country, it has more than 1.9 million Medicaid beneficiaries and spent $12 billion on the program last year—making it the 11th-largest Medicaid program in the nation and a potential goldmine for managed-care companies that want a slice of the growing Medicaid pie.
Even if state lawmakers pass a final bill soon, analysts say it'll take North Carolina's Medicaid department a while to receive approval from the CMS, put out a request for proposals and finalize contracts. “But we believe this is a reminder of the continued building pipeline of opportunities in managed Medicaid,” Brian Wright, an analyst at stock research firm Sterne Agee CRT, said in a research note.
Baggett doesn't see a formal transition occurring for at least three years. “The contentiousness has been over the 'how' and 'when' we're going to do it,” he said. “I think we've got a long way before any dramatic change occurs.”