News: CJ Exclusives

Critics: Separate Medicaid Agency May Be No Bargain

Similar system in Oklahoma has not contained costs or increased accountability

The state Senate’s proposed budget would carve Medicaid out of the Department of Health and Human Services in hopes of making it a more accountable, standalone agency with budget stability. But in Oklahoma, where that was done years ago, the results “are disastrous,” one critic of the Sooner State reform says.

“We could begin to stand up the new organization as soon as July 1,” with transfer of services from DHHS taking about a year, said state Sen. Ralph Hise, R-Mitchell, co-chairman of the Senate Appropriations Committee on Health and Human Services.

The Senate-passed budget allocates $4.9 million for consultants, contractors, and initial staff to develop the new agency. The House budget unveiled Tuesday does not include a similar provision.

Jonathan Small, vice president for policy at the Oklahoma Council of Public Affairs, understands the impulse to create a standalone Medicaid agency. But he cautioned North Carolina lawmakers the solution could be even more costly than the problem.

“If you compare [Oklahoma] fiscal year 2003 to fiscal year 2013, state spending on Medicaid has grown 172 percent, or $1.2 billion. That doesn’t sound like a lot in North Carolina, but that’s pretty significant dollars in Oklahoma on an annual basis,” Small said.

“We can directly tie the astronomical growth in our Medicaid budget to them having their own now separate agency,” he said. Indeed, according to the Kaiser Family Foundation, which closely tracks Medicaid spending, Oklahoma has outpaced North Carolina in average annual growth since 2004.

“Once you create a separate welfare entitlement agency, you’ve then created an entrenched constituency group, and that’s exactly what we’ve seen in Oklahoma,” where the Oklahoma Health Care Authority board members have close ties to the health care industry, Small said.

“Now this board has become actively involved in trying to influence health care policy in the state. They and their staff have fought efforts by lawmakers to try to better coordinate and manage care in the Medicaid system, and they fought other efforts by legislators to improve the efficiency in Medicaid,” Small said.

As an example, he noted attempts to rein in expensive, medically unnecessary C-section births that shot up 33 percent through Medicaid. Normal vaginal deliveries cost about one-third as much.

“The pressure was so heavily put on those board members that they decided not to do that,” Small said.

Oklahoma lawmakers created the autonomous, seven-member, uncompensated Medicaid board to gain more legislative control, budget predictability, and focus on the Medicaid program, Small said. North Carolina’s Senate Republicans have voiced those same goals.

Hise said the Senate envisions Medicaid board members being budgetary experts instead of health care insiders because the Medicaid budget “is one of the most clustered spaghetti piles you could ever see.”

For example, he said, the department had $21 million in state spending tied to positions that had been unfilled for more than six months, and nearly $34 million in vacant positions for the full fiscal year. The money was shifted to “anything that could be cost allocated to Medicaid,” Hise said.

Including federal funds, perhaps twice that much was funding items that had little to do with Medicaid’s core mission of providing government health insurance to children and families, pregnant women, the poor, and disabled, he said.

“The only way to get the clear picture on the Medicaid budget is to cut it apart” from budget items such as medical education at the East Carolina University and UNC-Chapel Hill medical schools, early childhood education, Health Department spending, and other areas, Hise said.

Small believes North Carolina would be better served reforming Medicaid from within by going to a managed care system.

“The sky is not falling in Florida, or Kansas, or Louisiana, where they are moving to systems of more managed care,” he said. Florida allows health care provider-led networks to compete with managed care systems.

Oklahoma’s legislature has pushed for such a system the past two years.

“They have been thwarted by the Health Care Authority’s independent board,” where members support the “really sweet” fee-for-service model favored by hospitals, Small said. North Carolina also has fee-for-service Medicaid.

Doctors and hospitals benefit financially from fee-for-service if they get “the Medicaid agency to cover as many services as possible at as high a reimbursement rate as possible, and prevent the legislature from doing anything from encroaching on the care,” Small said.

State Rep. Verla Insko, D-Orange, a member of the House Appropriations Subcommittee on Health and Human Services, said inexperienced House and Senate leaders “really don’t know what they’re doing” in attempting to reform Medicaid.

“They have no idea the problems that will emerge, that they will not be able to fix. It’s too much too soon. It’s too fast,” Insko said. “I think that they’ve bought into the idea that the private sector can do everything better than the government.”

She is particularly concerned about a $28.8 million Senate cut to end automatic Medicaid enrollment for 11,886 participants in a joint county-state special assistance program. It provides personal care services to a small part of Medicaid’s aged, blind, and disabled population in residential settings such as adult care homes.

The Senate plan would move some of those participants into Obamacare’s federal health insurance exchange.

“It is a fallacy that the Affordable Care Act would cover their needs. The policies that they would get under the Affordable Care Act don’t cover the services that they’re getting under Medicaid. Those policies have co-pays, co-insurance. We can’t do that,” Insko said.

The state now provides Medicaid to anyone who qualifies for the special assistance program even if they make too much money to qualify for Medicaid. The Senate budget ends that automatic Medicaid eligibility.

Two groups comprise the 11,886 participants. Of those, 5,238 no longer would be eligible to receive Medicaid, according to DHHS.

Hise said many in that subset are part of the so-called dual eligible population. They already have private insurance or Medicare coverage. The rest would be eligible for subsidized coverage through Obamacare.

The second group totals 6,648. They would retain Medicaid coverage because they qualify on their own without the special assistance automatic enrollment, Hise said.

None of the special assistance recipients are being left without doctor care and hospitalization, Hise said, and their room and board charges still would be paid at residential facilities. What would be eliminated are premium, optional services North Carolina provides but the federal government does not require.

Those additional services are better than many North Carolinians have in private insurance. They are “much more robust here than you’re dealing with in any other state, and states like South Carolina don’t even offer the program,” Hise said.

Also eliminated would be $3.6 million in the “medically needy” category in the aged, blind, and disabled population. Participants in this group may not earn more than 100 percent of the federal poverty level.

Hise said North Carolina certified 3,342 people as medically needy Medicaid recipients even though they earned too much. That was done by allowing them to pay treatment deductibles and using other checkoffs against their income. Those losing these Medicaid services now will be eligible for plans on the federal exchange.

The House budget does not include the cuts to the special assistance and medically needy programs. It has $300,000 for a study to define a more limited personal care services program. It also includes $1 million to study Medicaid reform.

Shifting North Carolinians into the federal insurance exchange does not mean Senate Republicans now embrace Obamacare, Hise said. Rather, it is a defensive reaction to the Affordable Care Act’s push to force states to expand Medicaid enrollment.

North Carolina’s Medicaid program created the special assistance safety net programs for those denied private insurance due to pre-existing medical conditions, Hise said.

Health plans on the federal exchange prohibit denial of coverage due to pre-existing conditions, so the state no longer needs to provide those extra programs, Hise said.

Dan E. Way (@danway_carolina) is an associate editor of Carolina Journal.