The once-floundering state Medicaid system is expected to stay within its budget for the fourth consecutive year. Meanwhile, a planned switch to managed care is getting positive reviews from federal regulators.

State Department of Health and Human Services officials gave those updates Tuesday to members of the Joint Legislative Oversight Committee on Medicaid and NC Health Choice.

House and Senate leaders continue to debate Medicaid’s transition to integrated care. It combines physical and behavioral health services instead of channeling patients into separate systems. Lawmakers debated how the shift will affect the mental health care system the state has built over the past decade.

Dave Richard, DHHS deputy secretary for the Division of Medical Assistance, said Medicaid spending was $3.8 billion through September. That was $30.7 million, or 0.8 percent, under budget. The program is expected to finish the year spending less than budgeted.

Richard said slightly more than 2 million people were enrolled in Medicaid as of October, a 3.4 percent increase from the 1.94 million participants a year ago.

Steve Owen of the Fiscal Research Division said the fastest growth rate since December 2013 was in the Family Planning program, at 339.6 percent. All other categories combined showed a 14.5 percent increase.

Provisions in the Affordable Care Act may have spurred the Family Planning growth, one of the least expensive Medicaid programs. The average cost for a child in that program is $6 a month, so it can serve more people without boosting costs dramatically, Owen said. But a surge in recipients of the aged, blind, and disabled program, where monthly costs per participant are more than $1,400, caused it to spend nearly 1 percent more than budgeted.

Jay Ludlam, assistant secretary for Medicaid transformation, said in the next few weeks DHHS again will ask the federal Centers for Medicare and Medicaid Services to let the state switch to managed care.

The current fee-for-service plan is expensive. It pays for every procedure and clinical visit. Under managed care, providers receive a flat monthly fee per patient and must provide all services within that “capitated” amount.

CMS could approve the amended application in February, Ludlam said.

Then, commercial managed care networks or private physician groups could apply to become Prepaid Health Plans. As many as five PHPs would serve Medicaid and NC Health Choice recipients statewide, with four regional contracts issued to provider-led entities.

Ludlam expects the shift to occur in July 2019.

“We are the largest state that hasn’t moved to managed care,” DHHS Secretary Dr. Mandy Cohen said. Because of that, CMS has backed the state’s move in that direction, offering suggestions, and warning not to copy provisions of state plans that were rejected.

Dollar and Rep. Verla Insko, D-Orange, raised concerns about integrated care’s effect on  the current state-managed system of LME/MCOs, which administer services for mental health, substance abuse, and intellectual and developmental disabilities.

Dollar said the LME/MCO public managed care concept should continue in its present role. He warned the state would lose hands-on control of behavioral health care if a corporate for-profit entity takes it over.

Richard said he anticipates LME/MCOs would remain part of the PHP systems. He did not guarantee their survival down the road.

“We’ve heard a lot of rosy things about the LME/MCOs,” said Sen. Ralph Hise, R-Mitchell, a committee co-chairman who has been at odds with Dollar over the LME/MCO system.

Integrated care under a managed care model will serve mental health patients better, Hise said, because the PHPs must meet performance standards or risk losing their contracts.