Medicaid in North Carolina

by Becki Gray, Carolina Journal, October 3, 2013.

Before Obamacare, before individual mandates, before exchanges, there was Medicaid. Started in 1965 under President Johnson as part of his War on Poverty, Medicaid extended health insurance coverage to low-income Americans.

Today, Medicaid is the largest publicly funded insurance program in the country. It serves low-income families, the elderly, and disabled. One In five Americans is on Medicaid, more than one-third of the births in the United States are covered by Medicaid, and one-fourth of U.S. children get health care through Medicaid.

Medicaid covers one in nine North Carolinians — 1.6 million of us — and 51 percent of births are covered by Medicaid, the sixth-highest rate in the nation.

Medicaid is funded jointly by the state and federal governments. North Carolina’s share of the program is about $3 billion, while total Medicaid spending in N.C. is closer to $14 billion.

Medicaid spending has grown 90 percent over the last decade and is the fastest-growing part of our state budget, with spending rising by 15 percent in 2011-12; 16.8 percent in

2012-13; and a projected 17.2 percent in 2014-15.

North Carolina’s Medicaid costs are the highest in the South and among the highest in the nation. We have more people enrolled and spend more per patient than neighboring states. Twenty-five percent of the state’s primary care physicians aren’t accepting new Medicaid patients, limiting access, reducing health outcomes for patients, and driving up costs.

Uncontrolled expenses result in consistent budget overruns. Just this year, legislators faced a $400 million shortfall. Since Medicaid is a federal entitlement program, it has to be funded before anything else. Medicaid is the biggest driver of state budget decisions, crowding out other priorities.

Recent audits disclosed that our Medicaid administrative costs are significantly higher than in other states and consistently exceed budgeted amounts for contractual administrative services, with little to no attention paid to cost containment.

And then there’s fraud. In 2010 the Government Accountability Office released a report identifying $48 billion “improper payments” nationally. That’s nearly 10 percent of the $500 billion annual expenditures.

Medicaid was poorly managed before the McCrory administration took over. But recent personnel issues and glitches with the rollout of the NC FAST and NC TRACKS computer systems have highlighted problems with Medicaid that must be tackled now.

The General Assembly’s 2013-15 budget authorized the administration to establish a Medicaid Reform Advisory Group to propose fixes for the program.

Medicaid can be reformed to be pro-patient and pro-taxpayer. Sensible proposals include allowing comprehensive medical providers to compete for patients, allowing individualized plans with subsidies based on need, and focusing provider payments on improvements in patients’ health.

Then there is Obamacare. The Affordable Care Act relies on increasing Medicaid enrollment, leaving a healthier and less-poor population to join the health exchanges. Obamacare writers assumed that mandating states to increase the income eligibility of Medicaid recipients from 100 percent of the federal poverty level to 138 percent would shift more people into Medicaid.

They did not, however, anticipate that the U.S. Supreme Court would reject the mandate. Nor did they anticipate that even with a federal offer to pay 100 percent of the costs for a year, more than half the states (including North Carolina) would decline to expand Medicaid.

But the Medicaid rolls will grow. The court did not strike down the portion of the law enrolling in Medicaid all children age 6 to 18 in households earning less than 138 percent of the poverty level. In North Carolina, 51,000 kids will move from the state-sponsored Children’s Health Insurance Program to Medicaid. The initial cost to N.C. taxpayers: $50 million.

And this is just the beginning. Medicaid has been called the anchor of the Affordable Care Act. The question becomes: Will it sink or save the American health care system?