N.C. Hospitals to help finance Medicaid expansion?

North Carolina Gov. Pat McCrory says that he is still exploring options for expanding Medicaid, including having hospitals help finance the 10% of the total cost not covered by the federal government in the out years.

“They would have to have skin in the game to cover the extra 10 percent,” McCrory said.

This comment is the strongest signal I have seen that the Governor is serious about moving ahead, because he has laid down the marker of what the hospitals who so favor expansion will have to give to get it (and they will go along under terms like this).
The simplest mechanism through which the largest hospitals (that are most typically linked to University health care systems) would be via the capping of the North Carolina sales tax exemption granted to Not for Profit organizations in the state. This post from Summer, 2013 notes that around 75% of the value of this tax exemption flowed to hospitals. During the last long session of the North Carolina General Assembly, the hospitals were at odds with the N.C. Chamber over this policy, but the real issue between them was Medicaid expansion. Essentially, they were willing to give up the heretofore unlimited state and local sales tax refund, but only if they got Medicaid expansion in return.
The tax reform passed in 2013 capped the amount of state and local sales tax refund that a Not for Profit organization (hospital, University, small 501 c 3) at $45 Million dollars, which was just above the amount that Duke (combining University and Health System) received in 2014, the biggest in the state (G.S. 105-164.14(b) see page 55).
G.S. 105-164.14(b) – Cap on Refunds for Nonprofit Entities and Hospital Drugs: This subdivision is amended to add “[t]he aggregate annual refund amount allowed an entity under this subsection for a fiscal year may not exceed thirty-one million seven hundred thousand dollars ($31,700,000).” The amount applies to refunds of State tax only. A local aggregate annual cap is added in G.S. 105-467(b) in the amount of thirteen million three hundred thousand dollars ($13,300,000). (Effective July 1, 2014 and applies to purchases made on or after that date; HB 998, s. 3.4.(b), S.L. 13-316.)
So, the General Assembly set a cap in 2013 that didn’t apply to anyone yet. Over time it will start to apply, but there are very few Not for Profit organizations that have more than several hundred thousand dollars of this refund, so dropping the cap well below $45 Million annually will most hit (1) Universities; and (2) large hospitals/health care systems. The 10 or so biggest would essentially pay the way for the rest of the hospitals, and smaller 501 3 c organizations could maintain their state and local sales tax refunds.
Inside baseball for sure, but look for this to be the way that hospitals/health systems and the Universities that own the big ones to be the way they “help pay the state’s cost of Medicaid expansion.”

Stance on Medicaid could cost N.C. $10 Billion

So says a Charlotte Observer/McClatchy analysis that was done in conjunction with Kaiser Family Foundation, the best source of non partisan health policy information around (update: it is actually done with Kaiser Health News, and independent, editorial arm of KFF). They quote me in the story, and here is the plan I put out in January, 2014 to which they refer. Here is a post from last year about the fiscal impacts of States sitting out the Medicaid expansion.

After the 2014 election, the political incentives will begin to align in a way that makes possible a reform plan that will likely include some sort of modified Medicaid expansion in North Carolina.

No Medicaid short session in North Carolina

A few weeks ago, there seemed to be an agreement between the N.C. House and Senate to have a special session on Medicaid reform in late November, 2014. That no longer appears to be the case, unless the Governor called the General Assembly back for a special session, which I believe that he has the ability to do if he so wishes.

I have mixed feelings about this. On the one hand, given all the words that Republicans spilled about Medicaid being messed up, it is astonishing they managed to agree among themselves (they control the House, the Senate and Governorship) about …..nothing. Quite a failure if you take their own words about Medicaid seriously. On the other hand, they didn’t do anything really bad, and there were points during short session that outcome was not inevitable.

Conservatives often say it is good when legislative bodies do nothing. Perhaps that was the best realistic outcome possible for the short legislative session.

Who is covered by Medicaid

Kaiser Family Foundation has a great overview of who is covered by Medicaid, what type of care they need, how much it costs, and how it is financed.


When evaluating any Medicaid reform proposal it is key to get straight how a proposal effects these groups. In the North Carolina Medicaid reform discussions (that are apparently going nowhere fast), some have said they want to move all parts of the program into such arrangements quickly. Generally, I think the largest groups (children + adults constitute three fourths of the beneficiaries) could be moved quickly into managed care because most of their care is acute care (physician, hospital), while I think we need to move more slowly for the elderly and disabled. They are of course the most expensive groups, but that is because they tend to have both acute and long term care needs.

In any event, the most important thing to understand about any Medicaid reform proposal is how it would effect each of these groups.

End of the session Medicaid stuff

The N.C. Senate passed their Medicaid reform last night, and it is virtually identical to what I didn’t like much last week. Things haven’t changed much in terms of the House v the Senate since I wrote this, but they will have to work out some sort of deal over the next week or so on this. They are putting together an omnibus technical correction bill and who knows what ends up in that.

However, sometimes decent things can come about in the middle of the night (did you know that the Medicare hospice benefit and the direct precursor to the current Medicare Advantage program were jammed into TEFRA 1982 at the last minute?). Anyway, let me suggest one thing that might be a good thing to stick in while no one is looking–a technical planning grant under section 1311(a) of the ACA. Regardless of what the honorables decide to do about Medicaid, there will a great need for as much information as possible to guide the development of the new plan, and the ongoing functioning of the health care exchange in our state (~350,000 North Carolinians have private insurance purchased with subsidies).

We initially had such a grant as requested by Governor Perdue, that the Republicans sent back with great fanfare once they took over both Houses of the General Assembly and the Governor’s mansion in January, 2013. We could still get such a grant, but must do so prior to January 1, 2015 (here is sec. 1311(a)(4)(B)*

(B) LIMITATION.—No grant shall be awarded under
this subsection after January 1, 2015.

Republicans can pass anything they want simply by agreeing amongst themselves, but of course that means they also own it a la the Pottery Barn rule. Let me humbly suggest there is some chance that they haven’t thought through their health reform plan as much as they might have, that it will be hard to pull it off if the docs and hospitals are opposed to it, and that it would help us all to have more information and data, and not less.

*Bonus. If you want to impress your friends, the sections in dispute in the court cases this week are sec 1311 and 1321. They are quite short; you can print it out and impress your friends (also sec 1401)

N.C. House v Senate Medicaid proposal

I am not opposed to managed care in Medicaid. In fact, in January 2014, I proposed an approach to both expand insurance coverage and reform Medicaid by using private insurance to cover newly eligible persons via Sec 1331 (Basic Health Plan) of the ACA that would have insurance companies and integrated delivery systems compete for the newly eligible beneificiaries. Down the road, the state could opt to place a large proportion of Medicaid beneficiaires into private insurance.

The move toward capitation throughout the health care system and for payers to insist on improved or at least steady quality per cost is inevitable and generally a necessary and good thing. My problem with the Senate Medicaid proposal is that it is too much, too fast. A few points on the two plans (both of which are quite incomplete because they don’t address expanding insurance coverage, and don’t address other things that I did, like the patient safety/medical malpractice situation and scope of practice laws): Read more of this post

Medicaid Managed Care Across the U.S.

The North Carolina Senate  discussed today a proposal for Medicaid reform that would be the broadest application of managed care in any State nationally. By broad I mean:

  • They want all categories of Medicaid beneficiary (children, adults, aged, blind and disabled–including the dual eligibles) to be a part of managed care
  • Soon: 2016 for those covered by private insurance company plans; 2018 for provider-based plans (think Duke offering a plan for Medicaid beneficiaries in Durham, Granville, Vance and Franklin counties)
  • For the full benefit package, including long term care and specialized services for the long term disabled, behavioral, etc
  • Based on a capitated payment (insurance plans or provider organizations get a fixed amount per month to be responsible for the full benefit package)
  • With the capitation rate set low enough so that North Carolina would spend less on Medicaid than it would under the default system

Actually doing this–putting all Medicaid beneficiaries, under full capitation, for the full benefit package within 2 or 4 years and reducing the state’s Medicaid costs–would amount to the grandest health policy change in U.S. history. And you thought liberals had wild eyed schemes! Read more of this post

Decreasing Medicaid eligibility: reducing or shifting costs?

North Carolina House and Senate Republicans are grinding toward a resolution of their differences in how to proceed with Medicaid reform. The latest from the Senate sounds mostly similar to their past offer (reduce Medicaid eligibility for some aged, blind and disabled beneficiairies, and move to bid out the full Medicaid program to private insurance companies, but allowing provider networks to bid). Hereis is a brief review until today of the many twists and turns since complete Republican control of state government commenced in January 2013.

I will get to the ins and the outs of the emerging plan when it emerges some more, and we hear from the House.

A quick point on the continued insistence of Senate Republicans to reduce eligibility for some aged, blind and disabled recipients–Rose Hoban quotes Senator Harry Brown (R-Jacksonville) in a committee meeting yesterday as follows:

“That is a major concession for us. We think that you eventually have to address eligibility requirements in Medicaid if you want to control costs,” Brown told the committee.


Read more of this post

Others move ahead on Medicaid while N.C. stands still

New Hampshire became the latest state to move ahead with a Medicaid expansion tailored to the preferences of their state (adults with incomes up to 138% of poverty can be covered by their Medicaid managed care program, or they can receive payments to subsidize employer provided health insurance for workers with low wages). New Hampshire has divided government (Dem Governor, divided Legislature), as does Arkansas that has adopted a privatized Medicaid expansion under which federal money will be used to purchase private health insurance for those who would otherwise qualify for Medicaid.

So far 7 states with Republican Governors have managed to figure out a beneficial means of expanding Medicaid in spite of not being a big fan of the President’s, and 3 others: Utah, Pennsylvania, and Indiana are currently negotiating with the federal government to obtain waivers that will allow them to expand under state-specific details/models (that generally include some sort of privatized expansion).

Drew Altman notes that Red States will pay close attention to what other Red States do regarding Medicaid expansion/health reform, and there will likely be a drip-drip-drip move toward expansion/reform proposals that make sense within the politics of a given State, that will eventually give way to a rush of expansions except for perhaps the deep south. In North Carolina, which is totally red in terms of control (Governor, both state houses), but which had the closest margin of any State in the last two Presidential elections (14,000 and about 100,000 votes), the Republican party appears to be dead in the water on Medicaid, unable to negotiate with itself, leaving our state which was once thought of as a leader in the South, relegated to the sidelines to watch others embark on state-specific reform plans.

Medicaid reform in North Carolina

My granddaddy would say the N.C. General Assembly is “on a twisty path” so far as their Medicaid reform goes. 3.5 years after they took over the General Assembly, and 2.5 years after the Republican Party gained total control of the state’s policy apparatus, the details of what they have termed to be absolutely crucial to the future of the state (Medicaid reform) are clear as mud. It has gone something like this.

  • The Governor initially wanted to bid out the entirety of the Medicaid program to managed care companies. The provider community was skeptical.
  • Later, the Governor changed his mind and was in favor of a regionalized, Medicaid ACO system that maintained the role of Community Care North Carolina (CCNC). The provider community seemed ready to get behind this and a way forward was glimpsed.
  • The Senate budget a few weeks ago produced a vague paragraph in their budget that put us back to bidding Medicaid to private managed care companies with a couple of specifics: CCNC was going to be eradicated, and we were going to reduce Medicaid eligibility for the aged, blind and disabled to the lowest level allowed by law.
  • The House decided to move a separate (outside of the budget) Medicaid bill. It went from a 10 page bill in May with CCNC intact and and something similar to the Governor’s preferred regionalized Medicaid ACO approach, to a vague 3 pager.

I have no idea what will happen. I hate to invest lots of blogging on this because it keeps changing and getting less specific over time. If you like conspiracies (and I always suspect incompetence/confusion over a plot–especially when a legislative body or a university is involved) then here is one for you. This vague bill is set up to let the Governor call for Medicaid expansion as key part of reform the week after the 2014 election.

Stick with me.

Sections 1 and 2 are aspirational and outline goals for Medicaid (e.g budget predictability, slow rate of cost growth), and Section 3 states that the Executive Branch (Governor) in the form of the Department of HHS is to lead the movement toward such a system. Sections 8 and 9:

ScreenHunter_01 Jun. 21 12.31

Last year’s budget explicitly banned DHHS from seeking any Medicaid waiver without express permission of the General Assembly. This bill provides an outline and says DHHS work out the details after consulting with stakeholders

ScreenHunter_02 Jun. 21 12.36

Let me promise that all the stakeholders that are involved in health care delivery know that expanding insurance coverage is a part of developing an improved Medicaid program. We could even develop a privatized option, and I have even written a policy outline suggesting how we could do this in a way that increases competition in North Carolina’s exchange. Plenty of other Republican led states have figured out how to move ahead.

Far fetched? Maybe. But, two years from this November, Governor McCrory is going to have to run for re-election in a non-gerrymandered district, unlike the members of the General Assembly. For context, he won by ~500,000 votes, and President Obama lost N.C. by ~100,000 in 2012. I think it is safe to assume that the 400,000 persons who split Obama/McCrory are not so thrilled with the direction of the state. Further, you will never undertake a huge reform without the existing health care system being involved. I have heard several Republicans say that the large systems (like Duke, UNC, etc.) are going to have to step up and do some things they don’t like for the good of the State. I agree.

The same thing could be said to those in charge of our State today. They may be setting up a way to make it happen.


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