First Thoughts on N.C. DHHS Medicaid Reform Plan

As required by the budget passed last Summer, the North Carolina Department of Health and Human Services issued a Medicaid reform report to the North Carolina General Assembly today, who will presumably take up the topic during the short session that begins in May, 2014. The General Assembly issued the following 3 goals to N.C. DHHS last Summer:

  • The General Assembly directed that reforms made to the Medicaid program shall:
    •Create a predictable and sustainable Medicaid program for North Carolina taxpayers.
    •Increase administrative ease and efficiency for North Carolina Medicaid providers.
    •Provide care for the whole person by uniting physical and behavioral health care.

The big idea of the plan is for Accountable Care Organizations (ACOs) to provide care to Medicaid beneficiaries on an at risk basis (profit if you reduce costs; take a loss if there are overruns). A few highlights, most of which are written fairly generally, as is the report:

  • What an ACOs is has been broadly defined; it can be physicians and other professionals; joint ventures between hospitals and physicians; networks of providers; and safety net organizations such as community health centers, FQHCs, etc. can either participate for form their own ACO. Organizations can propose alternative structures to set up an ACO.
  • The document explicitly notes that CCNC can be a part of an ACO, and in fact, it sounds as if they can be a part of more than 1, as well as noting that CCNC could choose to become an ACO itself. Many have viewed them as being in trouble, but I think they are in the cat bird seat from a primary care network perspective. Of course, they will either need partners, or will have to somehow to be capitalized and contract with hospitals if they “go it alone.” Lots of health policy in the last sentence.
  • the ACO must have a governing board.
  • Insistence on evidence-based practice and some interesting data sharing requirements that could boost research.
  • Minimum capacity size for ACO: 5,000 Medicaid beneficiaries.
  • Program to start July, 2015, with a goal of 40% of ACO-eligible beneficiaries covered by ACOs by June 30, 2016; 80% of beneficiaries by June 30, 2018. Note: the precise definition of ACO eligible Medicaid beneficiaries will be very important. There are some hints, but more details need (below).
  • Most Medicaid beneficiaries are eligible to be covered by an ACO unless they are in some of the smaller waiver programs (family planning, Breast and Cervical Cancer control and Legal Aliens). The explicitly note that they are considering making dual eligibles eligible for Medicaid ACOs, but believe they must be voluntary to the patient. They describe a desire to work with CMS on dual eligible possibilities. I have written tons on this.
  • Benefits carved out of ACOs: mental health/subtance abuse, Long Term Care, Dental, and certain high cost imaging and drug expenditures. This makes sense, especially carving out Nursing Home care.
  • There are caps on profit and loss to ACOs; 15% profit and 5% loss in the first year, rising to 15% profit and 10% loss after 5 years. So, more upside than downside to the ACOs.
  • Lays out a process of identifying needs for Long Term Services and Supports (LTC) in the State. Not sure exactly what this means, but it is important and reform of LTC greatly needed.
  • They have some cost savings estimates that will take me some time to look through.

What next?

  • The General Assembly made no mention of the decision to expand Medicaid under the ACA or not in their charge to N.C. DHHS, who in return doesn’t mention this choice back to the General Assembly. However, it will quickly become a central part of the negotiation between the General Assembly and the health care providers in the State around this plan. The proposed plan is basically inviting the State’s health care delivery system to “step up” and go at substantial risk for caring for Medicaid beneficiaries. And they (providers) are going to increasingly get more aggressive about insisting on expansion of some sort. The framework Don Taylor NC Health Reform Proposal 1 14 14 that I have proposed would work just fine within the structure that DHHS has proposed, and provides a way to have a privatized expansion that would add even more force to the ability of this ACO approach to reform the entire health care system in the State, and provide competition/options in the North Carolina health insurance marketplace.
  • This is going to set off another wave of aggregation/consolidation or accelerate it, whichever way you want to view it. The incentives around this sort of plan are to get as big as possible, I think. At some point, there is likely to arise some anti-trust questions around all of this.

I will blog ad nauseum about this over the next weeks and months.

Duke/UNC grad students put out Medicaid expansion plan

A group of Duke and UNC graduate students have put out a plan for a modified private option Medicaid expansion in North Carolina (traditional Medicaid under 100% FPL, and a buy-in to private insurance from 100%-133%).

I taught these students in a practicum/group based independent study course “The Future of Medicaid in N.C.” last fall in which I put to them the charge that the Medicaid Advisory Commission received. The final product for the class was a document that laid out where they thought Medicaid should go in the State of North Carolina. They have continued to work on their project this semester, and this report represents their updated thinking about what North Carolina should do, including original work they conducted to simulate the costs of expansion. I have given them feedback of course, but it is their work. They are excellent students, and most are moving into the job market this spring. Let me know if you want an intro to them.

NC DHHS “High Level Overview” Medicaid Reform

North Carolina’s Department of Health and Human Services rolled out a “high level overview” of Medicaid reform recommendations to the N.C. Medicaid Advisory Commission this afternoon. The Commission will provide feedback, and then N.C. DHHS makes a proposal to the North Carolina General Assembly by March 17, 2014. A few quick thoughts before I am off to teach (realizing the meeting is still underway):

  • Care will be provided by Medicaid Accountable Care Organizations (ACOs), with the structure of such not being clear, but the goal being movement towards integrated delivery networks being fully at risk to share savings/loses with the State. In early years, the risk to providers is less and walks up over time. Key questions: who can be ACOs? How many will there be per region of the State? Why is Community Care North Carolina not mentioned? There is lots of rhetoric about building upon what now works in North Carolina, but they leave out the most obvious current player in Medicaid in the state.
  • By 2018, 80% of Medicaid beneficiaries are to be covered by Medicaid ACOs. The most important question here is who are the 20% not covered by then? If they are primarily the long term disabled and the dual eligibles, I think this is doable. Keep in mind that over half of the Medicaid beneficiaries in N.C. are children and after adding adults you are up to 75% of the total. I think they are essentially saying they will put all of Medicaid into ACOs that are not dually eligible for Medicare or long term disabled by 2018, and then address long term care separately (see below).
  • They suggest consolidating mental health and intellectual development and disability services into 4 Local Management Entities (LME). Note there are 7 Medicaid regions, so provision of mental health and some of the specialized long term care services would be more broadly organized?….a big issue is integration of this care with Medicaid ACOs; this will be very hard and very important.
  • On Long Term Care, they call for a broad strategic process, and “assessing the viability of a risk-based, managed LTSS delivery model that spans all LTSS services.” They are smart to leave themselves a way out on this…I don’t think a fully at risk approach to this group (dual eligibles) is really possible given the breadth of the long term care needs they have and who they are. However, the conversation they describe about rationalizing the long term care delivery system is worth having. Keep in mind that Medicaid is the default nursing home insurance program in the state and nation and has been so for 40 years. I give them credit for getting straight that Medicaid is not one monolithic program, and separating out the long term care services and supports issue for a separate discussion. This is key to good Medicaid policy.

A good deal of my white paper Don Taylor NC Health Reform Proposal 1 14 14 on health reform in North Carolina is reasonably consistent with this general approach. The missing piece from what N.C. DHHS proposed today is any way to expand insurance coverage in the State. There is a great deal of rhetoric coming out of the meeting already about the “provider community in North Carolina” stepping up to move towards at risk provision of care to the Medicaid population for the good of the State. Fair enough. I suspect that the large integrated delivery systems are ready to go, in part because if they don’t then outside managed care companies will come in and do so. However, I suspect a big part of the discussion from the provider side (writ large) going forward will be that they are ready to step up if the State is ready to expand insurance coverage. That will quickly become the predominant question.

update: revised a bit for clarity.

N.C. Medicaid Reform Advisory Group

The North Carolina Medicaid Reform Advisory Group, created by last Summer’s Budget, will meet on Wed February 26, 2014:

At this meeting, DHHS will share with the advisory group an initial Medicaid reform proposal. The public is invited to observe the presentation and discussion between the advisory group and DHHS.

I have been thinking that the Medicaid Reform Advisory Group would submit a plan, but looking back at the text (see pp. 162-63) of the budget I see that is not the case. DHHS submits the plan, and the Medicaid Reform Advisory Group has been created to advise DHHS:

SECTION 12H.1.(e) Advisory Group. – There is established the North Carolina Medicaid Reform Advisory Group (Advisory Group) in order to advise the Department of Health and Human Services in its development of its detailed plan to reform Medicaid. The Advisory Group shall meet in order to (i) provide stakeholder input in a public forum and (ii) ensure the transparency of the process of developing the reform proposal. The Advisory Group shall meet at the call of the chair.

The meeting next Wednesday is framed as a discussion between DHHS and the Medicaid Reform Advisory Group (that has two sitting members of the General Assembly, and 3 persons appointed by the Governor). Here is the Medicaid Reform web page, with links to info from past meetings. This is the white paper Don Taylor NC Health Reform Proposal 1 14 14 that I put out in January on Medicaid/health reform in North Carolina.

It seems as though the meeting next week will provide a strong signal about the direction and scope of the reform that North Carolina’s executive branch has in mind for this year.

Randomly Assign Medicaid and Study?

My friend and Duke colleague Chris Conover suggests that states caught in the coverage gap due to their decision to not expand Medicaid (people too poor for exchange subsidies, but not eligible for Medicaid; WSJ says ~20-25% of the uninsured in North Carolina fall into this category) should consider a replication of the Oregon Medicaid experiment in which people were randomly assigned to Medicaid. States could then study the results.

There is merit to the idea in a State whose political leadership is uncertain about Medicaid expansion, and especially when some invoke the Oregon study as a reason to not expand Medicaid (I am not going to rehash that debate now). If multiple States undertook such an experiment,it would provide a great deal more evidence about the impact of coverage expansions, particularly given the idiosyncratic attributes of States. If North Carolina did this, we would need to very carefully design the study; for example, the Oregon study actually only included residents of Portland, as Chris notes in his piece, and we would need to make sure we invested enough resources in the study to provide definitive answers. North Carolina would especially need to make sure we could understand how such an experiment worked in both rural and urban areas.

My suggestion that North Carolina expand insurance coverage using a Basic Health Plan under Section 1331 of the ACA could certainly have an experimental component built into it. In fact, North Carolina could seek authority to do a BHP along side a Medicaid waiver, and randomly assign those below 100% of poverty to traditional Medicaid, or the private insurance/provider option that I proposed in the BHP. The comparison would then be to determine if the private coverage option differed from traditional Medicaid in terms of outcomes.

My white paper Don Taylor NC Health Reform Proposal 1 14 14 goes beyond health insurance expansion and calls for a demonstration/test of an alternative medical malpractice and patient safety approach among those newly covered, and efforts to expand the supply of health care providers by lessening regulation and expanding the practice authority of non-physician providers are also included. We should seek comprehensive reform efforts, and not only focus on coverage expansion.

The ACA has quite a lot of flexibility built into it for States, and the Obama administration has shown a willingness to allow States to experiment with different models and approaches. States like North Carolina have tremendous political leverage that we are now wasting. There are many potential approaches and models. North Carolina needs to pick one and move ahead with a coverage expansion that informs overall system reform, and commit to evaluating and learning from the results.

North Carolina Medicaid reform reset

The North Carolina Medicaid Advisory Commission held a public meeting yesterday, that is best described as a reset. The Governor’s initial Medicaid proposal that envisioned 3 or 4 “entities” bidding against one another to deliver the full Medicaid package in all 100 counties is now dead (7 part series on the plan; more).

In its stead appears to be the beginnings of a regional-based approach (map below) that will be messaged around “building upon the strengths of existing North Carolina providers”.

ScreenHunter_01 Dec. 06 15.37

This reset addresses some of the concerns that privatization would entail the state “walking away from exisiting provider organizations now serving the Medicaid” population. However, the figure above noting the “% payments out of region” still points to a desire to have managed care companies go ‘at risk’ for covered lives in defined geographical areas. However, some Republican members of the General Assembly appear to be skeptical (not just the Democrats). They are asking the question: what would out of state managed care/insurance companies add to the State?

A few preliminary thoughts.

  • The Governor’s initial plan outline was unworkable, and it is good that they have moved away from that.
  • The map above divides the State into regions in which large, integrated health systems would have an obvious advantage in delivering care: Carolinas Health Care System in region 6, Vidant (East Carolina University) in region 7. Wake Forest take region 2. Duke and UNC are both in region 3, but UNC has a big presence in region 1 as well.
  • If at least part of the Medicaid population will be put into comprehensive (across the benefit package; more than just primary care) at risk managed care contracts, who has the heft to bid? The obvious in state insurer is Blue Cross/Blue Shield North Carolina, and then I am sure some of the national for profit managed care companies will be interested. The large in-state health systems could contract with insurers, but they actually have the provider brands in the State. Why give that away? My guess is the next weeks and months will see the creation of new, state-based managed care organizations that join the insurance function with the care delivery footprint of these large provider systems to defend the Medicaid market share they now enjoy. They really don’t have much choice.
  • What about Community Care North Carolina, the highly touted primary care delivery network that is the backbone of current Medicaid primary care now? They could contract with all, some, or one of the various managed care companies, insurance companies, or large delivery systems (and presumably this could differ by region of the state). They are certainly at the heart of a “lets go with what works well in North Carolina” message. Earlier this year, some worried that CCNC would be killed. Now they are very much alive.
  • The past 15+years have seen tremendous aggregation of health care providers in North Carolina. If North Carolina goes ahead with an at risk managed care approach to the program, that will just increase the pressures for further aggregation of one type or another (maybe even provider/insurance aggregation), as the big in state care delivery players prepare to fend off the out of state for profit managed care companies.

Stay tuned.

N.C. Medicaid Administrative Costs

The line “Medicaid is broken so we can’t expand it” has been repeated ad nauseum in North Carolina during the past year, with a key claim being that North Carolina spent more than several comparator states on administrative costs. Adam Searing recounts the events of the past year, including factual push back that unfortunately had little political impact.

A recent North Carolina General Assembly Fiscal Staff study shows that not only are the North Carolina Medicaid Program’s administrative costs not higher than those State’s to which they were compared, but are actually lower:

ScreenHunter_01 Nov. 25 13.51

Slide 20 above shows where North Carolina ranks in terms of percentage of program costs going to administration as compared to the states used for comparison in the Spring. The source of the earlier error was that amounts being paid to managed care companies were being to assumed to go 100% toward patient care, when in fact managed care companies used some of that for administrative costs (as they reasonably could be expected to do), and a portion of the money would go to profit (as is reasonable to expect; why else would they being doing it).

Above is an apples-to-apples comparison. The earlier mistake was not one of getting the numbers wrong (from the CMS-64 form). It was a case of the numbers not being very meaningful in the manner they were presented given the rise in managed care across many of the comparator states. As the N.C. Fiscal Staff Study from last week noted:

ScreenHunter_02 Nov. 25 14.01

North Carolina doesn’t have higher than expected administrative costs; they are actually lower than those used for comparison last January. This is not a reason to not expand Medicaid in North Carolina.


ACA redistribution via Medicaid: what it means for future reform

The self imposed redistribution from mostly poor (mostly red) states, to mostly rich (mostly blue) states via the ACA Medicaid expansion is a direct result of the June 2012 Supreme Court ruling that made it voluntary.

That 7-2 court decision, and the subsequent state decisions, mean that the primary liberal/progressive health reform goal of expanding insurance coverage is being thwarted in some of the most needy states. Liberals/progressives have two choices: fight out the state-by-state Medicaid expansion decisions, or seek a health reform deal with conservatives that would be more likely to expand coverage in the non-expanding, poorest states, sooner. The first is not a pleasing outcome, and the second seems like a political impossibility.

This result was likely inevitable given the SCOTUS decision coupled with the re-election of President Obama; as I said in my post the day the decision was released:

…in the Medicaid aspect of the ruling the court identified the penalty of losing all of your states’ Medicaid funding if you don’t undertake the prescribed Medicaid expansion, to be something that the Federal Government could not do because it would be coercive to states. While this may seem to Conservatives a bit like the question “other than that Mrs. Lincoln, how was the play?” in the long run I suspect this precedent will be important going forward in policy debates.

Leaving the Medicaid expansion in place, while allowing states to not undertake the expansion without losing all medicaid funding has set up a fascinating test of ideology v. financial self interest for Conservative states. People’s lives are at stake here and I don’t mean to minimize that, but again, elections are important and I suspect what State politicians plan to do about the Medicaid expansions will be a key question in some states this Fall.

Reihan Salam has persuasively noted that a default insurance option is needed for health reform, motivated at least in part by the difficulties of I agree with him–if I could do just one thing to the ACA, it would be to add such a default option.

However, I have long felt that a political deal on health reform was needed, and such a deal was at the heart of a book I put out in September 2011 that claimed to identify a health reform deal between Democrats and Republicans, that had at its heart replacing the individual mandate with a default insurance option in the form of universal catastrophic health insurance implemented via the Medicare program. My overriding political point in Fall 2011 was that a Super Committee deal that made the SCOTUS case go away could have removed the doomsday outcome for both sides. We didn’t get such a deal, and also got a mixed SCOTUS decision, that has lead directly to an uneven Medicaid expansion.

My proposed deal is not a liberal/progressive dream, but then neither is the uneven Medicaid expansion.

Paradoxically, a SCOTUS ruling that had struck down the individual mandate as unconstitutional and invalidated premium supported private insurance sold in exchanges but that left the Medicaid expansion untouched would have produced what would have seemed like a bigger loss for Democrats at the time, but that would have at least resulted in all persons up to 133% of the poverty level being guaranteed health insurance. From such a base, the parties could fight another day and the red states, especially in the South, could have continued their tradition of saying they hated the federal government (all the way to the bank). But that is not where we are, so where do we go from here?

I think Liberal/Progressive reformers need a health reform deal because of the uneven Medicaid expansion, but we are in a difficult position because we have no control over the the biggest block to a health reform deal: the fact that elected Republicans do not hold any coherent health reform position(s) for which they are willing to vote (old posts here, here, here, here, here, etc)

It takes two sides to make a deal. This doesn’t mean there aren’t conservative intellectuals with reform ideas–Capretta, Moffit, Ponnuru, Roy, Salam, Douthat and others–these are thoughtful people with ideas that I think are reasonable to differing degrees. But whatever I think of them, some amalgamation of their ideas desperately needs to meet the Republican-controlled Commerce Committee in the House of Representatives, ground zero for any actual health reform effort; and then the CBO.

I think that all of these intellectuals realize that the Republican party is the only way for their ideas to reach legislative fruition, and they know that eventually the Party will have to be for something in health reform. And I believe they are quietly working towards making this case within the Republican Party. The entire country, but especially Liberals/Progressives who know that more must be done on health reform, should be rooting for them to succeed.

Update: while I wasn’t attempting an exhaustive list of conservative public intellectuals with reform ideas, I should definitely have included Yuval Levin.

Has the N.C. Medicaid Reform Advisory Group been appointed?

Randall Williams seems to think so. In an op-ed on Medicaid reform in the News and Observer this morning, Dr. Williams who was a member of Governor McCrory’s transition team says:

To decrease costs, the governor has proposed privatizing Medicaid and increasing competition among managed care plans. Currently, a five-person panel – one member selected by the state Senate, one by the House and three by McCrory – is studying the issue. Whatever the panel recommends and the governor and lawmakers decide, health care quality, access and costs are going to be major challenges for North Carolina and our country.

I have written about this Medicaid Reform Advisory group, created by the Budget passed this Summer, which is to provide Medicaid reform options to the General Assembly by March, 2014. At the October 8, 2013 General Assembly hearing looking into the actions of Secretary Wos, this commission had still not been publicly named, at least according to public statements by the Governor’s press office.

Is Dr. Williams correct, that the group has been appointed and is working, yet their identity is unknown to the public, or did he misspeak in the op-ed?

Update, via twitter, WRAL reporter Mark Binker:

No word on the Senate. Update 2: Mark Binker @binker says the Senate Pro-Tems office says that he has not made the appointment yet.

Future of Medicaid Class: Charge & Questions

I am very excited to be teaching a new Masters of Public Policy course this Fall on The Future of Medicaid in North Carolina. The 14 students all have background in health policy, including prior job, coursework and recently completed internships.

The charge to this class is going to begin with the charge that the recently passed North Carolina budget gives to a new Medicaid Reform Advisory Group ( p. 161-62):

SECTION 12H.1.(a) The Department of Health and Human Services, Division of Medical Assistance, (Department), in consultation with the Medicaid Reform Advisory Group created by subsection (e) of this section, shall create a detailed plan for, but not implement, significant reforms to the State’s Medicaid Program that shall accomplish the following:

  • Create a predictable and sustainable Medicaid program for North Carolina taxpayers.
  • Increase administrative ease and efficiency for North Carolina Medicaid providers.
  • Provide care for the whole person by uniting physical and behavioral health care.

The class is going to function as an alternative, Medicaid Reform Advisory Group.

The first order of business when we meet for this first time tomorrow night is to decide if there are any other goals/charges that should be added to the work of the group?

I will be suggesting one more:  identify a means of providing a straightforward means of paying for health care for as many North Carolinians as possible.

Below is a link to a series of questions that I have posed to the group to help them organize themselves into functioning units. This is important work, and it should be fun as well. If you have additional questions they should address, post them in the comments.

Medicaid Practicum Course.Topics.8.26.13


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