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State proposes experimental health networks for Medicaid patients

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  • Making sense of Medicaid

    Q. What is Medicaid?

    A. The government health insurance plan for poor children and their parents, the elderly poor and disabled people.

    Q. How many North Carolinians are on Medicaid?

    A. 1.7 million people are covered in North Carolina.

    Q. What does Medicaid cost?

    A. In 2013, the program cost $12.4 billion in North Carolina. The state pays about a third of the cost, and the federal government pays the rest.

    Q. What was the managed-care concept floating around?

    A. To have three statewide managed-care organizations that would be responsible for health, mental health and dental services. The state’s health care providers did not like that idea because it would have brought out-of-state, for-profit insurance companies in to manage Medicaid. The companies would have been given a set amount of Medicaid dollars and would have had to make their profit by providing services at a cost below that amount.

    Q. What is the accountable care organization concept?

    A. Accountable care organizations are networks of health care providers that are given a target amount of money to spend on their patients. If they keep the cost of care below that amount while showing that they are properly caring for patients, the network keeps some of the savings. If the network spends more than projected, it is responsible for covering part of the cost. Accountable care organizations could be run by a hospital system or large medical practice. Under the proposal, dentists would not have to join an accountable care network.

    Q. What’s next?

    A. DHHS will provide a detailed plan to the Medicaid advisory committee before sending it to the legislature next month. The plan could be taken up by lawmakers in the short session, which starts in May.



RALEIGH State officials rolled out a plan Wednesday for changes in the state Medicaid program that are a huge step away from the managed-care proposal Gov. Pat McCrory and top state Department of Health and Human Services officials pitched last year.

The new proposal avoids a fight with doctors, hospitals and other health care providers over the future of the $13 billion government health insurance program that covers about 1.7 million poor children and their parents, elderly people and disabled people.

McCrory wants changes in Medicaid to make costs more predictable. Miscalculations in the state Medicaid budget have frequently sent legislators, DHHS and the governor’s office scrambling to find money to cover overruns.

Instead of pursuing managed care, DHHS proposes that hospitals, doctors and clinics form networks called accountable care organizations, an option that state health care groups publicly supported. Health care providers objected to the prospect of national managed-care companies coming into the state and profiting from the Medicaid program.

Under the new proposal, North Carolina health care providers would be able to control the accountable care networks, and the state’s care coordination program for Medicaid patients called Community Care of North Carolina could be preserved.

“I do think this is a historic day of a sort,” said Rep. Nelson Dollar, a Cary Republican and chief budget writer in the House. “They’re moving in an innovative way that doesn’t bring in insurance companies or other entities. That may work in some areas, but it’s not suited to where we are in North Carolina or where we want to be.”

DHHS Secretary Aldona Wos told an advisory group Wednesday that the plan is a realistic and achievable compromise. Some will criticize it as not strong enough, not quick enough and not forceful enough, Wos said, while others will say it’s too quick, too much and too intrusive.

“But make no mistake with this compromise,” she said. “This compromise is good policy for North Carolina. It is a vast improvement on how we deliver Medicaid in our state.”

Seeing savings may take years

McCrory has pinned offering a broad plan for teacher raises to controlling Medicaid costs. But any savings from the new Medicaid plan could be years away. The legislature and the federal government have to approve the plan. Under the DHHS timeline, the accountable care networks wouldn’t start signing up health care providers until next year.

Accountable care organizations are being promoted nationally for Medicare, the government health insurance for the elderly. But the networks are rarer for Medicaid programs, and they don’t have a long track record.

Accountable care organizations “are relatively new in the scheme of things,” said Bob Atlas, a consultant the state hired to work on the plan. “There’s not a great deal of experience.”

Under the proposal, doctors and hospitals would continue to be paid as they are now, by billing for individual services. But the networks would be able to keep some of the savings if they keep costs below projections while showing that they are properly caring for patients. If an accountable care organization spends more than projected, it would be responsible for covering part of the cost. Most providers aren’t currently held to government spending targets.

Patients may not immediately see any difference, but eventually, health care could be more efficient and easier to obtain.

Mental health separate

There would still be a separate Medicaid system for mental health patients. Local government offices would continue to provide Medicaid patients with mental health care under a managed-care system, where they get a set amount of money to pay for treatment. State officials said mental health and physical health would be better integrated than they are now, but questions arose about coordination and running two payment systems side by side.

“Without care coordination, we’re not going to get the benefits from the dollar savings,” said Peggy Terhune, CEO of Monarch, a mental health services provider.

Health care groups said they supported the proposal.

“It’s one of the best provider-led models that we can think of right now,” said Cody Hand, a vice president at the N.C. Hospital Association. “Before we do anything else, we should give this a try.”

N.C. Medical Society CEO Robert Seligson, who delivered a harsh assessment of the managed-care proposal last year, likes the new plan much better.

“The proposal offered today by the Governor adopts new and innovative ideas that have great potential to reform Medicaid in a way that can have positive impact throughout our healthcare system,” he said in a statement. “We applaud the Governor’s willingness to embrace new approaches to Medicaid reform and believe these changes, rather than the traditional managed care models of the past, are in the best interest of all North Carolinians.”

Bonner: 919-829-4821; Twitter: @Lynn_Bonner
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