By Richard Craver
The state Senate unveiled its latest Medicaid reform initiative Thursday, compromising with the House on a bigger role for provider-led entities, but still insisting on creating a cabinet-level N.C. Medicaid Department.
The version contains other potential sticking points, such as behavioral health managed care organizations (MCOs) playing a subcontractor services role, and the Senate’s pursuit of reducing, then eliminating, state financing for the N.C. Community Care Networks.
Medicaid covers about 1.9 million North Carolinians. There has been a financing gap of almost $2 billion since the start of the 2009-10 fiscal year, though the N.C. Department of Health and Human Services said it has returned $194.5 million in cash-in-hand to the state General Fund at the end of the last two fiscal years.
The Senate version of House Bill 372 was given a favorable recommendation by the Health Care committee. It now goes to the Appropriations committee for review, which will meet at 3 p.m. Monday. It is likely to be recommended for a vote on the Senate floor that evening.
“We have worked hard to find common ground between the governor, House and Senate in our efforts to achieve budget predictability and sustainability, ensure administrative ease and efficiency for health care providers and foster better health outcomes,” said the co-chairmen of the Senate Health Care committee, Ralph Hise, R-Mitchell; Louis Pate, R-Wayne; and Tommy Tucker, R-Union, in a statement.
Medicaid reform is one of the biggest sticking points between state Republican leaders and Gov. Pat McCrory, who has said repeatedly he thinks that the program is broken, though some health care advocates dispute that assessment.
The Senate plan would make Medicaid Department employees exempt from the State Personnel Act, “providing greater flexibility to hire highly skilled employees, pay them competitive wages and hold them accountable,” according to a news release. The department would be overseen by a cabinet secretary appointed by the governor and confirmed by the General Assembly. Senators initially wanted to create an independent Medicaid Benefits Authority to oversee the department.
Sponsors of the Senate version remain convinced that the separate Medicaid department is needed given “a long history of problems at the state DHHS spanning several administrations (that) has resulted in major operational and budgetary problems.”
The Senate has set aside $5 million for transition costs and would, as for other state departments, provide annual financing.
Sen. Joyce Krawiec, R-Forsyth, said she expects the Senate to approve its version of House Bill 372.
“I am not certain what, if any, impact the separate Medicaid Department will have on negotiations,” Krawiec said. “My colleagues and I believe that Medicaid could function much more efficiently as a separate department.”
It is not clear whether the Senate’s new willingness to compromise is linked to Wednesday’s resignation announcement of Dr. Aldona Wos as state health secretary.
The House bill, which passed the House by a 105-6 vote June 24, had been stuck in a Senate Ways and Means committee – which rarely meets – since June 25.
Wos opposed removing Medicaid from DHHS. Some analysts have said the Wos’ departure, effective Aug. 17, offers the McCrory administration a fresh start with the General Assembly on Medicaid reform.
“The Senate had a testy relationship with Secretary Wos, so her resignation may have been a precondition for moving ahead with reform,” said Adam Linker, a policy analyst with the left-leaning N.C. Justice Center.
The Senate and the House already agreed on a “whole person” strategy of coordinating physical, behavioral, dental, pharmacy and long-term health services.
The Senate moved in the House’s direction of a hybrid approach that has a role for provider-led entities, accountable-care organizations (ACO) and for-profit insurers. In the House version, although a provider-led entity can contract with a for-profit insurer, those insurers cannot have a majority stake in the group.
The Senate committee co-chairman said the compromise would provide “better budget predictability and sustainability” through a capitated system, where a flat fee is paid to cover all physical, mental and long-term care services for most Medicaid recipients. In the House version, provider-led entities would cover at least 90 percent of Medicaid recipients.
“The current system rewards volume: The more you do, the more you get paid,” said Rep. Donny Lambeth, R-Forsyth, and a key writer of the House bill.
“The new system rewards quality and value.”
Though Hise said such a capitated system reduces over time the risk of cost overruns, he told committee members that provider-led entities are likely to lose money in the short term as they lead patients toward a proactive, preventive care strategy that likely will require more office visits in the short term.
Instead of requiring Medicaid recipients to be enrolled in fully capitated plans within two years, the Senate agreed to the House’s preference of waiting longer, until 12 months after the Centers for Medicare and Medicaid Services approves implementation.
Medicaid beneficiaries will have a choice of three statewide plans, as well as up to 12 regional plans based on where they live within five to eight regions to be established by the proposed department.
The Senate moved closer to the House position by financing behavioral health MCOs longer during a transition to single entities. CenterPoint Human Services is a behavioral health MCO that serves Davie, Forsyth, Rockingham and Stokes counties.
The Senate would have providers – whether not-for-profit, nonprofit or for-profit – subcontract with the remaining behavioral health MCOs for those services. Senate Bill 568 is the first legislative attempt at reducing the number of MCOs, an effort that also has been pursued by DHHS officials.
The bill, which has not progressed since being introduced March 30, would reduce the number of MCOs from nine currently to between four and six by Jan. 1, 2017.
“Sub-contracting with LME/MCOs appears to be mandatory, at least until the end date of the first contract,” said Betty Taylor, executive director of CenterPoint.
“At this point, I do not know the term of the contract the state would be considering. And of course, it is anyone’s guess as to what would legislatively transpire by the end of the first contract.”
The Senate provides $8 million to create a statewide health information exchange “to allow a seamless transfer of patient records between every provider in the state.”
“We hope our House colleagues will agree to this compromise so we can get Medicaid costs under control and focus on other core priorities like education, infrastructure and public safety,” the co-chairmen said in the news release.
Lambeth said the Senate “feels strongly on the value of this department, and it remains one of the points we disagree on. We are well down the road on a model plan for North Carolina and those persons served by this entitlement program.”
Community Care of N.C. is a homegrown, nonprofit series of Medicaid managed-care networks that has significant statewide support among doctors and health care providers, as well as several federal and state lawmakers.
The CCNC networks saved the state almost $1 billion in Medicaid costs between mid-2006 and mid-2010, according to an independent actuary’s report in 2011. CCNC officials had no comment on the latest Senate version.
The Senate budget would discontinue contracts and payments to the network, effective May 1. That represents a financing cut of $64.9 million in fiscal 2016-17.
The N.C. Hospital Association said that although it is pleased that the Senate took the Medicaid reform language out of its state budget plan, “we do not support the current Senate proposal.”
“North Carolina hospitals are committed to working with legislative leaders from both bodies on a final plan for Medicaid reform and encourage them to find common ground around a provider¬‐led approach.”
“We remind our leaders that a successful transition to a capitated system of provider¬-led care must allow health-care providers the certainty of the certificate-of-need law (for new projects) and continued sales tax refunds for nonprofits.”
The NC Medicaid Choice Coalition, which favors a for-profit role in reform, said the Senate version “represents an important step forward in the Medicaid reform effort.”
“The bill offers free market solutions that will help our state control Medicaid spending and improve health outcomes for Medicaid patients.
Importantly, it relies on a hybrid approach that allows commercial managed care plans and provider-led entities to participate in the state Medicaid market on a level playing field.
“This legislation draws on the experience of Medicaid reforms already enacted in 39 states to provide an effective North Carolina solution tailored to the unique needs of our state.”
John Dinan, a political science professor at Wake Forest University, said “if an agreement is to be reached this year, there will likely have to be give and take on both sides.”
“The Senate has long called for a standalone department to administer Medicaid.
“If the House were to agree to such a proposal, this would take care of one of the main outstanding issues and would presumably allow for further deliberation and bargaining whereby Senate leaders would agree to move closer to the preferences of House leaders on one or more other disputed issues concerning Medicaid reform.”