Raleigh, N.C. — Saying North Carolina's Medicaid program is too complex and inconsistent, Gov. Pat McCrory on Wednesday unveiled plans to reform the costly health plan for low-income and disabled state residents.
McCrory said the Partnership for a Healthy North Carolina would provide more comprehensive care, improved customer service and a more predictable cost structure by using private service providers.
"Right now, the system does not treat the whole person. It separates physical health from mental health and even substance abuse," he said. "People can't get better. They can't break the cycle of illness or addiction, and that's costing a lot of money and is not serving patients."
Health and Human Services Secretary Aldona Wos said a system of "comprehensive care entities" would be built statewide by July 2015 to create a single entry point for patients and that information technology and billing systems would be consolidated to better handle administrative costs.
A recent state audit determined that North Carolina spends $180 million more on Medicaid administration than the average of eight other similar-sized states because of "structural flaws" and mismanagement.
Medicaid as a whole has been drowning in red ink in recent years. Lawmakers approved a $206 million bailout last year, and McCrory last month asked state agencies to limit spending so he could shift as much as $262 million to cover another shortfall.
"This is not a budget exercise," Wos said of the reform effort, noting that the ultimate goal isn't to trim Medicaid spending. Still, she said, savings would come from the overhaul.
"We have a system that doesn't meet the needs of the patient, that doesn't meet the needs of the taxpayer," she said.
The state will hold a competitive bidding process for the three or four comprehensive care entities, she said, and they would be paid a set amount per enrollee each month. The organizations would have to absorb any cost overruns.
"It makes the comprehensive care entity ultimately responsible for the outcomes and for managing their own risk," Wos said.
"This is the first step to privatizing Medicaid in North Carolina," said Adam Linker, a policy analyst with the Health Access Coalition in the left-leaning North Carolina Justice Center.
Linker said the state should learn from its past mistake of trying to privatize the mental health system.
"That was a disaster with cost problems, accountability problems and people falling through the cracks," he said.
McCrory said he has already contacted U.S. Health and Human Secretary Kathleen Sebelius about getting approval for the reforms since the federal government pays for the bulk of Medicaid services. Wos also met with more than 20 lawmakers early Wednesday to begin drafting legislation covering the changes.
"We'll take it under serious advisement along with the Senate, and hopefully, we can come to something we can support as well," House Speaker Thom Tillis said.
The governor predicted a bruising battle in the General Assembly, noting some providers and special-interest groups aren't interested in changing the Medicaid system.
The North Carolina Medical Society quickly questioned McCrory's plan.
"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," Robert Seligson, chief executive of the doctors group, said in a statement.
Seligson noted that the public-private Community Care of North Carolina, which coordinates patient care for Medicaid patients with chronic conditions and has a three-year contract with the state, already handles many of the issues McCrory is addressing and won a national award Wednesday for its operations.
CCNC spokesman Paul Mahoney said the organization is a national model for its "proven ability to enhance health care quality while restraining costs."
"We believe we have much to offer our state as it seeks to improve the quality and efficiency of its Medicaid program," Mahoney said in a statement.
Democrats also criticized McCrory, more for his recent decision not to expand Medicaid under the federal Affordable Care Act than for his reform plans.
"The governor’s plan is a small step compared to the opportunity he had earlier this year to expand Medicaid to 500,000 North Carolinians," House Minority Leader Larry Hall said in statement. "Medicaid expansion would have created 25,000 new jobs and protected rural hospitals. It is simply the right thing to do."
"We support a holistic approach to health care, but are we really going to go back to the private managed-care system that failed in the '90s?" Senate Minority Leader Martin Nesbitt said.