About 1.8 million North Carolinians receive Medicaid benefits, with federal and state taxpayers contributing more than $14 billion a year to the program. Now North Carolina and other states are trying to figure out how to ensure quality care and outcomes, while reducing costs. Katherine Restrepo, John Locke Foundation Health and Human Services Policy Analyst, recommends transforming Medicaid into a consumer-driven model. Restrepo discussed the issue with Donna Martinez for Carolina Journal Radio. (Click here to find a station near you or to learn about the weekly CJ Radio podcast.)
Martinez: 1.8 million people in North Carolina — We’re a state of 9 million-plus. That’s an awful lot of people who are enrolled in this program.
Restrepo: That’s right. Well, the problem is that, as more and more people are enrolled on Medicaid, our taxpayer dollars continue to go up to pay for all of these people. It’s not necessarily a problem to pay for people who really need medical assistance, but the problem is that there’s only one organization, through Medicaid, that pays for, that supplies these benefits for Medicaid beneficiaries.
And because of that, there’s no accountability. There’s no competition to remain fiscally afloat, to rein in Medicaid costs, and to actually ensure positive health outcomes are being achieved. So the biggest thing is to switch from just one managed care organization that offers benefits to patients.
Martinez: We’re talking about Community Care here?
Restrepo: Yes, that is known as Community Care of North Carolina. That is North Carolina’s one and only managed care organization — and instead, to have multiple managed care entities, also known as comprehensive care entities.
Martinez: Let’s talk a little bit about the money, because I used the number $14 billion. That’s astronomical. Explain where that comes from.
Restrepo: Medicaid is a joint program, so it’s funded jointly by the state and federal taxpayer dollars. So, about two-thirds actually of North Carolina’s Medicaid program is funded by the federal government. Each year the budget exceeds its appropriated amount for Medicaid. The flaw to the Medicaid system is in large part due to the open-ended federal match rate.
And so, in other words, the federal match rate is the amount that the federal government offers to the state to fund Medicaid. The poorer the state, in other words, the more federal money it receives. And because there’s no fiscal responsibility, states just spend, spend, spend, and then they expect to be bailed out by federal dollars each year.
Martinez: Now earlier this year we found out here in North Carolina, through a state audit and some investigation by the McCrory administration, that our program in North Carolina has a number of problems. Just briefly explain what those problems are.
Restrepo: I think there’s definitely overutilization of services, because there’s not responsibility in the patients’ hands. It’s an entitlement program, so it’s like an open buffet. They can go to the doctor whenever they want. They can get prescriptions whenever they want, without any sense of fiscal responsibility. So that’s what drives up our Medicaid budget every year.
Martinez: So there have been cost overruns in this program.
Restrepo: Absolutely — hundreds of millions of dollars of cost overruns.
Martinez: Evidently there are some problems also administratively, just with administering the program itself.
Restrepo: Right. Yes. And so, with Gov. [Pat] McCrory’s plan, the Partnership for a Healthy North Carolina, there’s going to be one financial system for reimbursement, so it will be more of a smooth transition for provider payments and processing of claims for Medicaid beneficiaries.
Martinez: Based on what you’ve said, it’s very clear that we need to do something to reform our system. You are endorsing a consumer-driven model. Let’s talk a little bit about what the governor has proposed. Is he on the right track or not?
Restrepo: Yes, he definitely is on the right track because, like I mentioned earlier, instead of just having one managed care organization that offers benefits to Medicaid patients — Community Care of North Carolina — there’s going to be competitive contracting where three or four managed care organizations will compete to gain consumers — in this case Medicaid beneficiaries. And so when you compete to gain consumers, it’s inevitable that you’re going to offer lower rates and provide better-quality services to ensure positive health outcomes.
Martinez: Has the governor put together his plan based on a consumer-driven model like you’re recommending?
Restrepo: Absolutely, because the three principles of consumer-driven Medicaid [are] patient choice, competition among the different managed care entities, and fiscal responsibility. All of these managed care entities, or the comprehensive care entities in Gov. McCrory’s plan, will have to remain fiscally afloat. They’re going to have to cover any cost overruns themselves rather than [use] our taxpayer dollars.
Martinez: Katherine, North Carolina is certainly not the only state that’s trying to deal with the challenge of Medicaid, and a few other states have been doing some things to reform their systems. You’ve been analyzing them to find out best practices basically.
Restrepo: Yes.
Martinez: Let’s talk about what you found. You’ve been looking at Indiana. What have they done?
Restrepo: Well, what I love about Indiana is that they really emphasize patient responsibility instead of just the regular, standard Medicaid open-buffet approach for receiving services and benefits. So, in other words, Indiana runs as a state-run health savings account, its Medicaid program. And so based on the health status of each patient, they’re given an allotted amount of money into a personal savings account for health care purposes.
And so they can use that as out-of-pocket expenses for doctor visits, prescription drugs, anything — any medical necessities. That promotes patient discretion for what they’re paying for and reins in cost.
Martinez: It sounds as if in Indiana, the patient is much more involved in deciding, “Do I really need to see a doctor for my sniffles, or is that something that I can just maybe purchase an over-the-counter medication for?” Just more involvement in their own care.
Restrepo: Absolutely, yes. It promotes responsibility, personal responsibility on their part, because as much as providers have to be involved for caring for Medicaid, beneficiaries should be just as responsible as well, to really make the system work.
Martinez: What has been happening in the state of Florida? How have they approached their reform?
Restrepo: Florida is really a pro-patient choice approach, where there are 13 different health plans that beneficiaries may be able to choose from, with up to 31 different customized benefits within each health plan. So these beneficiaries are also able to vote with their feet or change from one health plan to another if they’re not completely satisfied.
And there are also healthy incentives involved as well, like if they go forth with preventative screenings — for breast cancer, annual physicals — they will receive more money into their health savings account as well, and use that for other purposes.
Martinez: Katherine, if you had one recommendation for the members of the legislature and the governor to consider, that you would love to see in any final reform program, what would it be?
Restrepo: Definitely to promote a consumer-driven Medicaid program. It’s as simple as that. I mean, managed care organizations need to learn how to balance a checkbook, effectively utilize taxpayer dollars, and most importantly, increase health outcomes among Medicaid beneficiaries for the long term.