News: CJ Exclusives

State gets waiver from D.C. to implement Medicaid managed care

Dr. Mandy Cohen, N.C. secretary of health and human services, speaking at a May 2017 town hall meeting in Greensboro on Medicaid reform. (CJ photo by Dan Way)
Dr. Mandy Cohen, N.C. secretary of health and human services, speaking at a May 2017 town hall meeting in Greensboro on Medicaid reform. (CJ photo by Dan Way)

North Carolina has received federal approval to transition to a cost-saving, whole-health Medicaid managed care system that will take the state out of the day-to-day management of the government insurance program for the elderly, disabled, and poor.

The federal Centers for Medicare and Medicaid Services signed off on a required waiver North Carolina requested to launch a demonstration program to integrate physical health, behavioral health, and pharmacy benefits.

The current system often fails to coordinate care for the state’s 2 million Medicaid recipients. That can create inefficiencies, duplicated services, and higher expenses. The new system is intended to provide more predictable costs.

The N.C. Department of Health and Human Services filed the waiver application in 2017. In a news release Wednesday, Oct. 24, DHHS called the approval “a major milestone in implementing North Carolina’s Medicaid Transformation and in moving the state’s health care system toward further integration and coordination.”

“Our highest priority is the health and well-being of the people we serve,” said DHHS Secretary Mandy Cohen. “Receiving this waiver approval from the federal government will help us continue to build an innovative and whole-person centered system that addresses both medical and non-medical drivers of health.”

“Today’s action is another step in the legislature’s effort to transform our state’s broken and wasteful Medicaid program into a more sustainable, patient-centric model,” Senate leader Phil Berger, R-Rockingham, said in a written statement. “The General Assembly began this process in 2015 and we look forward to working with DHHS as implementation continues.”

The state now will be able to create Tailored Plans to serve people with intellectual/developmental disabilities or higher intensity behavioral health needs. A specialized behavioral health home model to ensure strong care management for those individuals is included, DHHS said.

DHHS can support broader state efforts with greater flexibility to combat the opioid crisis and improve access to substance use treatment in mental health institutions.

The managed care plans can offer an innovative Healthy Opportunities pilot program to improve health and reduce health care costs, according to DHHS. These pilot programs will identify the most cost-effective ways for managed care plans to deliver whole person care and ensure that Medicaid dollars are purchasing value.

Under the existing structure, the state pays for volume of care, rather than focusing on outcome-based treatment.

In 2015, the General Assembly directed the transition of Medicaid from that predominantly fee-for-service structure to managed care.

DHHS said it has solicited extensive feedback from clinicians, beneficiaries, hospitals, counties, health plans, elected officials, advocates, and other stakeholders in developing the components of the 1115 Waiver Demonstration that require CMS approval.

“The process for procurement for the Medicaid program can certainly move forward now” that the federal approval was received, said state Rep. Nelson Dollar, R-Wake, chairman of the House Health, and Health Care Reform committees.

“There are some elements that, as I understand it, will continue to be under discussion, but it’s a significant milestone,” Dollar said. “Now the real challenge comes with the implementation” of the thousands of reform plan elements that will be put in place over the next three years.

“We are pleased that the waiver was approved, and will continue to work with the department to ensure a smooth transition to Medicaid managed care. At the same time, we will be working with the secretary and the General Assembly to ensure the viability of the health-care safety net for all North Carolinians,” said Julie Henry, spokeswoman for North Carolina Healthcare Association whose members include the state’s hospitals.

Commercial managed care companies and health care provider-led entities were invited to submit bids to win service contracts as Prepaid Health Plans. They will receive a flat monthly rate per patient weighted by their required level of care, rather than getting paid for each individual service.

The bids were opened this month and are now under review. Up to four statewide commercial networks and 12 regional provider-led entities will be awarded contracts in February.

The first phase of the Medicaid transition will involve $6 billion in procurement. That is about one-third of the state’s total Medicaid budget, and is the largest purchase in state history.

Documents for the 1115 waiver, including a fact sheet of key components, the original and amended waiver applications, a copy of the approval letter from CMS and other related transformation information, may be found on the NC Medicaid transformation website at