House leaders try again on Medicaid reform

Posted June 10, 2015

N.C. health, mental health, Medicaid generic

— State House leaders were on familiar ground Wednesday as they unveiled this year's Medicaid reform proposal.

The plan looks very much like their 2014 proposal, which the Senate refused to consider. The six-page bill, released Tuesday evening, proposes to allow Medicaid to be run by provider-led entities, or PLEs, also known as accountable care organizations. The entities would bid for contracts to manage networks of 30,000 or more Medicaid patients in capitated plans.

The cost per patient would be set by actuaries based on the patient mix the network would serve. The PLE would assume full risk if its cost for service exceeded the actuarial projection.

Under the plan, 90 percent of the state's Medicaid clients would be served by PLEs within five years. The other 10 percent, those with the highest-cost needs, would continue to be managed by the state under traditional fee-for-service coverage.

PLEs would be required to provide primary, emergency and specialist care but would not be required to provide dental care, drug coverage or care for dual-eligible (Medicaid/Medicare) clients.

The plan also would not include behavioral health services already being provided by regional nonprofit managed care organizations, although sponsor Rep. Donny Lambeth, R-Forsyth, expressed optimism that those services could be integrated at a later date.

Co-sponsor Rep. Nelson Dollar, R-Wake, said the plan would capitalize on the state's existing Medicaid and medical infrastructure, including its primary-care "medical home" model and its hospital network.

"Truly, we can build on this foundation a North Carolina solution," Dollar said.

"This plan will provide greater budget certainty and long-term cost savings," he told the House Health Committee. "Very important – this plan will improve long-term health outcomes for our citizens. That’s really where you control costs."

"There’s no one silver bullet," he added. "Anyone trying to sell one, don’t buy that."

PLEs could spend no more than 10 percent of their Medicaid funds on administrative costs. They would have to meet their performance goals within six years. Lambeth said he anticipates many PLEs will compete in overlapping areas, allowing enrollees to choose their network.

"It is not an HMO," Lambeth said. "It is built around patient choices and flexibility."

Changes from 2014

In what appears to be an effort to appeal to Senate leaders, the 2015 proposal includes a few changes from the 2014 version.

While it would still keep Medicaid under the Department of Health and Human Services, it would set up an independent quality assurance board, made up of health care experts, to oversee performance goals, assessment rubrics and rewards and penalties for PLEs. It would also set up a legislative oversight committee for Medicaid, with seven members each from the House and Senate.

Senate leaders have long proposed taking Medicaid out of DHHS and making it an independent entity with a paid board of politically appointed directors. DHHS has fought that proposal, saying it would result in expensive duplication of services and would derail the agency's move toward whole-patient care.

The 2015 plan also keeps the state's existing behavioral care entities separate from the reform and includes a slightly longer timeframe for the transition.

But it does not waiver on one key sticking point: It wouldn't allow commercial for-profit managed care organizations, or MCOs, to bid for the contracts. Senate leaders favor allowing MCOs to bid because they believe they can complete the transition to a capitated plan more quickly, saving the state money sooner.

Rep. Marilyn Avila, R-Wake, argued Tuesday morning that both PLEs and MCOs should be able to compete for the contracts.

"The state’s responsibility is to determine what we need from these organizations, not to prescribe how they are set up," Avila said. “We are prescribing, and our pharmacy degree in the General Assembly is lacking sometimes in the success of our prescriptions. Let people who know what they’re doing come in, rather than saying, 'It’s got to be this way, and it’s the only way it can be.'"

Provider groups have long argued that they will be underbid by the commercial MCOs, which they say will then cut services to make a profit.

Lambeth said the plan doesn't completely shut out MCOs.

"Providers will be free to contract with the commercials [MCOs] if they need certain areas of expertise," he said.

Representatives of the North Carolina Hospital Association, the North Carolina Medical Society, the North Carolina Healthcare Facilities Association and East Carolina Behavioral Health all spoke in favor of the House proposal.

Chip Baggett with the Medical Society called it "a provider-led solution focused not only on cost containment but providing high-quality care."

"It represents the essential framework of where we need to go, and that’s good, and we need to get started," Baggett said.

After two more hours of debate later Wednesday afternoon, the committee voted to approve the bill. Its next stop is House Appropriations, where it could come up as soon as Thursday.


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