Time is running out, and Medicaid transformation is imperiled.

State representatives began questioning whether Medicaid managed care will fail under its current timeline. The concerns came during a Wednesday, Oct. 23, meeting of the House Health Committee.

If a state budget isn’t passed in the next three weeks, transformation will crash into more delays. But funding isn’t the only problem plaguing the transformation of the program serving the state’s most vulnerable people. 

Medicaid transformation is the most massive change the state program has undergone, and the scope of the change is rivaled only by its complexity. Transformation will privatize the management of the state’s Medicaid program, ushering 1.6 million low-income North Carolinians into the network of one of five health insurance companies. 

But it isn’t just changing things for patients. Doctors, hospitals, and health care providers are all caught up in the transformation — and they aren’t happy. 

Transformation was supposed to happen in stages, but after the budget stalemate delayed the first stage, transformation will go live Feb. 1 with one statewide launch. But even as the state worries about delays, hospitals warn change is moving so fast Medicaid could collapse.  

Providers still resent DHHS’s latest attempt at a data sharing system, NCTracks, the DHHS software debacle that maddened providers in 2013. They worry history will repeat itself. 

“We’re not here for finger-pointing or browbeating, but don’t be surprised if you hear gnashing of teeth coming from this side of the desk,” said Southeastern Health Chief Financial Officer Thomas Johnson. “To me, [the delay is] a red flag that’s already been thrown. We’re looking at a big bang statewide, and it really requires a higher degree of testing if you are going to put that much at risk at one time. It sort of feels like we’re rolling the dice.”

The program goes live in four months, but only three hospital systems and 12 regional hospitals have signed contracts. So far, a mere 40% of providers who saw a Medicaid patient within the past year have signed on.

If providers want to be considered in the algorithm that sorts those who failed to choose an insurer — usually the vast majority of Medicaid enrollees — they have three weeks to finish contracting.

As funding for Medicaid transformation remains locked in the budget stalemate, the N.C. Department of Health and Human Services is pleading for the “right budget” — one that will protect transformation from more delays, and shield the department from slashes to its budget.

“Let’s talk about the elephant in the room, which is the budget,” DHHS Secretary Mandy Cohen said. “Managed care cannot go live [without a budget]. … We have been able to sustain the work despite not having a new budget by moving around other resources. But we are really at the end of our ability to do that.”

She warned further delays in funding would also affect rollout. 

“Delays do cost money,” Cohen said, adding that a delay would hurt insurers. “They are working very hard, and understand that the money from the state will not flow to them until we launch. They are fronting a fair amount of money.”

But several legislators voiced doubts that any budget would materialize by mid-November.

“We have to deal with what we know today. We don’t have a budget,” Rep. Donny Lambeth, R-Forsyth, said. “We have to adjust to that reality. I don’t think it’s likely we’re going to have one, quite frankly.”

Lambeth suggested pushing the start date to July. 

“I’m very concerned about your Feb. 1 date, given that we aren’t necessarily providing you with the tools you need to stay online and on timeline,” Lambeth said. “Literally that is 90 days away, and I don’t see how that is possible.”

Such a delay seems to enjoy the support of the hospital lobbyists, who said neither hospitals nor data systems were ready. 

Data and data sharing systems are essential for transformation to Medicaid managed care. Southeastern Health alone will have to install four new IT systems, modify three existing systems, and test all for data exchange.

But physicians’ experience with NCTracks is still fresh. When the Medicaid managed care provider list recently experienced glitches, providers became still more wary. 

“These were similar kinds of things like we had back during the NCTracks debacle,” said Chip Baggett, N.C. Medical Society senior vice president. “Four or five months into that program, we saw practices just saying, ‘We’re done.’ And not just leaving Medicaid but leaving the small town in rural N.C.”

Both Cohen and the hospital lobbyists described getting the data systems right as a “complicated big machinery operation.” 

“It’s going to be a daunting task. One thing we want to guard against is the experience we had with NCTracks, which, from the providers’ perspective, was a nightmare,” Johnson said. “We believe it could have been avoided if there had been adequate time for additional testing.”

Cohen blamed the recent glitches in the provider lists on “messy” underlying data.  

“This is a very complex technical lift for the department,” Cohen said. “The issue is the underlying data was never meant to do managed care. It was meant to do fee-for-service … and as you service that data for a different purpose it was never intended for, you have unintended consequences.”

She tried to reassure providers that data sharing and the switch to five managed care organizations would not create crushing administrative burdens. 

“We have been very focused on the administrative burden. Going from one payer to five — there’s going to be administrative complexity,” Cohen said, stressing the state was working to streamline what it could. 

Cohen is also fighting to hold onto her own administration. After the legislature considered cutting funding to her department and relocating DHHS, she has repeatedly warned such measures would harm oversight and patient safety. 

She received a measure of support in the committee meeting. 

“When you ask groups to provide health care who are not health care providers, they are problems,” Rep. Wayne Sasser, R-Stanly, said. “It is our responsibility to give you enough people to implement this program and make sure that the people we’ve hired in this profit layer are not out there just to deny services to our patients and underpay providers.”

North Carolina is one of the last states to adopt managed care. The legislature started transformation five years ago, deciding managed care could prevent Medicaid from racking up yearly deficits. 

“We knew when we started it that it was going to be bumpy. This is a major transformation of a huge program,” Lambeth said. “We had to do something different, because fee-for-service wasn’t working. …. I am convinced that managed care, if done properly, will control the rate of increase in health care costs.”