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.

About Don Taylor
Professor of Public Policy (with appointments in Business, Nursing, Community and Family Medicine, and the Duke Clinical Research Institute), and Chair of the Academic Council at Duke University . I am one of the founding faculty of the Margolis Center for Health Policy. 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 First Thoughts on N.C. DHHS Medicaid Reform Plan

  1. Pingback: North Carolina could use Sec 1331 of the ACA with the federal exchange | freeforall

  2. Pingback: Incentives for Consolidation v Anti-Trust | freeforall

  3. Pingback: N.C. Senate Budget on Medicaid | freeforall

  4. Pingback: North Carolina Senate Budget on Medicaid

  5. Pingback: Medicaid reform in North Carolina | freeforall

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