News: CJ Exclusives

McCrory Announces Bold Medicaid Proposal

Plan would move patients to managed care, shifting cost overruns to providers

RALEIGH — Gov. Pat McCrory hopes to inject market-based solutions into the state’s costly Medicaid system, shifting the burden of controlling systemic budget overruns from state taxpayers to managed care contractors that would offer competing statewide plans.

“The Partnership for a Healthy North Carolina is designed to make sure that people are not just getting care, they are getting the right care at the right place at the right time,” McCrory said in announcing the initiative on Wednesday.

“The current system is not structured to serve the best needs of … North Carolina’s young and elderly, the disabled, mentally ill, and those on low-income,” McCrory said.

“While we are currently providing services to these individuals and to families, we are spending a lot of money doing it, and yet the system does not focus on improving the overall results and delivering better health outcomes,” he said.

Much of Medicaid is now under the management of the nonprofit contractor Community Care of North Carolina. Partnership for a Healthy North Carolina, with a rollout target of July 2015, would transform the present system dramatically.

“Comprehensive care entities” would be the managed care contractors chosen through a competitive bidding process. Medicaid recipients could shop and choose from the differing options according to their individual needs.

The new system is designed to save money by reducing administrative costs — North Carolina pays 30 percent more in administration than the national average of other states, McCrory said — and by delivering better health outcomes through proper measurements not in place in the current system.

A mechanism such as the Consumer Price Index would be used to make forecasts more reliable in what is now a $13 billion annual Medicaid budget.

“Our plan is to create a predictable funding system where the money for all Medicaid recipients will actually follow the individual based on their specific needs,” said Health and Human Services Secretary Aldona Wos.

“And, importantly, it makes the comprehensive care entities ultimately responsible for the outcome and for managing their own risk so the taxpayer will no longer be on the hook for all of the overruns,” she said.

McCrory signaled his plans may meet many obstacles. It requires approval from the federal Department of Health and Human Services and the General Assembly. A letter was sent to Washington Wednesday seeking waivers to launch the program.

“We’re going to need the cooperation of hospitals, and Medicaid providers, and other health care providers, many who have been working under the old system for decades,” he said.

“And there are going to be people within these systems who are going to do everything they can to sabotage any reform because they may be comfortable the way the system is working right now,” McCrory said.

Initial reaction from some groups that have enjoyed a good working and financial relationship with the program operated by CCNC was less than enthusiastic.

“Health care is vitally important for all North Carolinians, and we’re interested in learning more about the details of the governor’s proposal,” Robert Seligson, CEO of the North Carolina Medical Society, said in a prepared release.

“However, if the administration’s idea of reform is bringing in out-of-state corporations so they can profit by limiting North Carolina patients’ access to health care and cutting critical medical services to our state’s most vulnerable citizens, that is not change we can support,” Seligson said.

“We have a homegrown, nonprofit, national-award-winning program in CCNC that addresses problems the governor identified and has produced hundreds of millions of dollars in taxpayer savings through coordinating health care,” Seligson said. “We question the wisdom of handing this important function off to Wall Street.”

Don Dalton, vice president of public relations for the North Carolina Hospital Association, said his organization was still analyzing the proposal to determine what its impact would be.

“We still believe involving CCNC is the best bet,” Dalton said.

He said the hospital association submitted a response to a Request for Ihformation sent out by DHHS in February “that builds on the strengths of CCNC and our hospitals being even more engaged with their Medicaid patients to try to get them into medical homes and to expand that concept.”

The CCNC concept is built around medical homes — Medicaid recipients are assigned to a primary care physician who is expected to keep up with their overall health needs so that regular doctors’ visits prevent more costly hospitalizations and trips to emergency rooms.

Some are applauding the new initiative, with some cautions.

“I’m excited,” said Michael Cousins, a Clayton resident who is a nationally recognized expert in evaluating health care outcomes — and one of CCNC’s biggest critics.

Cousins is among a body of national experts who believe support for CCNC is based in part on flawed financial analyses concluding that CCNC has saved taxpayers money.

“There isn’t a tried-and-true recipe for a successful coordinated care delivery model we can pull off the shelf. We’ll need to embed a systematic, test-and-learn, continuous improvement program as part of the implementation,” Cousins said of the new system.

“And the lessons of CCNC are clear — if we don’t measure the outcomes rigorously, we can’t improve them,” Cousins said. “So I’m hopeful the Partnership for a Healthy North Carolina program doesn’t follow in the footsteps of CCNC and instead sets up a rigorously measured, continuous improvement program from the start.”

Wos said common themes among the 160 responses received from the DHHS Request for Information were that Medicaid has “a disjointed [information technology] system,” there is “too much administrative duplication,” and that “a Medicaid system that does not look at the person as a whole was the fundamental problem of our medical community.”

The reform framework “simplifies the system for our providers, who are currently dealing with many different IT systems and many different financial systems,” Wos said.

Under the new system, North Carolina Tracks would be the exclusive information management system for billing and reimbursement. The statewide NCFAST system would be the single system to determine Medicaid eligibility, Wos said.

The comprehensive care entities would give individuals a functional needs assessment and be the single portal to the entire range of services under the new system, including basic care, along with treatment for mental illness, physical or developmental disabilities, and substance abuse.

The current system has multiple points of entry that are not coordinated, causing recipients to bounce from office to office, provider to provider, with little or no information sharing.

Comprehensive care entities would be required to operate statewide and to serve both urban and rural areas.

“That will ultimately prevent cherry-picking [by insurers of the healthiest patients] and it will create more importantly a sustainable model for our future,” Wos said. There would be a higher reimbursement rate for comprehensive care entities with higher levels of more seriously ill Medicaid patients.

The system would include safeguards to ensure the private managed care companies don’t earn high profits by cutting services or provider pay.

“The key to this is a strong contract that dictates the performance of each and every one of the comprehensive care entities,” Wos said.

State Medicaid Director Carol Steckel said all comprehensive care entities would have to offer a basic plan meeting all Medicaid requirements, but could include any extras on top of that they believe will help to control costs and improve outcomes.

She said the state would tap into “the collective wisdom” of the experience in other states to learn how to create strong requests for proposals and contracts to protect the state from “financial hostage holding” of private vendors.

An example of that, Steckel said, would be inclusion of a medical loss ratio component limiting a contractor’s administrative costs to a set percentage.

“The rest has to be returned in medical services or services for recipients,” Steckel said.

“There are enormous numbers of measures that the hospitals, the pharmacies the nursing homes already use as Medicare providers, as private insurance providers, that we’ll use to start tracking” health outcomes, Steckel said.

Satisfying set outcomes will be part of the contracts, she said.

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