Commentary

Medicaid reform: How the House and Senate compare

Since 1978 North Carolina’s Medicaid program has been managed by the Division of Medical Assistance, which is within the NC Department of Health and Human Services (DHHS). As the state’s Medicaid program stands today, most Medicaid enrollees are categorically needy – in other words, aged, blind, disabled or very low-income families (including pregnant women). As Medicaid enrollment has grown from under 500,000 enrollees in 1978 to over 1.5 million enrollees in 2015 so have the expenditures. Even though Medicaid spending growth between 2007 and 2012 was less than growth in private health insurance premiums, many states are reforming Medicaid to enhance budget predictability, increase quality of care, and promote long-term cost savings as enrollment increases. NC is no different as both the House and Senate have recently released their plans for Medicaid reform.

The House Medicaid reform bill was discussed in a previous post, but here is a quick recap. The House reform bill aims to build upon the system NC already uses by establishing provider led entities (PLEs). As the transition takes place, the PLEs can rely on the expertise and knowledge of Community Care of North Carolina. This model is similar to an Accountable Care Organization (ACO) approach in that networks of providers such as hospitals and doctors take responsibility for not only coordinating patient care, but for the finances. This model moves away from the current fee-for-service payment model, which rewards quantity of medical visits and/or procedures over quality of care and ultimately increases costs to providers taking a capitation payment. Capitation payment allows for providers to take on financial responsibility as they receive one risk-adjusted payment per patient. Providers in an ACO work to refer patients to other providers within the network. It is important to note that patients can select a provider outside of an ACO at no additional cost. Finally, five million dollars has been provided to reform Medicaid over a five year period in the House bill.

The Senate budget provides 10 million dollars to reform Medicaid by 2017. Like the House Medicaid reform bill, the Senate also includes the transition from a fee-for-service model to a capitation payment model. One major difference is that instead of using one type of organization to provide care and take financial responsibility, the Senate’s version of Medicaid reform uses a hybrid model. NC would contract with outside Managed Care Organizations (MCOs) who would then work with regional PLEs to provide care to Medicaid enrollees. Another significant difference between the two reform bills is that the Senate’s version of reform would remove oversight of Medicaid from DHHS to a new Health Benefits Authority, an eight member board focused on Medicaid and NC Health Choice. What is interesting is that members of the board would be appointed by the Governor, President Pro Tempore of the Senate, Speaker of the House of Representatives, and Secretary of Health and Human Services .

No matter how NC lawmakers ultimately decide to reform Medicaid, there is one action that both versions fail to do – expand Medicaid to 500,000 North Carolinians in the coverage gap. The same waiver that policymakers will submit to CMS to reform Medicaid can also be used to expand Medicaid as many other states have done.

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