Author photo

Carolina Journal News Reports

N.C. Could Save Billions With New Medicaid Approach

Model used in Florida lauded for encouraging savings, promoting choice

Sep. 17th, 2012
More |

RALEIGH — North Carolina could save $2.7 billion a year by moving away from its primary-care focused Medicaid structure and adopting a managed-care model used in five large Florida counties, based on research by the Foundation for Government Accountability.

“I think the Florida success story is one of the great untold tales of health care in America,” said Christie Herrera, vice president of policy at the Naples, Fla.-based foundation. “Today, those five counties are saving the state of Florida $118 million a year.”

Backers of the risk-based managed care model used in Florida say it forces medical providers rather than taxpayers to absorb any losses if the costs of care exceed the amounts agreed on in state contracts. Moreover, the Florida model allows Medicaid recipients to choose among a variety or providers and plans, rather than granting most Medicaid care management to a state-sanctioned monopoly, Community Cares of North Carolina.

The foundation projected what other states would save if Florida’s pilot project were applied to their Medicaid programs, Herrera said.

“What we found was, in North Carolina, $2.7 billion in savings if North Carolina implemented Florida’s reform,” Herrera said. Of that, $1.3 billion would be saved annually in the disabled population, and $1.4 billion from the Medicaid-eligible population, she said. For the state budget year ended June 30, North Carolina’s Medicaid spending was $14.2 billion.

Herrera is no stranger to health care law. During her previous job as director of the Health and Human Services Task Force for the American Legislative Exchange Council, 38 states enacted model legislation the task force developed.

Florida’s pilot has been in place since 2006, and the state legislature voted last year to expand it statewide. Herrera is optimistic federal Medicaid officials will approve the conversion, which is estimated to save the state $901 million annually, because the Obama administration already granted the pilot a three-year extension.

Herrera said the Foundation for Government Accountability is among those endorsing competitive bidding as a flexible alternative to the rigid, government-heavy models of delivering Medicaid insurance for the poor and disabled.

“North Carolina’s costs are so high” under the CCNC system that services most of the state’s Medicaid recipients, Herrera said.

“If Florida’s Medicaid reform pilot was its own state, it would have the second-lowest per-person Medicaid cost in the country. So you’re looking at $24.42, whereas North Carolina is $41.43 (per enrollee per year),” Herrera said.

While CCNC is “certainly helpful for people with a lot of different diseases,” she said, “the good news about Florida’s pilot is it’s that plus so much more.”

Patient choice

Patients can choose among 11 plans in the Florida pilot. Those include Medicaid managed care plans, private insurance companies and physician-owned private networks. There are 31 full-time, multilingual counselors to help recipients choose the best plan for their needs.

There are customized benefits, such as a meal program for pregnant mothers and statewide plans for children with special medical needs. Enhanced benefits up to $125 are awarded for patients embracing healthy behaviors, such as going to a doctor for smoking cessation. Recipients can opt out of Medicaid in favor of purchasing a private plan.

Even so, North Carolina’s CCNC model is defended by doctors, hospitals, and lawmakers, despite chronic Medicaid cost overruns, including a $375 million shortfall in the fiscal year that ended June 30.

Unlike full-risk managed care programs, which put the burden on the contracted plan administrators to pay for any budget deficits, CCNC passes the red ink on to the state taxpayers.

A model for the nation?

“The CCNC, in our minds, is the example that many more states around the country should and will follow given the opportunity,” said Don Dalton, vice president of public relations at the North Carolina Hospital Association.

“I’m very excited about what we’ve been able to achieve through CCNC, and I think a lot of other states are actually looking at the CCNC model,” said state Rep. Nelson Dollar, R-Wake, who chairs the Joint Legislative Oversight Committee on Health and Human Services.

Pam Perry, vice president of business development for Amerigroup, which coordinates health care needs exclusively for public beneficiaries in 14 states, sees a different trend.

“Comprehensive, risk-based managed care plans are the most prevalent type of managed care arrangements in Medicaid,” said Perry, who received her undergraduate public policy and sociology degree at UNC Chapel Hill.

“As of 2010, over 48 percent of Medicaid enrollees were in a full-risk plan, compared to only 15 percent in 1995,” she said.

“When you look at the reports that are on the Kaiser [Family Foundation] website, you don’t see the majority of states shifting to the [primary care case management] model, they’re shifting to the full-risk managed care,” said Mark Trail, former Medicaid director for the state of Georgia.

CCNC is a primary care case management model. The Kaiser Family Foundation conducts independent health policy analyses widely used as guiding stars in the health care field.

Trail said his state became a leader in the Southeast in Medicaid savings only after moving away from a model similar to, but not as “enhanced” as, CCNC and to a managed care system.

“There were a number of things that didn’t work for us,” said Trail, who is now working with Health Management Associates, a health care consulting firm. “What didn’t work so well was saving money.”

Georgia moved about 70 percent of its population into full-risk managed care in 2006, Trail said. It maintained a much smaller version of its old CCNC model, but the governor is now considering a state report to convert even that to full-risk managed care.

Federal Centers for Medicare and Medicaid Services data show Georgia leads the 11 states in the Southeast region for controlling growth in spending per Medicaid enrollee. Its spending fell 2.7 percent from 2004 to 2009. North Carolina’s costs jumped 2.2 percent during those years.

Georgia spent $4,835 per Medicaid enrollee in 2009, the lowest in the Southeast. That was down from $5,532 in 2004. North Carolina per-participant costs grew from $6,641 in 2004 to $7,275 in 2009, the highest in the Southeast.

“There are no questions but there have been all kind of problems with the system in Georgia” and other states using full-risk managed care, Dollar said.

Part of the increase in North Carolina’s per-patient costs stems from moving more recipients into CCNC from the aged, blind, and disabled category. The goal is to reduce the initial spike in their care costs by using CCNC’s lower-cost approach to better manage their cases, Dollar said.

“We have just accelerated that in the last year and a half to take on more of the higher-needs patients, so we’re not at anywhere near the zenith to where CCNC is going to be to benefit North Carolina’s Medicaid program,” Dollar said.

“There have been some horror stories” in states that turned over control of Medicaid programs to private companies, Dollar said. Generally they cut reimbursements to providers to reduce costs, and that revenue decline pushes some providers away, he said.

“You don’t have to cut the legs out from underneath the docs to save money,” Trail said. Georgia pays physician providers at 121 percent of the national Medicare reimbursement rate, just below North Carolina’s 127 percent reimbursement rate.

Dan E. Way is an associate editor of Carolina Journal.