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A way out on Medicaid expansion and Medicaid privatization for Governor McCrory?

After reading Rose Hoban’s story [1] about the out-of-state Medicaid managed care companies who still seem eager to come to NC and privatize our award-winning Medicaid program and my friend and colleague Joan Alker’s blog [2]today about how Arkansas is using private insurers to expand Medicaid I had some thoughts for our own Governor and his many Medicaid dilemmas.

First, despite the newfound enthusiasm reported among the out-of-state for-profit managed care industry that they can swoop into NC next year and grab a lucrative chunk of the Medicaid market, I really don’t think that’s going to happen. And this is despite the obvious need the General Assembly and Governor will have next year for finding major money to raise teacher pay and restore some of the massive cuts to the education budget they made this year. After seeing their approval ratings drop precipitously and a constant stream of stories about their education cuts, political leaders will want to do something, especially in an election year, and what better way to find money than take it from the health care program for poor people by selling it off at a discount to the for-profit vultures like Wellcare who paid $137 million in fines for fraud [3] over the last couple of years?

Well, it won’t happen. It’s an election year next year and those out-of-state companies make money in one major way when they take over a Medicaid program – they pay doctors and hospitals less and they pay for fewer health services. There’s enough experience around the country that doctors and hospitals in our state know exactly what to expect when these vultures come calling, and it isn’t pretty. Every legislator who contemplates this sort of sale is going to hear an earful from some pretty big hospital employers and well-loved pediatricians, family physicians and other groups back home about selling off NC Medicaid. And don’t forget, NC’s Department of Health and Human Services has squandered through blatant cronyism, drastic fumbles in how they pay Medicaid provider bills and general arrogance any hope the McCrory’s administration had for forcing through such a big and unpopular change. The health players in NC simply don’t respect the McCrory’s administration enough to make a deal like this work even if it did make policy sense.

Here’s the second problem for McCrory. His staff at least has to know what a great deal accepting the federal Medicaid money is to expand health coverage to 500,000 of our poorest people under the Affordable Care Act. We save millions of dollars in the state budget for literally for years according to the NC Institute of Medicine. And so the McCrory administration would – I think – secretly love to do a Medicaid expansion. Because of this, staffers must be looking at the Arkansas Medicaid expansion for inspiration as the only other Southern state to take the plunge. In Arkansas they are taking the Medicaid money and buying people private plans on the Arkansas health exchange. There has to be some serious evaluation of this approach – for one thing, it’s almost certainly going to be more expensive than a straight Medicaid expansion – but politically it is a winner in a conservative state.

That brings me to my possible way out. Could people in McCrory’s staff who actually know about healthcare be thinking to do a Arkansas-type expansion where we use Medicaid money to buy private coverage? In NC that would mean that NC Blue Cross would benefit as a private, in-state, nonprofit company from the Medicaid expansion and McCrory could say he was expanding Medicaid using private plans. This would leave the out-of-state companies out of the loop but is much less politically problematic for both the legislature and Governor. It also leaves the majority of the NC Medicaid program as-is, but since Medicaid is saving money and winning awards, how bad can that be? Although don’t expect a governor who says “Medicaid is broken” at every opportunity to admit that. If he did decide to try the Arkansas expansion approach, McCrory could ¬†point out a strong program evaluation could see if the NC’s private exchange plans for Medicaid were working any better than the rest of the program to test his privatization theories. And McCrory would also know that because we are expanding NC Medicaid with 100% federal dollars we are still saving money for the state regardless of which approach we take.

So, let’s recap. An Arkansas Medicaid expansion solution lets McCrory claim some victory on privatization without angering a powerful state constituency that General Assembly members likely don’t want to make mad in an election year. It saves a substantial amount of money – over $100 million in the first two years that can be put to good use. And finally it doesn’t require the painful process of regaining the trust of the medical and public health communities that a wholesale change in NC’s Medicaid program would require. I’m not going to hold my breath, but this is one way out of the hole we’ve dug ourselves into in North Carolina.