April 8, 2015

A famous football coach once observed that a tie is like kissing your sister.

His thought comes to mind considering NCDHHS’ plan for Medicaid reform. Call it faux reform .

The NCDHHS bureaucracy’s plan is to create Accountable Care Organizations to manage Medicaid. These are networks of doctors and hospitals paid to deliver care for Medicaid recipients based on the quality rather than the quantity of care. Accountable Care Organizations are supposed to take some of the loss if Medicaid costs come in higher than they bargained for. ACOs are written into ObamaCare which ought to raise an eyebrow right there.

And by the admission of NCDHHS consultants, ACOs are going to have all the Medicaid budget impact of a chihuahua taking on a doberman.

As North Carolina Health News reported, “ACOs have generated favorable results [and] some not so favorable,” DHHS consultant Bob Atlas told the gathering. “The jury is still out. We’re hopeful.”

They added “But Atlas also said that “true stability” could only come from a managed care model of payment that seems to be off the table for now.”

So there is a candid assessment from NCDHHS that Accountable Care Organizations are unproven and won’t bring stability to our Medicaid budget that is plagued with rising costs and cost overruns.

As to savings, “Spending will grow,” Atlas said.

He predicted that if $5 billion of the state’s Medicaid program flowed through ACOs, the state may eventually see $100 million in savings.”

A savings of $100 million is not even enough money to cover 3 days of Medicaid spending.

So here we are going through all this turmoil, negotiation and angst of reforming Medicaid when the ACO model is nothing more than faux reform. A cynic would say it’s just an exercise to gin up campaign contributions from lobbyists and healthcare providers trying to protect their slice of the Medicaid pie.

There is a basic reason why ACOs won’t save money. They don’t have any experience saving money. As explained by ACO booster Zeke Emanuel, brother of Rahm and a key ObamaCare architect, “The key skill these ACOs and hospital systems lack—the skill insurance companies specialize in—is the actuarial capacity to predict and manage financial risk”

So if North Carolina goes down the ACO road, we’re going to have to wait for them to figure out how to manage risk. In the meantime, we keep spending and spending.

ACOs are being brought to us by the same bureaucrats who squandered tens of millions on the NCDHHS computer system fiasco. There is no need to reinvent the wheel. Other states are using traditional managed care companies to save Medicaid money. If we even got close to matching their results, we would be saving hundreds of millions every year.

Traditional managed care companies, as Emanuel admitted, understand how to manage risk. If a big company like Aetna or United Healthcare miscalculates, they will have to eat the cost overrun. But if an ACO, our local doctors and hospitals, make a miscalculation, does anyone really believe there won’t be a full court press for a bailout from the state? After all, we can’t let good old Doc Jones go broke, can we?

We need real reform to save real money. Republicans should go big or go home.