Did North Carolina really need Medicaid reform?

by Tom Campbell, Executive Producer and Moderator, NC SPIN, June 30, 2016.

Now that the NC Department of Health and Human Services has submitted detailed plans for the Medicaid reforms passed last year we are able to get a clearer picture how reform is to be implemented. Our analysis leaves us with more questions than answers.

For several years we were told our Medicaid program was broken, primarily due to budget cost overruns, inadequate administration and the need for more predictable budgeting. Much (not all) of the huge Medicaid deficits were the result of the recipient growth during the recession, the legislature attempting to make changes not approved by the feds and lawmakers’ failure to establish realistic Medicaid budgets. Legislators and DHHS are currently doing a much better job of budgeting. Our management and administration of Medicaid is much improved, delivers better care to recipients and enrollment growth is on post-recessionary projections, all resulting in sizeable recent year-end budget surpluses.

DHHS has done a good job of taking legislative mandates and putting them into an organized program, albeit one that requires waivers by the federal Center for Medicare and Medicaid Services (CMS). These waivers will require months for approval and many more months to be implemented. The new plan calls for Managed Care Organizations (generally for-profit companies) and Provider Led Entities (doctor and hospital groups) to be compensated through a capitated, or per-patient per-month, fee. Whereas any surpluses from budgeted amounts currently revert to the state and its taxpayers, the new plan assigns surpluses to the MCOs and PLEs.

North Carolina must still provide oversight, which includes at least 5 additional layers of administration (the MCOs and PLEs), new procedures, payment arrangements and relationships with local health departments, care givers and, of course, the legislature itself.

All this is projected to save about $400 million over the next 5 years of the waiver, of which North Carolina’s projected savings will be $134 million or $27 million per year - not small potatoes, but in a $14 billion annual Medicaid program not significant enough for all the hoops we are jumping through.

The new plan effectively cuts out Community Care North Carolina, an organization Republicans don’t like, but to our mind one that has helped save the state through better patient care management.

Our analysis leaves many unanswered questions. For starters, will CMS grant the requested waivers or will North Carolina spend more time and money revising and revamping the reforms? Approximately 90 percent of primary care physicians now accept Medicaid patients but will they continue to do so, especially if paperwork becomes more burdensome or their reimbursements are cut or delayed? And what happens if (more likely when) these MCOs and PLEs find they cannot provide prescribed care for the agreed upon monthly amount they receive? The record in other states indicates they will either demand increases or discontinue their participation, leaving the state worse than before reform.

The ultimate consideration should be whether North Carolina’s Medicaid recipients would receive better healthcare? There is little evidence demonstrating they will.

We understand our leaders’ desire for budget predictability and cost controls but North Carolina cannot delegate responsibility. The Medicaid reform plan appears no better and might likely be worse than what we now have, leaving us questioning why we went through this lengthy and costly process.