NC restitching the health safety net
Posted June 20, 2014
Updated June 23, 2014
Raleigh, N.C. — Even the simplest question doesn't have a simple answer when it comes to Medicaid, the health insurance system for poor and disabled.
"We still can't tell you how many people are enrolled in Medicaid, or which part of Medicaid they are enrolled in," Steve Owen, an analyst with the legislature's nonpartisan Fiscal Research Division staff, told lawmakers last week.
The uncertainty around enrollment, a symptom of problems with two new computer systems designed to process claims and track patients, reflects a broader uncertainty about about funding and function that has dogged Medicaid for much of the past two decades.
A change to how North Carolina manages Medicaid costs has the potential to affect every state resident -- in their tax bills, their insurance premiums and at the hospital admissions desk.
Q&A: Medicaid basics Lawmakers and Gov. Pat McCrory have become so frustrated with annual cost overruns, problems paying providers and uneven treatment of patients that they have made a massive retooling of the system a top priority but are now faced with deciding between two dramatically different options.
That decision, one that will likely be made in the next two weeks, will not just affect the roughly 15 percent of North Carolina residents whose health care is paid for through Medicaid. Every North Carolinian, even if they have never been part of the Medicaid system, will encounter the consequences of the debate's outcome on their tax bills, in their insurance premiums and at the hospital admissions desk.
Big numbers can mean big problems
McCrory described Medicaid as a "broken system" before he took office, and lawmakers have repeatedly blasted the system's managers over the past few years as cost overruns have put a bigger and bigger bite on the state budget.
"After going into my fourth year now of continually wrestling these same issues every year and every year, you're seeing a seeing a Senate that doesn't want to see that same thing in the future," said Sen. Ralph Hise, R-Mitchell, who helps oversee health care spending in the chamber. "We don't want to see the same claims backlog, the same overruns in coming years."
Doctors paint a much different picture of the system.
For state-funded technology, failure a likely option "Over the 30 – almost 37 – years I have been working with Medicaid, I have been very happy with Medicaid," said Dr. David Tayloe, a pediatrician in Goldsboro.
Yes, he said, the system has had problems. Yes, health care providers and those who administer patient benefits have butted heads over the decades. And recent problems with the NCTracks provider payment system have meant large and persistent headaches for his billing staff.
But as the head of Goldsboro Pediatrics, a practice that cares for 1,800 Medicaid patients, Tayloe says the system has worked relatively well, a point that is driven home when he talks to doctors in other states.
"They drool over our Medicaid program," he said.
Doctors elsewhere, he said, envy the input North Carolina physicians have had in building the state- and federally-funded health insurance system here.
That disconnect between those writing the checks for the system and those who provide the care has been a running theme through much of this spring's Medicaid debate at the legislature.
The number of people covered by Medicaid in North Carolina has floated between 1.5 million and 2 million individuals over the past year. By itself, that kind of swing makes costs for the system hard to predict. So, too, does the variety of people who are covered.
North Carolina cannot pick and choose or easily cap whom it covers. If someone meets the eligibility rules laid down by state and federal law, they must receive coverage.
"If I could have one wish for policy makers in the entire state, it would be to understand Medicaid has a lot of different groups. It's like four programs jumbled into one," said Don Taylor, a professor and health care expert at Duke University's Sanford School of Public Policy.
In North Carolina, children and pregnant women make up the bulk of the Medicaid population. But the bulk of the cost in the system is driven by elderly and disabled patients who rely on the system for more than just well-checks, prescriptions and emergency room visits.
In 2009, Taylor points out, aged and disabled residents were only 27 percent of those enrolled in North Carolina's Medicaid program, but they incurred 63 percent of the costs.
Even in the relatively less expensive pediatric arena, Tayloe said, roughly 5 percent of the children incur more than half the costs. Those are children with complex health conditions such as diabetes, cerebral palsy, sickle cell disease and HIV.
One of the reasons that North Carolina's Medicaid system has received plaudits from other states is because the system here does a better job than most of managing those complex cases. Even lawmakers who are drafting the reform proposals say North Carolina's system does well by some measures.
Somewhere close to 80 percent of physicians in the state accept Medicaid patients, a figure above the national average and a sign that the system pays providers, if not well, well enough. The state also provides a number of optional services that aren't mandated by the federal government.
"That lends itself to a state that has operated a very compassionate, a very forward-thinking Medicaid program where care actually meets the patient and where services actually meet those who are in need," Rep. Nelson Dollar, R-Wake, said this week.
The question facing policy makers is how, or whether, to build on those efforts.
Making a bid to control costs
Three of the staffers who work in Tayloe's office every day don't work directly for his practice. Rather, they are part of Community Care of North Carolina, a nonprofit that works with health care providers across the state to manage Medicaid patients.
"We work on behalf of the state to improve the care and cost of the care provided," said Mark Benton, the chief operating officer for CCNC.
Medicaid funding, reform efforts continue to divide House, Senate While in many respects Medicaid works much like the fee-for-service health insurance one might find in the private market – doctors are reimbursed for each procedure or test they perform – CCNC provides care coordination, what some refer to as a "medical home." The CCNC care coordinators in Tayloe's office do things such as follow up with patients from the practice who wind up in the emergency room, ensure that prescriptions are filled and administered correctly and conduct home visits after a patient is discharged from the hospital. The idea is to make sure whatever treatment the practice's 17 pediatricians and eight nurse practitioners providers isn't undone.
The idea of coordinating care and doing things that keep people healthy, rather than simply responding when they fall ill, is the germ at the heart of competing proposals to remake Medicaid into a more predictable cost for state taxpayers.
Next year, roughly $14 billion will flow through the program. Of that, somewhere around $10 billion will be paid by the federal government, with the rest picked up by state taxpayers. In order to set aside enough money to pay the state's share, state health officials need to project how many patients Medicaid will have and what kind of treatment they will need.
Those kinds of predictions are a notoriously tricky business, with even small errors producing huge swings in raw dollar terms. A 1 percent error in Medicaid forecasts means the state will spend $140 million more than anticipated.
To get at that problem, leaders in both the state House and state Senate would move toward "capitation," an industry term that means providers like Tayloe would be paid a flat fee per patient. If providers are able to spend less than than whatever that fee is, they earn a profit. But they take on the risk of having to spend more if a patient's condition is more expensive than projected.
"The notion of both these ideas is to make somebody responsible for the totality of the care provided," Tayloe said. "The idea is that you would both save money and improve the quality."
But the House and Senate would do this in very different ways.
Senators would drive down the number of people eligible for Medicaid, dumping some 6,000 aged, blind and disabled people from the rolls. Their plan would also create a new department to govern the Medicaid program and set up aggressive cost-control targets that would require timely use of huge data sets.
"The Senate budget is trying to clear the decks for outside insurance companies to come in and do managed care," Tayloe said.
In that kind of system, insurers would be responsible for setting the rules for when services are covered, what doctors patients can see and other aspects of care.
McCrory has pushed back on this plan. In an interview Friday, he said his administration has argued for an approach that would be tailored to North Carolina and be led by the state's health care community.
He is not alone.
"The managed care companies usually don't ask us how we would run the program. They just run it," Tayloe said.
Health care providers from the North Carolina Hospital Association to the North Carolina Medical Society, which represents doctors, have panned the Senate proposal. Although reasons for the resistance vary, the overarching theme is a fear that it puts more emphasis on the fiscal bottom line than on quality of care.
As an alternative, providers have backed a pair of similar proposals put forward by McCrory and state House leaders that would build networks of accountable care organizations across the state.
Known as ACOs, these networks are led by physician groups, hospitals and other providers. In some models, they are given financial rewards for controlling costs but share some of the risk for cost overruns with taxpayers. In other models, an ACO would bear all of the risk for the patients under its care.
The accountable care model would build upon the work already done by CCNC and would likely incorporate and expand the role of the nonprofit.
The ACO concept is relatively new, but it is spreading both to the private industry as well as to other government-run health care programs. Cornerstone Health Care in High Point is one of the first practices in the state to organize an ACO for patients in Medicare, the federally run health insurance system of the elderly.
A 2012 Kaiser Family Foundation report was upbeat on the prospects of the ACO model but warned it was not a silver bullet. Early attempts at managed care models, the report said, delivered neither the cost savings nor patient outcomes lawmakers in other states had hoped for.
"This tension between rapid cost containment and delivery reform was one reason that some earlier Medicaid managed care initiatives proved unsuccessful," the report said.
What happens if we don't get it right?
Medicaid, and what the state does with the system, can seem abstract to those who don't rely on the system for coverage or payment.
House Medicaid proposal embraces governor's plan Joann Anderson, president Southeastern Health in Lumberton, came to the legislature recently to drive home the message that what happens in the Medicaid arena affects the health care that everyone in North Carolina receives.
"The Medicaid discussion in this building and in this state is relevant to each one of us," Anderson said. "If we want good health care in our state, Medicaid has to be in the conversation. We all have to be concerned about it. We all have to be concerned about access to care."
About a quarter of all patients who walk through the doors at Southeastern Health are covered by Medicaid. If lawmakers can't ensure the remade Medicaid system provides a steady income, she said, hospitals would be forced to scale back the services they offer. Although Southeastern Health hasn't been forced to consider such a move yet, Anderson said, it's possible hospitals and health systems could shutter high-risk, high-cost programs like OBGYN services or mental health programs.
That's not an abstract idea. Vidant Pungo Hospital faced closure earlier this year in part from sagging revenue associated with government-run health programs.
Hospitals aren't the only providers that could face changes if the reform effort doesn't go well.
Tayloe said his and most other pediatric practices will accept any Medicaid patient who walks through the door. But if it becomes completely unprofitable to work with Medicaid patients, doctors will start limiting how much of their practice is made up of those patients.
"Hopefully, we will never get to that point," he said.
North Carolina isn't completely in control of its own destiny, however.
Even today, changes small and large to the state's Medicaid program must be approved by the Centers for Medicare and Medicaid Services, a federal agency that oversees state Medicaid programs. It typically takes federal officials months, if not years, to sign off on changes.
"At the end of the day, we're not the final judge on that," said Dr. Robin Cummings, North Carolina's Medicaid director.
Among the things that have driven cost overruns in the program, Cummings said, are those delays in getting changes approved. Lawmakers will sometimes draft a budget that anticipates savings made by one particular change to the program, but if the change doesn't get approved, those savings won't materialize.
"Sometimes as they look at it, one phone call that we have may say, 'This looks OK, you can do it.' The very next phone call – and I just experienced this two weeks ago – (will be), 'Well, no, I don't know who told you that, but here's the official interpretation,'" he said. "So, you've got to work through all that."
So, it's safe to say a major overhaul like the proposals pending at the legislature now would get a fair amount of federal scrutiny.
The expansion question
One place where the federal government and North Carolina have not seen eye-to-eye is on the issue of Medicaid expansion.
Under the federal Affordable Care Act, what some people call "Obamacare," the federal government asked states to expand their Medicaid programs to cover more people. That expansion would have been mandatory under the original law, but the U.S. Supreme Court struck down that requirement.
Given the option, North Carolina declined to expand.
"Before I expand the system, I've got to fix the current system," McCrory said at the time.
"I would agree with the governor's assessment in the past that, given Medicaid as it existed then, I don't think it could have tolerated another 500,000 individuals coming into that system," Cummings said.
Whether the state should expand Medicaid now, he said, is a policy question. Neither McCrory's Medicaid reform proposal nor the plans put forward by lawmakers contemplate expansion.
That leaves some 300,000 to 500,000 North Carolina residents in an awkward spot due to how the federal health care law was drafted. Most are part of families that make too much money to qualify for Medicaid but too little to receive federal subsidies to help buy insurance plans on health care exchanges set up under the law. Childless adults, most of who don't qualify for Medicaid coverage at all in North Carolina, are also part of that number.
Nicole White, 42, of Raleigh, is one of those folks in the gap. She works more than 30 hours a week at Bojangles' but is still considered a part-time worker, so she does not qualify for benefits. She hasn't had a physical or other preventive care in years, since most of her income goes to food and rent.
If she had the option, White said, she would like to have insurance.
"Until then, if I have a problem, I go to the emergency room and let the bills roll in," she said.
Patients like White are a problem for hospitals, the state and even those who carry private insurance.
"There is cost shifting," said Anderson of Southeastern Health, describing a practice in which those who are able to pay for medical services are charged more to compensate for those who can't pay the bills.
Medicaid expansion, she noted, was supposed to compensate hospitals like hers for the loss of other federal payments that helped cover indigent care.
"We're seeing those reductions, but we're not seeing the other side of that," Anderson said. "We still have a lot of people uncovered."
The patients in this Medicaid gap, as well as the problems and uncertainty surrounding those with Medicaid coverage, are two sides of the same thorny coin.
"It would be nice to be paid for the services that are being provided. There's no business that can run on no revenue," she said. "We need our costs covered."