Trump administration brings opportunities, risks for NC Medicaid program

North Carolina may be able to move ahead faster with what lawmakers hope will be a cost-saving transformation to the state's Medicaid system under President-elect Donald Trump, but state officials worry federal funding for the program could ratchet down under the Republican administration.

Medicaid is the health insurance program for the poor and disabled jointly run by and paid for by the states and the federal government. It has long been a budget bugbear for North Carolina lawmakers, who in 2015 laid the framework to remake the program into a managed care system. The federal government has to sign off on those changes, a long and laborious process that is still in its beginning stages.

Because Trump and Republicans in Congress want to give states more flexibility, North Carolina could see that process speed up considerably, according to both lawmakers and those who oversee the state's current Medicaid program.

"We're all speculating at this point, but there are certainly indications that the goal is to be more flexible with states, and that may make it easier for us to implement what we want to," said Dave Richard, a deputy secretary in the state Department of Health and Human Services who oversees Medicaid.

The biggest feature of North Carolina's "Medicaid Reform" effort moves away from a fee-for-service model in which doctors and other health providers are paid for each service they deliver, what critics derisively call "sick care." Under the state's proposed system, a certain amount of money would be allotted for each patient every year. Health providers and insurers would make money by holding down health costs and keeping patients healthier but would be at risk for when a patient's conditions become costly.

Right now, North Carolina must pick its way through a warren of regulations and regulatory approvals in order to make that shift. But during the campaign, Trump talked about turning Medicaid into what's known as a block grant program, which would give states lump sums of money to manage within a broad set of rules, rather than expanding or contracting federal Medicaid spending based on the services each individual patient uses.

Lawmakers said a shift to block grants could lead to far less nickel-and-dime arguments over technicalities. For example, during a meeting of the legislature's Medicaid Oversight Committee, lawmakers heard about two instances when technical mistakes led the federal government to ask North Carolina to return millions of dollars.

"The state governments know their people best and can manage the administration of Medicaid far better without federal overhead. States will have the incentives to seek out and eliminate fraud, waste and abuse to preserve our precious resources," Trump said as part of a broad Medicaid policy statement.

Trump health care picks hint at direction

The president-elect's picks Tuesday to run the federal Department of Health and Human Services and the Centers for Medicare and Medicaid Services are people who have broadly advocated for those ideas. Seema Verma, who Trump tapped to run CMS, worked on Medicaid issues for Indiana Gov. Mike Pence, the vice president-elect. She designed Indiana's Medicaid expansion, which took advantage of a feature in the Affordable Care Act, what some call Obamacare, to extend health coverage to more people.

"She has a lot of experience with Medicaid and knows the practical realities of the budget," said Don Taylor, a Duke University professor who specializes in health policy.

Verma, Taylor said, is someone who appears to believe that the federal government could lower its spending on Medicaid by, at least in part, giving states more flexibility in how they run the program.

Trump's pick to head HHS is Georgia Congressman Tom Price, who has talked about turning Medicaid into a block grant program.

"He means it as a way to lower federal costs compared to what they would have been," Taylor said.

Price is known as a staunch Obamacare opponent, similar to legislative leaders in North Carolina. Unlike Indiana, North Carolina did not expand its Medicaid program under the ACA, in part because of uncertainty over long-term costs. North Carolina Health and Human Services Secretary Rick Brajer told a legislative panel Tuesday that U.S. House Speaker Paul Ryan's Medicaid proposals would increases costs for states that had undertaken such expansions and keep states like North Carolina from engaging in new expansions.

However, Brajer warned that little is known for certain.

"There is a Republican majority House, there's a Republican majority Senate and there's an incoming Trump administration, and you'd think they would all be holding hands, (having) a kumbaya moment. It may not work out that way," Brajer said.

Because different states have handled Medicaid expansion and reforms differently, as is the case between Indiana and North Carolina, there could be regional tensions among federal lawmakers about how to move forward.

While state health officials and lawmakers say they welcome more flexibility to forge ahead with Medicaid reform, they worry that, if that flexibility comes through a block grant, it could mean North Carolina state taxpayers will pick up more of the bill for the health care partnership.

"Our experience as a department is, whatever we've been given, a block grant generally gets smaller over time. It doesn't get larger," Brajer said. "We need to be careful with what happens with our Medicaid funds until greater clarity emerges on the direction of these changes."

Rep. Donny Lambeth, R-Forsyth, who was one of the key architects of the 2015 Medicaid overhaul, agreed that, while the state may be able to move more quickly on its Medicaid reform efforts, there could be a long-term tradeoff.

"The framework that we had ... that pushed the risk to providers and allowed them to manage that risk and give them the flexibility, that's somewhat very similar to what Washington is talking about giving the states."

In that respect, Lambeth said he's "encouraged" by what he sees shaping up on the federal level.

"But long-term, five or 10 years down the road, my worry is they set it all in block grants, and now it becomes a really easy budget target where they can say, 'Oh, we're just going to reduce that block grant by X percent,'" he said. "That's a real worry."