Raleigh, N.C. — Medicaid is one of the biggest and yet most poorly understood government programs. Unanticipated swings in Medicaid spending can soak up money lawmakers would rather use for other purposes, and problems with the program can mean low-income people do without quality health care.
As lawmakers consider different ways of changing Medicaid, here are answers to some of the most common questions about the program.
NC restitching the health safety net Medicaid is a government-funded health insurance program for the poor and disabled. President Lyndon Johnson signed both Medicare, the health insurance program for retirees, and Medicaid into law on July 30, 1965.
"Medicaid at its very basic level is an insurance program for the poor of North Carolina," state Medicaid director Dr. Robin Cummings said. "We cover a number of disadvantaged families. We cover a number of aged, blind and disabled individuals, with the goal being we provide them with health insurance. We provide them health care, and the reason that's important is because, without Medicaid, those people would not have that opportunity to have that health care."
NC Medicaid recipients as of December 2013
*Source: N.C. Division of Medical Assistance
In North Carolina, Medicaid serves low-income parents, children, seniors and people with disabilities. Roughly speaking, Medicaid serves on average about 1.6 million North Carolina residents, although that number can go as high as 2 million. According to the Kaiser Family Foundation, there were 1.78 million Medicaid recipients in the state in April 2014. Put another way, that's about 15 to 20 percent of the 9.75 million people who live in North Carolina.
The income threshold for Medicaid varies by age and condition. Children in families with an income up to 200 percent of the federal poverty level are eligible for Medicaid. Most Medicaid beneficiaries are those whose income falls under the poverty line.
The state serves four basic populations through its Medicaid program. The definitions below are from the state Division of Medical Assistance:
- Aged, blind and disabled: "You may be eligible for Medicaid if you are age 65 or older, blind or disabled. Eligibility for Medicaid is based on your family’s monthly income and the amount of resources you own. To receive Medicaid for the blind or disabled, you must be evaluated by a doctor."
- Infants, children and families: This population includes pregnant women, poor children and the parents of poor children.
- Medicaid for Medicare recipients: This part of the program can help pay Medicare premiums, co-payments and deductibles for low-income senior citizens.
- Medicaid for long-term care: Long-term care programs pay for both elderly people who need nursing care as well as adults and children with long-term disabilities.
Those applying for Medicaid in the state must be both a resident of North Carolina and a U.S. citizen or provide proof of eligible immigration status. Applicants must have a Social Security number or have applied for one. Residents who receive certain types of other public assistance, such as Supplemental Security Income, Work First Family Assistance and special assistance to the blind are automatically eligible.
While children, pregnant women and younger adults make up the bulk of those enrolled in Medicaid, the elderly and long-term disabled generate more of the costs for the program. For example, an associate professor of public policy at Duke University found that, in 2009, 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.
Medicaid coverage varies by state. While 15 broad categories of treatment are considered mandatory, states have the option of adding more services to their program. The list of mandatory services includes:
- Inpatient hospital services
- Outpatient hospital services
- Early and periodic screening, diagnostic and treatment services
- Nursing facility services
- Home health services
- Physician services
- Rural health clinic services
- Federally qualified health center services
- Laboratory and X-ray services
- Family planning services
- Nurse midwife services
- Certified pediatric and family nurse practitioner services
- Freestanding birth center services (when licensed or otherwise recognized by the state)
- Transportation to medical care
- Tobacco cessation counseling for pregnant women
North Carolina, relative to its neighbors in the Southeast, has traditionally offered more optional services. Some of those of additional benefits include, for certain people, dental care, mental health services and prescription drug coverage.
People may apply online or in person through their county social services office. In addition, those who apply for Supplemental Security Income, a cash benefit issued through the Social Security Administration, are automatically applying for Medicaid as well.
For those who qualify, the system works much like health insurance. When a Medicaid patient seeks treatment, the system pays for the individual services provided to the patient.
Q: Something called Community Care of North Carolina is involved in the current Medicaid system. What is that?
Community Care of North Carolina, or CCNC, is a nonprofit that works with Medicaid providers in North Carolina. It helps doctors, especially primary care doctors, keep tabs on patients, making sure they take care of things such as filling prescriptions, arriving at appointments on time and taking other steps to remain healthy. The idea is that CCNC helps patients achieve "better health outcomes" while saving the state money by avoiding more costly treatments for ailments that get out of hand.
This approach is sometimes called a "medical home model." The system, which tracks patients and emphasizes avoiding big costs by spending on health maintenance, brings elements of managed care approaches favored by some health reformers to the state's current fee-for-service system.
Medicaid is jointly funded by the federal and state governments. In North Carolina, the federal government pays roughly two-thirds of the cost of the program, with the state picking up the rest of the tab.
For the fiscal year that begins July 1, 2014, the state's total Medicaid spending is expected to be roughly $14 billion, with state taxpayers picking up about $4 billion of that.
Q: Problems with Medicaid funding seem to be in the news a lot. What are shortfalls and why do they happen?
Medicaid is a huge program relative to the rest of state spending, and budgeting for the program requires some fancy guesswork and estimation. If those projections are off by just a tiny percent, it can mean a big swing in terms raw dollars. For example, in terms of the state's $14 billion total Medicaid budget, if projections are off by 1 percent, the state will end up short $140 million.
It has not helped matters that, over the years, good, real-time data on Medicaid spending and enrollment has been hard to come by. New computer systems known as NCTracks and NC FAST were supposed to help the Division of Medical Assistance keep a closer watch on the rate of Medicaid spending and provide more accurate information on the state's Medicaid population. However, due to problems with those systems, that information hasn't been available, and both lawmakers and administration staffers lack the quality of information they have been promised. Hence, Medicaid budget estimates still involve estimates based on historical data rather than information about what's actually happening.
One other historical problem has to do with the fact that the federal government must approve any changes North Carolina wishes to make to its Medicaid system. Changes to who is eligible for services, what services are provided or how those services are provided can take months, if not years, to win federal approval, if they are approved at all.
When lawmakers change the Medicaid program, they often do so anticipating the change will save money. But they will often bank on those savings coming in before the federal government approves the change. That lag in approval or an outright rejection can cost the state thousands or millions of dollars, depending on the scope of the amendment. A recent example of this happened when Gov. Pat McCrory and Senate budget writers anticipated levying a fee on certain mental health agencies that participate in Medicaid. Although this approach had been tried by other states, the federal Centers for Medicare and Medicaid Services ruled that it was not legal. That created a $60 million hole in the budget McCrory had put forward.
There are other reasons for shortfalls. For example, the federal Affordable Care Act has prompted a lot of people to apply for health insurance through online exchanges. When the exchanges process those applications, they send those who qualify to the Medicaid program. The state still doesn't know how many people will come to the Medicaid program through this "woodworking effect," in which those who previously didn't seek Medicaid coverage come out of the woodwork.
Like any large government program, Medicaid has had various problems over the years. Most recent high-profile issues have involved technology used to manage the program.
For state-funded technology, failure a likely option Patients and regulators have reported backlogs of recipients who have applied for coverage due to problems with NC FAST, a program meant to make applying for a number of government benefits easier.
Doctors, medical device vendors, hospitals and other health care providers have been frustrated with NCTracks, a system meant to both pay service providers and provide lawmakers with data on Medicaid spending.
Even before NC FAST and NCTracks became issues, there have been frequent shortfalls – occasions on which the program spent more than budgeted – in recent years, problems with how certain services such as mental health were delivered, and other problems.
This prompted Gov. Pat McCrory to describe Medicaid as broken both on the campaign trail and after taking office.
There have been questions about what exactly "broken" means. For example, an audit released at the start of 2013 purported to show cost overruns in the Medicaid program. But that audit didn't include information that showed North Carolina's program operated more efficiently than many.
What many lawmakers often mean when they say the system is broken is that its budget is growing quickly, and its costs are unpredictable.
NC leaders still at odds over future of costly Medicaid program "Reform" can mean different things to different people – it's a loaded word that politicians use to connote they are doing something positive. As used in this conversation, "Medicaid reform" is shorthand for remaking the Medicaid system to ensure that it both better serves patients and limits costs to taxpayers.
As of June 20, 2014, three different plans are being discussed:
- The governor has put forward a measure that would use accountable care organizations, or ACOs, to manage patients. Doctors, hospitals and other health care providers form ACOs as a way to better monitor the complete health of their patients. Under the McCrory proposal, ACOs would be rewarded for saving the state money, but taxpayers would still be on the hook for unexpected cost increases.
- A Senate plan would scrap the state's existing Medicaid system, building a new agency from scratch. That new entity would be responsible for recruiting private companies to care for the state's Medicaid population. The Senate plan would have to state move to "full capitation," a wonky word that says those new insurers would be paid a flat fee for each Medicaid patient and assume all of the risk for cost overruns.
- A plan put forward by House leaders embraces the governor's push toward ACOs. While it rejects the creation of a new department, it does move toward full capitation as described in the Senate bill, just more slowly.
Q: How is Medicaid tied up with the Affordable Care Act? What is Medicaid expansion? And what is the ACA "gap?"
The Affordable Care Act, what some people call "Obamacare," aims to prod as many people to get health insurance as possible. Medicaid plays into that story in two significant ways.
For those who do not have employer-based health insurance, the act sets up a system of health care exchanges, marketplaces where individuals can shop for health plans. Those exchanges collect an array of information about applicants, including income. Many of those who have searched for insurance on the exchanges have qualified for Medicaid coverage rather than private health coverage.
As originally drafted, the Affordable Care Act would have required states to extend their Medicaid coverage to all people who earn up to 133 percent of the federal poverty level. Those who earn more than 133 percent of poverty qualify for price subsidies for private insurance coverage.
However, the U.S. Supreme Court struck down the requirements that states expand Medicaid, saying it was up to each individual state legislature. North Carolina decided not to expand its Medicaid system.
That leaves a gap between those families poor enough to qualify for Medicaid – and most childless adults who do not qualify at all – and those who earn enough to qualify for private insurance subsidies. In North Carolina, 318,710 people fall into this coverage gap.
Those in favor of expanding Medicaid in North Carolina argue that, by insuring more people, the state would both improve the overall health of the population and save the state money.
"Providing health insurance coverage will help people gain access to the care they need, which can help improve health outcomes. Because of the high federal match rate, the offsets and the new tax revenues, the state would likely experience a net savings of $65.4 million from the Medicaid expansion over the eight-year time period," according to an analysis by the North Carolina Institute for Medicine.
Those savings come because the federal government has agreed to pick up the bulk of the cost for the initial years of Medicaid expansion.
In addition, proponents argue that expanding Medicaid will pour more money into the health sector and support job creation. The IOM report pegged this number at 25,000 new jobs.
Early in 2013, lawmakers passed a measure blocking Medicaid expansion in North Carolina with the support of McCrory.
"Our Medicaid system is broken, and I cannot expand a broken system," McCrory said at the time. "It would be unfair to the taxpayers, unfair to the citizens currently receiving Medicaid and unfair to create a new bureaucracy to implement the system."
Specifically, opponents of expansion said the state would not have been able to handle the influx of hundreds of thousands of new beneficiaries as it struggled to get two new computer systems online and find ways to control cost.
"The original offer that was made by the federal government ... is a bad offer for the state and a bad cost for the state," said Sen. Ralph Hise, R-Mitchell.
Hise said North Carolina would still bear increasing administration costs, and beyond the eighth year of the Affordable Care Act, there's no guarantee that the federal government would continue to take on a super-sized share of the costs for those above the poverty line.
"If the feds were open to a more sustainable future for the state and what they cover and how they cover, I think we'd be very interested," Hise said. "But as long as with the fed it is this take-it-or-leave it offer, the long-term numbers just don't add up."
Conservatives also dispute the claims that Medicaid expansion would lead to job creation.
"An expansion financed by a combination of federal tax hikes, Medicare cuts and state tax or budget changes means that some jobs will be created among providers serving Medicaid patients and other jobs will be lost," wrote John Hood, president of the conservative John Locke Foundation.