Another Medicaid problem. What's new?

by Tom Campbell, Executive Producer and Moderator, NC SPIN, June 12, 2015.

Just when we were beginning to trust that North Carolina’s Medicaid program was better managed and actually spending within its allocated budget we learned the program hasn’t been paying doctors and hospitals what they are owed.

Medicaid has more moving parts than a Swiss watch, making the $14 billion program extremely difficult to manage, but not many months ago Secretary Aldona Wos and leaders within the Department of Health and Human Services assured legislators they had delivered promised services under budgeted amounts and actually showed a slight year-end surplus. Now leaks coming out of our legislature indicate that surplus was a result of not properly paying doctors and hospitals for dual-eligible Medicaid and Medicare recipients for more than two years.

At first the blame was placed on NC Tracks, the computer tracking and payment system, but that is only partially true. DHHS chose to make payments to doctors and hospitals at levels less than federal guidelines allowed and the feds said DHHS must comply. Lawmakers, grappling with crafting a new state budget were annoyed to learn of yet another Medicaid problem and wanted to know how much was owed, both retroactively as well as for future budgets and finally learned costs were estimated to be less than $10 million. But the issue hurt department credibility.

The State Senate has long advocated that Medicaid be removed from DHHS and put under different supervision. Revelations such as this help reinforce their position, however the concept has problems. For starters, the federal government recognizes DHHS as the sole administrator responsible for Medicaid. To seek a change of management would be both time consuming and have no guarantee of approval. Even more problematic is identifying an agency or board to administer the program that could do better.

Not too many years ago we faced a similar situation with our State Health Plan. Legislators grew weary of soaring costs and a large unfunded liability for health benefits to current and retired teachers and state employees. They decided to take over the program and form a board to run it. After a few years and even greater problems they were forced to admit they could do no better than their predecessors and eagerly gave it to the State Treasurer to run. It is likely we could see a repeat of that scenario.

So once again Medicaid and Medicaid reform will delay a budget agreement and likely lengthen the adjournment for this legislative session. Most everyone agrees we need more predictable Medicaid costs. The preferred solution is to change from the current fee-for-service model to some form of a capitation system, reducing risks of cost overruns by allocating a fixed sum of money for each Medicaid recipient to either a professional managed care organization, like an insurance company, or a provider led entity, like a group of doctors or hospitals. If the capitated sum is greater than actual healthcare costs the entity benefits but also assumes the risk if healthcare costs are greater. The House and Senate have different ideas how to achieve this goal. The House released a new proposal this week; Senators will reveal theirs shortly.

But the greater issue is trust. DHHS needs to be more candid and forthcoming in sharing news, whether good or bad and we need to hear that news directly, not through leaks. That’s how to earn trust.