Opinion: Carolina Beat

Medicaid, Competition, and Accountability

RALEIGH — All kinds of deals are made during the legislative session. Whether a distillery can sell unlimited amounts or only one bottle to people taking tours; whether vehicle registration fees should increase 50 percent or 30 percent or at all; whether solar subsidies should be cut off now or extended for one year or two — solutions to complicated problems often entail compromises, concessions, and a little give and take.

One of the biggest deals to expect this session is Medicaid reform. Medicaid is a health insurance program provided by the state and federal governments for low-income citizens, the disabled, and children 18 or younger. Medicaid problems are numerous and complicated, but three major concerns must be addressed — ensuring quality patient care, cost containment, and budget predictability.

It’s a big deal. At stake is $3.8 billion in state funding (17 percent of the state’s General Fund budget), for a program serving almost 20 percent of North Carolina’s population. (Total spending including federal funds is almost $14 billion.)

Slightly more than half of the births in North Carolina are covered by Medicaid, and it is an entitlement program that must be paid for before other needs are met. When cost overruns occur, something else, like roads, schools, or tax relief, cannot be funded.

As far back as at least 2003, cost overruns have posed budget problems for lawmakers. Of the $1.3 billion increase in the new House budget, $400 million is for Medicaid alone. Projected enrollment growth next year is 200,000 new recipients.

Currently, Community Care of North Carolina is the sole primary care case management program for North Carolina’s Medicaid program. There is no competition, patients have no choice in service, and costs and utilization have increased. Medicaid reform should begin with addressing the concerns that arise from having a single, nongovernmental entity with such a large role in the market. (See editor’s note at end of story.)

Patients should be able to choose among several plans, excessive spending should be the responsibility of the health plan administrator, and health outcomes should improve as more tax dollars are invested in the program. That’s not the case right now.

Lawmakers are considering various reforms. Some suggest moving the administration of Medicaid out of the Department of Health and Human Services both to improve the program’s operation and address waste, fraud, and abuse.

Some suggest adopting an Accountable Care Organization model under which providers (hospitals and doctors) would administer the program and be paid for every patient service provided with any savings or cost overruns assumed mostly by taxpayers. Others prefer a managed care organization, operating much like a traditional insurance company, which would receive a flat monthly rate for each patient — allowing higher payments for patients who cost more to treat, like the elderly or those with pre-existing conditions. The MCO would have to absorb any cost overruns.

Medicaid reform negotiations to date have seen the governor and the House leaning toward an ACO model with the Senate preferring an MCO model.

Giving patients multiple plans would ensure better quality of care and drive down costs. But the best deal may well be a hybrid model, allowing ACOs and MCOs to compete for patients. Other states are having success with a hybrid system.

The key is not so much who offers services, but whether Medicaid is patient-centered, provides comprehensive care, gives meaningful choices, caps costs, and allows plenty of competition to ensure quality and drive down costs.

With Medicaid continuing to grow at alarming rates, taxpayers deserve and expect reforms that promise real cost savings. Patients should receive quality health care. Budget overruns should not crowd out other core functions of government. Competitive bidding and competition are the way to go for real reform.

Becki Gray (@beckigray) is vice president for outreach at the John Locke Foundation.

Editor’s note: This story was corrected after initial publication to clarify the role of CCNC in the state’s Medicaid program.