News: CJ Exclusives

State Budget Sets McCrory’s Medicaid Reforms in Motion

Governor and DHHS can start seeking waivers from federal mandates

The new state budget includes a provision creating an advisory panel to rewrite the way the state delivers Medicaid services. It’s part of the Partnership for a Healthy North Carolina reforms championed by the McCrory administration. The budget adds more than $1 billion to Medicaid spending to cover what legislative leaders called cost overruns.

The additional spending also accounts for mandates from the federal government as the Affordable Care Act, aka Obamacare, takes effect. One mandate is the so-called woodwork effect. Thousands of residents eligible for Medicaid who never enrolled now will sign up because of the mandate for individual insurance coverage. Another is the transfer of 51,000 participants from Health Choice, the subsidized program for low-income children, to Medicaid.

The Medicaid Reform Advisory Group would comprise one member of the House of Representatives, one senator, and three additional appointees, including the chairman, named by Gov. Pat McCrory. The state Department of Health and Human Services would provide support staff.

The panel’s final report must be submitted to the General Assembly for legislative approval no later than March 17, 2014, before it is sent to Washington to seek federal waivers that would set the reforms in motion.

The advisory panel is charged with meeting three overarching reform pillars McCrory established for the Partnership for a Healthy North Carolina, which would replace what the governor and Health and Human Services Secretary Aldona Wos frequently have called a broken Medicaid system.

The pillars are stability and predictability in budgeting, increasing the ease and efficiency of navigating the system by providers, and providing whole care for the patient by uniting physical and behavioral health treatment.

In addition, 11 components are mandated for inclusion in the advisory panel’s report to the General Assembly.

Several of those include defining methodologies used to increase efficiency and reduce cost growth. DHHS also must detail how any pilot programs will improve current operations, setting forth the methodologies to show they are scientifically valid.

The report must show how financial risks will be allocated and how private contractors will be held accountable for implementing the plan.

The McCrory administration envisions three or four competing private managed care organizations would deliver Medicaid services, replacing the monopolistic Community Care of North Carolina model now in place.

The advisory panel further is tasked with developing Medicaid State Plan Amendments, Medicaid waivers, amendments to state law, and any other actions necessary to implement the reforms.

“What’s in the budget looks pretty much like what we came up with,” said State Rep. Marilyn Avila, R-Wake, who served on one of the House subcommittees working to negotiate with Senate counterparts to develop the Medicaid budget.

Medicaid reform is vital, and experiences in other states that already have gone that route demonstrate the need, she said.

“If you look at the numbers and the results, you have to say it’s got to be the direction to move in when you look at dollar savings,” Avila said.

“But to me, as important as the dollar savings are the outcomes. You look at the data where they’re doing those comparisons of outcomes for people on Medicaid versus other programs, people who are on self-pay, and things of that nature, and the Medicaid outcomes are really, really bad,” Avila said.

“And when you’re spending that kind of money, you would expect a much higher, positive outcome for your patients,” she said. Better outcomes are “to me, just as critical as the fact that they’re showing savings.”

Jonathan Ingram, director of research for the Florida-based Foundation for Government Accountability, supports the approach North Carolina has laid out. Ingram has co-authored reports on the state’s Medicaid system with Katherine Restrepo, health and human services policy analyst at the John Locke Foundation.

“I think that a lot of the things that the state will end up negotiating with the feds are things that they are going to be considering when they’re negotiating with the [advisory] committee,” Ingram said. “They’re hearing the testimony, they’re doing the things that a committee does, which is building the plan, essentially.”

When the state negotiates with the feds on its state plan and waivers, “dozens of particulars” will be in play, he said.

“And by having that committee there at the beginning, they’re able to sort of settle on those and come up with compelling reasons of here’s why we’re actually doing this,” Ingram said. “They will have a detailed analysis of why they’re doing it this way and that puts them in a better bargaining position.”

The report the advisory panel must submit to the General Assembly “sounds like a typical waiver request you would send to the feds,” Ingram said. It makes sense for lawmakers to review and approve the plan “because then the legislature still gets to be a part of the negotiations, etc., and they’re not just punting the whole issue over to the executive branch.”

There could be downsides to having more people with final say over the plan, Ingram said. The process could evolve and move in unintended ways, “or a few people who might want something special could try to hold up the whole thing in return” for approving their requests.

Ingram said it is good policy to move toward multiple providers offering competing plans as opposed to CCNC, a former state agency that the General Assembly has designated as the sole Medicaid administrator.

Under the CCNC “medical home” model, “Health outcomes are on the decline, costs are well over budget, and costs continue to go up. North Carolina is spending more than any other state in the region on Medicaid per person and the Medicaid costs themselves, total, are growing,” Ingram said.

“You really have to ask the question, If CCNC is so successful, why are you spending so much money and why aren’t your outcomes improving?” he said. The federal government “can’t even use CCNC’s reports because they say they’re not real robust, they’re not scientifically valid” in determining whether a medical home model works.

The budget allocates $100,000 for the state auditor’s office to hire nationally qualified experts to conduct a peer-review-quality study using actual data to determine whether CCNC saves money and improves health outcomes.

“I think that it’s a great idea to allow CCNC to compete for Medicaid patients, Ingram said. “If they really are saving money, if they really are able to increase access, reduce costs, improve health, then they’re going to take a greater share of the market. They’re going to get more patients picking them rather than picking one of the other plans.”

Dan Way is an associate editor of Carolina Journal.