DHHS presents details of Medicaid reform plan

Published March 5, 2016

by Matt Caulder, Capitol Connection, March 1, 2016.

Top Department of Health and Human Services (DHHS) officials presented preliminary plans for stabilizing the state’s Medicaid system to state leaders Tuesday, in line with legislation passed last session to transition to provider-led entities (PLEs), prepaid health plans (PHPs) and capitated contracts.

The change is meant to make costs to the state more predictable by paying per patient and not per procedure, while also providing quality care to the 1.8 million North Carolinians on Medicaid and NC Health Choice.

The state will pay PLEs and commercial insurers a fee per patient, who will then be responsible for caring for those on Medicaid, with government oversight.

“Medicaid reform will provide incentives to medical professionals for improved patient outcomes. It transforms the state from a fee-for-service, or volume-based system, to one that pays plans a set amount for each enrolled person for a specific time, providing increased budget predictability to the state,” Rich Brajer, secretary of DHHS said.

The majority of enrollees are children, at 59 percent, but the aged, blind and disabled draw the majority of the budget at 61 percent of 2014-15 spending.

In recent years the state has experienced massive shortfalls in Medicaid, with the biggest gap coming in the 2010-2011 year when the system overran projections by more than $600 million.

Session Law 2015-245 created the Joint Legislative Oversight Committee on Medicaid and NC Health Choice, which received the DHHS recommendations, as well as the creation of a new division under DHHS called the Division of Health Benefits.

As part of the legislation the state Division of Medical Assistance will phase out a year after the capitated PHPs are active.

State will present program to federal government for approval

Under the legislation the state must present paperwork required to get federal approval by June 1, and then the program will be implemented 18 months after approval is granted.

Experts say that approval may be tied to North Carolina expanding Medicaid, which the state has so far decided not to.

Katherine Restrepo, who covers NC healthcare for Forbes, says that expanding Medicaid would cost the state billions, beginning in 2020, costing more than $600 million over the next decade.

“Starting in 2020, expansion would cost North Carolina $6 billion over the next decade,” she said. “That comes out to an extra $600 million per year. In the long-term, this will either lead to a reduction in provider payments, diverting resources from other important parts of the budget such as education or transportation, or tax increases.”