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.

Benefits of health insurance + Indiana Medicaid reform

A few quick thoughts as the N.C. General Assembly gets cranked up for the short session:

  • Austin Frakt has a nice round up discussing the cost-benefit calculus of universal coverage, engaging with my friend Michael Cannon‘s post on the evidence base for universal coverage. You can actually incorporate the ideas in my post over the weekend on reasons to be for universal coverage outside of health effects–and to counter- or in-favor arguments for it based on liberty–into cost-benefit analysis. It is just that monetizing such ideas is difficult. However, the most important thing about cost-benefit analysis is the attempt to have a comprehensive enumeration of the costs and the benefits, even if the precise measurement of them is difficult.
  • And I think looking carefully at the costs and benefits of how we spend money to expand coverage is more important than I did 19 years ago, but a technocratic solution may not exist (though check out this comment to this post in samefacts.com). It is first and foremost a values/moral discussion. And of course someone could be opposed to the ACA for a variety of reasons and support some sort of universal coverage. That is just not what the tenor of most of the debate has been like, but I would welcome the shift.
  • Gov Mike Pence writes in today’s WSJ about his proposal to move ahead to expand insurance coverage in Indiana by using Medicaid expansion money in a non-traditional means. There are now emerging  a series of expansion approaches outside of simple Medicaid expansion that are being undertaken by states whose political leaders are opposed to Obamacare. My suggestion to jump start comprehensive, state-based reform is here. I wish North Carolina’s leaders would come up with something that they are for in relation to health reform. Our elected leaders seem to be doing nothing, and our state is getting passed by. update: here is a good explainer of Gov. Pence’s proposal.

Duke/UNC student proposal on Medicaid

“A New Health Reform Framework for North Carolina: Medicaid Reform in Our State” (pdf) is the final product that flowed out of the final paper that graduate students from Duke and UNC turned in for a class that I taught in Fall 2013 entitled “The Future of Medicaid in North Carolina.”

The short version of their recommendation:

  • Expand Medicaid from 0-100% of federal poverty and leverage the infrastructure of Community Care North Carolina;
  • Expand from 100-138% of poverty via “private expansion” meaning using Medicaid expansion funds to pay private insurance premiums in exchanges

The report offers many suggestions regarding health system reform in North Carolina as well, that I won’t detail in this post.

It is safe to say that the students who were attracted to this course were reflexively for the Medicaid expansion, and in many ways “didn’t get” how the state of North Carolina wasn’t undertaking the Medicaid expansion as part of the ACA. Most of them are not from North Carolina, and only came here to study. I tried to push them hard over the course of the semester to take seriously the opposition. They mostly still don’t get the opposition or think it is primarily based on opposition to President Obama, but they wrestled mightily to try and understand the perspective of opponents’, and to fashion what they understand to be a plausible way forward that they believe has given some ground.

I should note that these students did independent cost projections, and considered issues of crowd out and woodwork effects. This report represents thousands of a dollars worth of effort at any sort of market rate, especially that done after the final product turned in for the class.

In the spirit of inquiry, I invite my fellow North Carolinians are opposed to expansion, to come wrestle and reason together with these students in their nuanced pages.

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.

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.