Earlier this month, the North Carolina General Assembly disbanded for the second time in the year, after reconvening to pass new congressional district maps. There was some hope that the legislature would make progress on the ongoing budget stand-off; however, there was no resolution, and one of the larger items left on the agenda was the future of Medicaid in North Carolina.
Since 2015, the state Department of Health and Human Services (DHHS) has been studying a way to change how our Medicaid system pays for services, at the direction of a law signed that year. Rather than acting as the insurance provider itself, the agency will contract out to insurance companies and pay a fixed price per enrollee.
This change has the potential to both combat the rising costs of the healthcare industry and improve the health of the over 2 million Medicaid recipients in North Carolina, almost a fifth of the state’s population. However, the way to make it most effective is to pair it with the long-overdue expansion of Medicaid proposed by the Affordable Care Act — one which could cover an additional 634,000 people by one estimate. The combination of policies could be hugely beneficial for anyone of low income, if the legislature would fully fund them.
Both Gov. Roy Cooper and legislative Republicans want to pass Medicaid transformation, though the funding levels proposed originally in the state budget were called insufficient by the DHHS. The department also called out legislators for not including any form of Medicaid expansion in the budget. While the state’s Republicans have long been opposed to expansion, some movement occurred in July, when a committee began considering a policy that would expand the program, although it would place a number of requirements on recipients.
While Democrats weren’t exactly happy about this form of expansion, it received unanimous support from its committee, as it represented a compromise accessible to both parties. “Obamacare” asked states to simply expand existing Medicaid programs — which don’t carry these requirements — in order to fill a “coverage gap” between prior Medicaid and the income level at which subsidies for the ACA’s insurance markets kick in.
Many Republican-led states refused to do so, largely due to their opposition to the policy and concern that the federal government would only pay for 90 percent of costs, which is still higher than the current two-thirds covered federally.
Medicaid transformation, by contrast, is a policy engineered specifically in North Carolina, which would attempt to change how medical insurance pays for treatments. Rather than a fee-for-service model, where the state pays for each individual treatment or medication a hospital provides, the new managed-care system would pay a fixed rate for each beneficiary.
This payment structure will create consistency in funding levels on the state’s behalf, but its importance stretches far beyond that. Insurance companies approved for managed care — including BlueCross BlueShield, the company which helped spearhead the program in cooperation with the DHHS — will be shifting how they pay healthcare providers as well, including potentially cutting payments to those which don’t provide good quality for patients.
Contracts have already been negotiated between insurance and providers to try to implement these changes, meaning funding for the program is the last hurdle that needs to be overcome. As a result of the budget impasse, the program has already been suspended. A funding measure early next year would likely be the best way to revive it.
Both expansion and transformation are immensely positive policies and would work well together to improve the health of all North Carolinians, but especially those with low income. When legislators reconvene in Raleigh next year, they should start it off right and pass both policies in a way that Gov. Cooper will be likely to sign. Anything less passes on a golden opportunity for the state’s healthcare system.
