N.C. Medicaid Managed Care Proposal

The N.C. Medicaid Managed Care proposal was put out today by the Cooper Administration NCMedicaidManagedCare. Don’t look now, but North Carolina looks to be engaging in bipartisan health care reform. You may recall that the Republican-controlled Legislature dictated that the Republican Governor develop and submit a 1115 Medicaid waiver by June 1, 2016, which he did. I submitted a comment on their plan with Aaron McKethan–some good ideas, some not so good. However, it was mostly an aspirational document and was not really detailed enough to warrant a CMS response.

Governor Roy Cooper’s Secretary of HHS Mandy Cohen (and former COO of CMS under President Obama) was confirmed last Spring and immediately set out to lead a process that is putting the meat on the bones of the Republican Medicaid reform aspirations. She fully committed to moving it ahead, demonstrating that both political parties are searching for common ground on Medicare reform.

It will take both sides to do something this big.

Annual State Costs of Medicaid Expansion

Governor Cooper released his first state budget yesterday, and he continued his call for Medicaid expansion, with the state share to be paid by hospitals that would receive more revenue from expansion. I have a piece in the January-February issue of the North Carolina Medicaid Journal making the case for expansion.

A few folks have asked me about some of the numbers in my piece above, and in particular my estimate of $6.2 Billion in State costs for the 10 years 2017-26 (that would leverage $52.4 Billion more in new federal money over the same period). The two most common questions are whether the State costs (1) account for other savings; and (2) are they the same each year?

The first answer is no, the $6.2 Billion are the estimated state flows required under expansion. This doesn’t answer what source pays them (the Governor suggested hospitals), but is just the magnitude of the flows required. The $4.9 Billion number also highlighted is adjusted for an estimate of uncompensated care savings, so is the net cost.


The answer to the second question is that the flows are not uniform across the years 2017-2026, but start lower and increase over time (with inflation and in growth in population). The table below provides the flows of new State costs with expansion, along side the state costs if we do nothing. The default federal cost of North Carolina’s Medicaid program under no change is around $135 Billion over the same 10 year period.


Note that the estimates I used are based on the Urban Institutes work and projections. There are a variety of such models and they don’t all yield the exact same answer, but provide similar magnitudes. More precise estimates could likely be developed for North Carolina, but at this point I don’t really think such technical questions are the stumbling block to expansion in North Carolina.

The Case for Medicaid Expansion

I have a piece (caseformedicaidexpansion-1-23-17) in the latest issue of the North Carolina Medicaid Journal arguing for Medicaid expansion. I wrote it last fall and thought it was going to be out during the Fall. I updated it briefly earlier this month, by invoking a Meatloaf song. The piece is based on the ACA payment formula and the Urban Institute’s modelling of expansion uptake and costs that they completed late last Summer.

The looming Cassidy-Collins Senate replacement bill actually includes even more advantageous Medicaid expansion terms for States like North Carolina than the ACA had (appears to have 95% FMAP for long run instead of 90%).

If expanding insurance coverage is an important policy goal, there won’t be a more advantageous way for States to achieve that goal than a Medicaid expansion with favorable terms like those included in the ACA, or in the Republican health reform bill that seems to be picking up steam in the U.S. Senate. Much like the ACA, expect the Senate to set the terms for what can actually become law re health reform in Republican controlled Washington.

Fact checking Medicaid expansion

Will Doran, a News and Observer/Politifact reporter has given a Mostly True rating to Governor Cooper’s claim that North Carolina is already paying for Medicaid expansion.

I have long been a supporter of Medicaid expansion as anyone who has read much of what I have written will know. I have a piece coming out in the next issue of the North Carolina Medical Journal that tries to make the case for the expansion (I was written last Fall, with a light update). I consider the case for expansion to be fairly straightforward, but there are many complicated moving parts to get both the coverage and financial numbers straight, and certainly to estimate what I would call derivative effects like jobs.

Just to help identify some of the complexities, I include a copy of my correspondence with Will when he asked my advice on this Fact Check. He wrote me On Jan 11, and I answered later that night while riding in a cab in Washington DC, so its not the most beautiful prose but you get the point (I italicized and bolded my answers here for clarity & I removed Will’s email and phone number):


Some answers below.

From: Doran, Will
Sent: Wednesday, January 11, 2017 7:51 PM
To: Don Taylor
Subject: Media inquiry on Medicaid in North Carolina

Hi Professor Taylor, I’m a reporter for PolitiFact North Carolina and the News & Observer in Raleigh. I’m working on a fact-check about Medicaid and was hoping you could answer what’s probably a stupid question that I have.

North Carolina residents and business pay 2.4 percent of the taxes the U.S. government collects. Is it safe to also say that the state’s taxpayers cover about 2.4 percent of the federal government’s Medicaid expenses? Or is the math much more complicated in reality?

Math is more complex than this. It is possible this is a reasonable estimate, but I am not sure without some work and digging.

Here is a toe dip into the complexity. Social Security payroll taxes are a key source of federal taxes paid in, but they don’t go to Medicaid expansion, and another large tax are Medicare payroll taxes that don’t pay for Medicaid expansion. Medicaid (federal share) is generally funded from general tax revenue (income taxes) and there are a variety of taxes levied by the ACA that could be thought of as paying for the expansion. This post address expansion and taxes, but doesn’t really answer your question. https://donaldhtaylorjr.wordpress.com/2017/01/05/did-gov-cooper-raise-taxes-yesterday/

This link lists the ACA taxes https://www.irs.gov/affordable-care-act/affordable-care-act-tax-provisions1

I also have one question that’s more policy-related, if I may take up a bit more of your time. Gov. Roy Cooper has said Medicaid expansion could create tens of thousands of jobs in North Carolina. But I know other states have not necessarily had that kind of result.

Kentucky, for example, has actually lost health care jobs since accepting the Medicaid expansion – despite a study that said the state would gain jobs. Is there any reason to believe that either scenario (the job gains or the job losses) is more likely to happen in North Carolina if we accept the expansion?

I am not sure. Surely someone must have done a summary of job impacts across states? Why did you pick Kentucky? There is a new model out focused on Michigan that predicts big job impacts….but I have read some criticisms of the study say the effect projected is implausibly large. The methodology of any given study in question is important. This is not really my area, but I will say from policy standpoint that I think job gains are what I would call derivative effects and not the primary intended effect. However, leveraging Billions of dollars into the state that wouldn’t otherwise be spent in the state will either increase jobs and/or wages paid to existing employees and/or expand revenue to health care providers that can be used for other purposes (like have a better bottom line). So, you could have derivative economic benefits even if you didn’t create more jobs. I don’t know this area better in part because I don’t think of jobs as the main point of Medicaid expansion. The key issue is how important is it to expand health insurance coverage? If it is impt, there will never be a more financially advantageous way for the state to do it.

I am sorry the answers are not simpler.


I appreciate any help you can give me about either of these questions. And if a phone call works better for you, my number is xxxxxxx.

Thank you.

Will Doran

PS here’s a news article on the Kentucky situation if you’re not already familiar: http://www.wdrb.com/story/30603715/kentucky-medicaid-expansion-has-not-produced-jobs-beshear-claims


Is there any space for a Medicaid deal in N.C.?

Yesterday, a federal judge issued a 14 day temporary restraining order against the federal government granting the Cooper Administration’s request for Medicaid expansion. I am unsure if there will be more federal judges or if this is the end of the Governor’s request, because 14 days is lots longer than the Obama Administration has left.

In the longer run, is there any space for a Medicaid deal between the Governor and the General Assembly? A few thoughts:

  • North Carolina’s pending Medicaid 1115 waiver will be taken up by the Trump Administration. I doubt a Clinton Administration would have granted it without an expansion of coverage, but who knows what the Trump administration will do on any topic. But, the executive branch implements changes to Medicaid and typically negotiates with CMS about such things. Governor Cooper has obviously shown policy initiative here whether you agree with what he did about expanding Medicaid, or not. And he has nominated a seasoned health policy professional with great experience running CMS as his own Secretary of HHS–you couldn’t ask for a more capable secretary to lead a negotiation with CMS and to roll out a reform. The General Assembly needs the Governor and his team to bring about the reforms they desire for Medicaid.
  • The Governor showed the policy priority that is coverage expansion for Democrats by stating his intent to expand Medicaid as he did, at some risk politically. That may be dead, but the winds of health reform that have blown nationally in the face of Dems politically for the past 6 years are getting ready to change 180 degrees (google loss aversion). There will almost certainly be some maintenance of extra federal monies to states for expanding coverage to low income persons (just look at the GOP Senators asking for this in States that have expanded), and if there is not a maintenance of the private insurance coverage gains that have come via the ACA, there are going to be 500,000 angry North Carolinian’s with subsidized coverage today who no longer have it. To expand coverage, the Governor will need to the General Assembly to finance North Carolina’s share of any such coverage expansion using federal money with presumably fewer strings attached than in the ACA 1.0.
  • I can think of one big idea that could improve the odds of a deal. First, assuming new flexibility for states in Health Reform 2.0, I would suggest the state saying we will work to expand coverage of low income persons and reforming the delivery system while giving the federal government the responsibility for financing Long Term Care in Medicaid, especially for the so-called dual eligibles who are covered by Medicare and Medicaid (much reading on this here). The dual eligibles are the most expensive part of Medicaid and their care wasn’t changed by the ACA, and the pending 1115 waiver doesn’t address dual eligibles. Off-loading financial responsibility for this group while taking more responsibility for low income persons in return for flexibility in how that is done is a trade that makes sense for N.C. because this effort can more directly help us move towards a stable safety net and individual insurance market to run along side our employer based insurance system.

The short, and obvious answer is that the Governor and the General Assembly need each other to achieve their goals. And the people of North Carolina need for them to figure this out. Perhaps the policy space needs to expand to work out a deal that makes sense for everyone.

Gov Cooper Plans to Expand Medicaid

North Carolina’s Governor Roy Cooper announced today that he will expand Medicaid via an “amendment to the State’s Medicaid program” by this Friday, setting up more conflict between him and the North Carolina General Assembly. Several quick thoughts in what I am sure is just the first step (and not the last one) in this process.

  • While running Medicaid is the essence of an Executive Branch State government function (along with education and corrections), the fact that the N.C. General Assembly passed a law in 2013 explicitly not expanding Medicaid sets up another round of conflict between the Governor and the General Assembly over the separation of powers. I have no idea of how that plays out legally.
  • Gov Cooper said he was encouraged by “people in Washington” to take this action which presumably means the Obama Administration, who could in theory act quickly on the request. Perhaps it could be undone soon by the Trump Administration, I don’t know.
  • The emerging details of the Republican “Repeal and Something…” on the ACA in Washington may have provided some of the impetus for the urgency of this action. It looks increasingly doubtful that a clean repeal will be achieved, and with vague notions from Republican leaders in Washington saying they won’t remove coverage from people or states in any replace plan, this move could redefine the baseline against which a future block grant or increased flexibility in expansion monies could be provided.
  • In policy terms, expansion would make North Carolina’s pending 1115 waiver a better policy. Here are some thoughts I have (along with my friend Aaron McKeithan) about the waiver (with me putting on my ‘benefit of the doubt’ hat; maybe Republicans could do the same and we might stumble into a deal?). Here is a past white paper I pitched  that makes the point that expansion helps to pave the way for fundamental reform of the Medicaid program and overall health care system in North Carolina. We need a reform that expands insurance coverage while moving away from fee for service in a manner that increases the value we get for the Medicaid dollar spent in our state. Again, the 1115 and expansion go together, they aren’t in opposition in policy terms.
  • Gov Cooper calls on the hospitals in the State to pay for expansion since they will benefit greatly in financial terms from expansion. There are a variety of details that can achieve such a self financing, and paying for the expansion is the easiest call ever for the hospitals of the State. For a large health system (like Duke or UNC), the magnitudes might be on the order of “we will give you $50 Million a year in return from $500 Million a year” in increased revenue.

I have a paper coming out in the North Carolina Medical Journal soon that makes the case for Medicaid expansion. The Urban Institute has the best projections/numbers on expansion. I will link up my piece and say more about the financing details when the piece comes out, but it is fairly straightforward to develop an expansion plan in which the total cost to North Carolina is self financed by the hospitals and health systems in the State..

Comment on N.C. Medicaid Waiver

Aaron McKethan and I submitted the comment linked below on North Carolina’s pending 1115 Medicaid waiver to CMS. Short version is there are some good ideas to work with, some potential problems, the most expensive part of Medicaid (dual eligibles) are excluded from the waiver and lots of reform work is needed there, and the waiver discussion gives our state a chance to reconsider Medicaid expansion–which would really allow our state to jump start state level health reform. If we committed to transparency and evaluation of the results, we could even become a national leader in this area.

pdf (Taylor_McKethan_NC_Medicaid_Waiver_Comments_7202016)

N.C. Medicaid Reform Waiver Draft

The North Carolina Department of Health and Human Services released the detailed outline of a proposed Sec 1115 Medicaid waiver request yesterday, doing so much earlier than the June 1, 2016 deadline imposed by last year’s budget. I am travelling in England and haven’t given it a read, but will get back with thoughts as I am able.

Rose Hoban is a great source of news on this and all things health policy in North Carolina.

“This is really the end of the beginning; this is the first hurdle,” said Dee Jones, who was hired to lead the new Division of Health Benefits, which will run the new Medicaid program. “There’s a lot of work to be done.”

A Few More Thoughts on N.C. Medicaid Reform

A few more thoughts expanding on my post last week on the Medicaid reform plan the North Carolina General Assembly passed yesterday:

  • North Carolina will have to get a waiver to implement this policy outline. I call it an outline because there are many details to be resolved before the initial waiver is due per the law (June, 2016); the law is 14 pages long, the waiver will be dozens if not hundreds of pages long.
  • The most likely thing to happen to North Carolina’s Medicaid program as a result of this law is nothing. I figure the passed law is 5% of the work, with 95% of the work to be done in the waiver process.
  • If Medicaid expansion is added as a part of the waiver, there is a chance to get a waiver from this policy outline that could be approved. Without expansion, I don’t think it will get approved.
  • The next President’s administration will almost surely judge the waiver. I am hearing the June, 2016 deadline is for a general outline of the waiver, and not the waiver itself to be submitted to CMS. If that is true, there is no way the Obama Administration will decide on this waiver.

North Carolina Medicaid Reform Bill Moves Ahead

The North Carolina General Assembly released what appears to be the compromise version of Medicaid reform that is poised to become law. It is similar to what was released in early August. Several big points.

  • The big idea is to allow private managed care companies to bid for the right to provide Medicaid services on a statewide basis (a bidding process will yield 3 options; full capitation), while also allowing up to 10 “provider led entities” (PLE) to bid to provide services regionally. On PLE, think big health systems and aggregations of same into new organizations here (Duke, UNC, Carolina’s Health Care, etc). The Senate wanted outside managed care companies to run a privatized Medicaid, the House wanted in-state solutions to move toward full capitated care (Sec 4, pp. 2-3). They have set up a test of the two approaches.
  • They have carved out the so-called “dual eligible” population. This makes sense in policy terms, and is something I suggested in my January, 2014 proposal for Medicaid reform along with a Medicaid expansion (they aren’t doing the expansion part). However, the dual-eligibles are also the most expensive part of the Medicaid program, primarily because they are receiving huge amounts of Long Term Care, most typically in nursing homes. The bill calls for study of how to bring dual eligibles into fully capitated plans in the future (Sec 5(11) p. 6). I don’t expect that to ever come about. Let me put it another way: if there are for profit private managed care companies who are (1) going to go fully at risk for widows in nursing homes with Alzheimer’s disease who are dual eligibles at (2) capitation rates that save North Carolina money, I want to make sure I don’t own their stock.
  • Community Care North Carolina (CCNC) gets a reprieve of sorts. They provide primary care case management and are well thought of nationally and in State, but the Senate has been desperate to get rid of them. Here is a post I wrote about 2 years ago on CCNC and statewide bidding for capitated Medicaid. CCNC can continue providing case management, but the bill imposes a contracted rate cut; they are legislating the outcome of a negotiation (Sec 7, p. 7). My hunch is that CCNC in whole, or in part, will turn up as important in some of the provider networks, most likely the homegrown PLE who will bid regionally.
  • Create a Division of Health Benefits to replace the Division of Medical Assistance, and run this program, with all employees exempt from the State Employee Act rules (Sec 13(e)(g)(1), p 10).
  • The sleeper section that I suspect will be revised. There are some very aggressive transparency provisions, that I applaud conceptually, but Sec 13(e)(9) p.10-11 says that the new Division of Health Benefits will put on their website monthly the number of enrollees by county and eligibility category for Medicaid, and the per member per month spending by category of services (itals mine). If they mean the premium the state pays to the company/PLE, then that is straightforward, but that is not what the text says. This sounds like claims based analyses (actual payments for care that the managed care company pays docs, hospitals, etc). The managed care companies will certainly consider this information to be proprietary. Reading this section makes me wonder if the NCGA really understands what they are passing.
  • The biggest fallacy in the entire bill is that the N.C. General Assembly “is not responsible for cost overruns” and so can wash its hands of future mistakes. This is how the entire enterprise has been messaged; if there are cost overruns then the state is not on the hook financially for them, but the managed care companies or or the Provider Led Entities are. That runs afoul of the provision above (if the companies have to eat the losses, why do they have to show the claims?). The impulse of the section above is that the General Assembly knows that cost if not the only important thing, but the care that North Carolinian’s receive is also important. There are some decent ideas in this bill, some bad ones, and most importantly some missed opportunities (not expanding coverage). However, the residual claimant if it all goes bad is the North Carolina General Assembly–they will never be arms length from Medicaid. It, along with education, tax code and corrections, is the fundamental essence of State Government.