Scope of Medicaid overhaul proposal changes

The Associated Press

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RALEIGH — Several months ago, Gov. Pat McCrory's administration proposed a dramatic overhaul of what he's repeatedly called a "broken" Medicaid system — one beset annually by hundreds of millions of dollars in shortfalls.

"Medicaid continues to be over budget and costs keep growing," said Mardy Peal, an adviser to state Health and Human Services secretary Dr. Aldona Wos. "It is clear to all of us — beneficiaries, providers and taxpayers — that Medicaid is an urgent and crucial matter before us."

But after criticism of the initial plan by medical providers and legislators, Wos' department has a scaled-back approach. Officials unveiled it to a small advisory panel meeting last week for the first time to try to build consensus on reform among lawmakers, the agency and interest groups. The updated plan is designed in part to allay concerns that the management of Medicaid could wind up in the hands of a few for-profit companies and would dismantle successful programs.

The two representatives of the General Assembly — the body expected to have the most say on a final product — serving on the advisory group aren't settled yet on whether a wide or narrow path to stability in the $13 billion Medicaid program is best.

Sen. Louis Pate, R-Wayne, said he believes fellow Republicans in his chamber largely are more inclined to accept a broader Medicaid overhaul, citing how the program's financial troubles have prevented spending on other priorities, such as salary raises for teachers.

"That'll open so many more possibilities," he said.

But Rep. Nelson Dollar, senior co-chairman of the House budget committee, suggests many problems could be fixed simply by expanding or tinkering with initiatives already in the state and improving Medicaid administration.

Dollar said at the meeting a significant portion of last year's Medicaid shortfall budget was caused by a forecasting error at the state Medicaid office. And he pointed to claims and premium expenditures growing slowly — less than 3 percent each of the past two years, according to data.

"There are tremendous advantages in North Carolina's system," said Dollar, R-Wake, adding "we need to be open to creating something that's not simply coming from someone else's experience."

Medicaid serves more than 1.7 million North Carolina residents, mostly poor children, older adults and the disabled. The state generally pays about one-third of the medical costs, with the federal government paying the rest. There's nearly $3.5 billion in the state budget this year for North Carolina's agency that runs Medicaid, second in expenditures behind the public schools.

McCrory, Wos and then-state Medicaid director Carol Steckel took a state audit highlighting Medicaid's troubles and attempted to build momentum toward reform. Last spring, they offered an alternative to the current fee-for-service system in which doctors, hospitals and other health care providers are reimbursed by Medicaid for each procedure they perform.

Their proposal would have had up to four statewide managed-care companies or other entities deliver the care. Medicaid would pay each organization a set price on each patient the network treated. Many legislators from both parties and medical lobbying groups balked at the concept, with many worried about the future of home-grown Medicaid improvements.

Those programs include the nonprofit Community Care of North Carolina, comprised of medical provider networks where doctors' offices receive an extra few dollars a month to manage each patient's medical regimen and control chronic illness. Community Care has contributed to hundreds of millions of dollars in Medicaid cost savings over the past several years, according to studies.

"We agree that the Medicaid system would benefit from continued improvements," Hugh Tilson, a senior vice president at the North Carolina Hospital Association, said late last week. But "we think the better way of improving Medicaid is by building on what already works in North Carolina."

The state went back to the drawing board. Steckel abruptly left her post this fall.

The latest iteration would carve up the state into six or seven regions. The state would enter into agreements with provider networks or managed-care entities to deliver services, with Medicaid paying again a set amount for each patient's treatment. A regional framework would allow smaller provider networks to participate, said Bob Atlas, a consultant hired by the state Department of Health and Human Services to help develop a Medicaid overhaul plan.

Atlas said the idea would continue to evolve with input from stakeholders. He said more states are expanding their use of managed care to make Medicaid budgets more predictable, offer more robust patient care and provide financial incentives to improve treatment quality. North Carolina lawmakers already have directed separate managed-care networks when it comes to treatment for mental health and substance abuse and services for people with developmental disabilities.

"What we have seen in other states is that a well-regulated system of risk-based managed care can be very successful in achieving these outcomes," Atlas told the advisory panel and more than 150 people in the audience.

The advisory group will take public comment in January on the new proposal. DHHS has a mid-March deadline to get its proposal to legislators. The General Assembly doesn't reconvene until May and could choose to hold off on Medicaid changes.

Once sounding rushed to get Medicaid managed care up and running by mid-2015, DHHS officials preached last week gradual changes that may not be fully implemented until 2020.

Peal, the DHHS adviser, said: "We are committed to not harming the current system."

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