Treasurer seeks to reform health plan

Pointing to a projected $1 billion budget hole in North Carolina’s health plan for teachers and other public employees by 2027, State Treasurer Brad Briner and his team are implementing an array of program changes and premium hikes. Their response may not be popular among beneficiaries — but reform is essential if the state is to continue providing health benefits at a reasonable cost.

That’s the argument made by Briner and three coauthors — state health plan executive director Thomas Friedman, trustee Brian Miller, and policy analyst Emma Turner — in a just-published article for the prominent journal Health Affairs.

“Much of the recent health care discussion around affordability has focused on broken markets, with an aim toward interventionist strategies such as price regulation,” they wrote. “With price regulation having failed to control medical expenditure growth in the fee-for-service Medicare Marketplace, a turn toward dynamic, market-driven tools is the natural choice.”

To shrink the immediate deficit, the state treasurer introduced premium increases, tiered by employee salary, as well as higher deductibles and greater use of preferred provider networks to secure more value for every dollar spent. At the same time, the new strategy enhances the primary-care experience by reducing copays, eliminating the often-frustrating process of prior authorization, and giving primary-care providers financial incentives to make lower-cost referrals and better manage chronic health conditions.

As for specialty care, Briner and his team are using the plan’s large scope as leverage to negotiate cost-effective bundles of surgical and other services. “Providers will benefit from certainty of volume, stable pricing, and the elimination of medical prior authorization,” they argued, while patients will gain more access to high-quality care.

Some of these reforms will pay immediate dividends. Others will take time to get right and achieve net savings. And more funding will still be needed. The North Carolina General Assembly already appropriated an additional $100 million this summer. More requests are coming.

Nevertheless, the state treasurer deserves commendation for tackling the problem at its source. As I’ve argued many times, political actors often complain about health care “costs” when they really just mean “prices.” They seek to transfer the cost — from patients to taxpayers, for example, or one set of medical providers to another — rather than truly reduce the cost or, more realistically, reduce its rate of increase.

Whether the subject is a budget impasse in Washington or Medicaid shortfalls in North Carolina, policymakers can no longer afford to delay, deflect, or merely hope for the best. Our health care system is overly bureaucratic and insufficiently competitive. Past federal “reforms” created artificial incentives for hospitals to merge and to acquire physician practices, and for health insurers to enroll non-poor members with huge taxpayer subsidies. At the state level, North Carolina artificially constrains competition among hospitals and precludes nurses, physician assistants, and other lower-cost providers from delivering medical services for which they are fully trained.

Certificate-of-need (CON) restrictions on the construction or expansion of hospitals and other providers make health care not only more expensive but also less available and effective. In a survey of the academic literature to date, published earlier this year in the Southern Economic Journal, economist Matthew Mitchell of West Virginia University found that the policy pursued by North Carolina and other states is outdated and counterproductive.

“The accumulated evidence is overwhelming,” he wrote, “that CON laws do not achieve their purpose. Instead, the balance of evidence suggests that these regulations increase spending, reduce access to care, undermine quality, and fail to ensure care for underserved populations.”

So far, the General Assembly has enacted only modest reforms of CON, including exemptions for some facilities and services. We need to abolish it outright. We also need to double-down on scope-of-practice reforms to expand access and embrace innovations such as artificialintelligence and direct primary care (a model based on membership fees rather than insurance claims). We need to arm patients with more information and choice. And we need to do these things right now.

John Hood is a John Locke Foundation board member. His books Mountain Folk, Forest Folk, and Water Folk combine epic fantasy and American history.