The logic behind N.C.’s nascent Medicaid reform plan-I

I am skeptical about the nascent Partnership for a Healthy North Carolina being feasible, but am going to grant the benefit of the doubt and write a series of posts laying out how it could work, along with questions/doubts that I have that supporters could answer to convince me. To be clear, I don’t doubt we need reform, I doubt this can work. I just provide questions and some general logic in this post; later posts will add numbers.

First, here is what I understand to be the big picture goals/parameters of the plan:

  • Provide the current Medicaid benefit package in a manner such that care can be accessed in any of North Carolina’s 100 counties. Reduction of benefits is explicitly not the key goal, while the ability to access the benefit package anywhere in the state is key. The Medicaid benefit package spans pre natal care to dementia care in a Skilled Nursing Facility.
  • Have the benefits delivered by a private entity that will bid for the right to offer this benefit package throughout North Carolina. I think this could be done by a not-for-profit or a for-profit entity. There has been lots of discussion of this point and clarity is needed. Regardless, these entities will be “at risk’ meaning that if there are cost overruns they will lose money; taxpayers will not be on the hook for overruns.
  • The key aspect of the plan is that the private entities will compete for the business of Medicaid beneficiaries, presumably via developing superior networks of services (benefits are uniform). The notion is that price will do down, while quality will go up, due to the private entities competing for the business of Medicaid beneficiaries.
  • I have heard it said there will be 3-4 choices of entities offered, each meeting the stipulations above.
  • A key goal is the integration of benefits, with special mention of problems with the mental health/substance abuse parts of the system. A key aspiration is to treat “the whole person” in the reform.

I will work through several more bulleted thoughts and points. Again, if I am wrong somewhere about what is intended, let me know. I am doing the best I can to integrate this overview with public statements that have been made.

  • What will the capitalization requirements be for these entities? It will require substantial capitalization (money in the bank) for an entity to be responsible for delivering the full Medicaid benefit package statewide. Presumably the Department of Insurance will have to ensure compliance?
  • Will this be an insurance-only model? For example, Blue Cross Blue Shield N.C. is by far the largest insurer in North Carolina and would be an obvious entity. This model would be they as insurance company that has created a virtual organization (insurance plus delivery system) via a system of contracts stipulating how much they would pay providers (doctors, hospitals, nursing homes, etc.).
  • Could the The State Employees Health Plan be an entity? They probably have the closest thing to the geographical and clinical span being discussed in North Carolina? (but they don’t have the long stay Nursing Home part; more on that below)
  • Or would something akin to a Social HMO whereby the insurance and provision function would be joined? In my understanding of this option, providers would be sole-source, meaning they would only deliver services for one entity and not others. I think this precludes this option in the sense that there is no way to provide sole source provision of the full Medicaid benefit statewide. Perhaps a hybrid is imaginable: lets say UNC becomes an ‘entity’ and does a sole source provision arrangement for beneficiaries in some counties, but then has a series of contracts for those in other counties. Is this ok? Can UNC then provide hospital services to another entity under contract?
  • Could CCNC be an entity? I say this mainly because one of the reflexive push backs has been ‘what about Community Care North Carolina (CCNC)?’ I will provide what I think to be the answer. Of course CCNC could be an entity if they (1) obtain the required capitalization; (2) can deliver the full benefit package in all 100 counties. This demonstrates how grand this vision actually is. CCNC is basically an integrated primary care delivery organization for Medicaid and Medicare beneficiaries (and the uninsured). I think of it as managed care for the primary care portion of Medicaid. So, managed care is old news in North Carolina, but the span of what is being discussed in terms of benefits and geography is was is new. CCNC does not now have, but would have to develop to become an entity: (1) hospital contracts; (2) contracts specialized mental health and disability services that they would now refer out to, but which they have not had to arrange payment details or disperse the money; (3) nursing home contracts. etc.
  • For the risk stratification aspect of the plan (goal is to not allow cherry picking of the healthiest beneficiaries), will the goal be to equalize up front, meaning tie more money (per member per month) to a given patients enrollment that will follow them? Or will the approach be to ‘balance out’ adverse selection after the fact? I am not sure what is envisioned.
  • For Nursing Home care, do you envision NHs to become sole source providers to a given entity? Or could all entities involved potentially have a contract in the same NH?  In some areas there may be enough NH supply to imagine a NH becoming a provider for entity 1 only. In others, doing so might ensure empty beds. Will entities seek to negotiate prices in each county in the state? Will they be spot prices, based on supply and demand on a given day, or locked in? I was in a series of NHs last week in an Eastern North Carolina county, and visited 3. 2 had not empty beds, while 1 did have an empty bed. Guess which one you would pick if you needed a transfer that day? If you are a World War II movie buff, trying to bid out skilled nursing care for the long term disabled and/or the dual eligibles seems ‘A Bridge Too Far’. I am open to being convinced.

I will follow up with posts that look closely at who is covered by Medicaid and what that means for reform, as well as the incentives for some of the big players in North Carolina as they decide whether to participate in this nascent Medicaid reform.

About Don Taylor
Professor of Public Policy at Duke University (with appointments in Business, Nursing, Community and Family Medicine, and the Duke Clinical Research Institute). I am one of the founding faculty of the Margolis Center for Health Policy, and currently serve as Chair of Duke's University Priorities Committee (UPC). My research focuses on improving care for persons who are dying, and I am co-PI of a CMMI award in Community Based Palliative Care. I teach both undergrads and grad students at Duke. On twitter @donaldhtaylorjr

5 Responses to The logic behind N.C.’s nascent Medicaid reform plan-I

  1. Pingback: N.C.’s nascent Medicaid reform plan-II-Who is covered by Medicaid? | freeforall

  2. Pingback: N.C.’s nascent Medicaid reform-III: Medicare Advantage as a model? | freeforall

  3. Pingback: N.C.’s nascent Medicaid reform IV: the dual eligibles | freeforall

  4. Pingback: N.C.’s nascent Medicaid reform V: what N.C. organizations could be an ‘entity’? | freeforall

  5. Pingback: North Carolina’s nascent Medicaid reform VII: new advisory panel | freeforall

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