May 6, 2015

North Carolina needs more funding for everything from teacher salaries to transportation. But taxpayers aren’t a bottomless pit either.

Since 2009,the State Auditor says Medicaid has overspent the budget by $5 billion. The latest audit determined the $63 million Medicaid surplus NCDHHS bragged about was really another $300 million deficit. (WRAL)

CPR Blog Post: Disappearing Medicaid Surplus

If the Legislature doesn’t end the chronic overspending in Medicaid, the state won’t have the money to tackle other priorities without massive tax increases. That’s why conservative reformers in the State Senate want N. C. to adopt Medicaid managed care like 39 states already do. Iowa is the newest state getting private insurance companies to bid on managing Medicaid on a fixed price contract.

The Medical Society and the House like ObamaCare’s Accountable Care Organization or ACO approach. These are groups of hospitals and doctors merged together , delivering care under the control of Community Care of North Carolina or CCNC. CCNC is basically the doctors supervising doctors. They’ve been the pilots at the controls of Medicaid through years of overspending along with NCDHHS.

The Medical Society’s ACOS start with a raise for doctors. Carolina Journal reported ”The society is lobbying the state to adopt a system under CCNC supervision that would allow physicians to keep the majority of money the state would save through health care delivery reforms, similar to the federally approved Medicare Shared Savings Program.

In its response to DHHS, the society recommends “providing a tax incentive in the form of either a tax credit or tax deduction for physicians enrolling in a value-driven network that is open to Medicaid patients.”

The proposal would increase Medicaid physician reimbursement rates to enhance recruitment of specialty doctors. It also broaches patient cost sharing through “co-pays, coinsurance, deductibles, and other cost-sharing arrangements.” Those could be reduced for patients meeting “certain health metrics or participating in health and wellness activities aimed at those metrics.” (Carolina Journal)

Bigger doctor fees? According to the Kaiser Foundation, North Carolina already has some of the highest reimbursements in the country with only eight states paying more. Here’s a sample (a 4% reduction 1/1/15 not reflected by Kaiser).

Medicaid Fee % of Medicare Fee

Location All Services Primary Care
United States 0.66 0.59
California 0.51 0.43
Florida 0.57 0.49
Georgia 0.75 0.70
Maryland 0.73 0.70
New York 0.55 0.42
North Carolina 0.82 0.85
South Carolina 0.81 0.74
Texas 0.65 0.61
Virginia 0.80 0.74

(Kaiser Family Foundation)

There are also questions about CCNC’s bold claims about huge savings they say CCNC has achieved for the state. Read these findings. “Despite the program’s accolades, Al Lewis, the founder of the Disease Management Purchasing Consortium, says CCNC is “a failure as far as reductions in cost and inpatient utilization are concerned.” He posted his analysis of the consultants’ work in an article on the Health Care Blog, “Is North Carolina Medicaid the Healthcare Industry’s Solyndra?”

Lewis cites data from the Healthcare Cost and Utilization Project (HCUP), a group of databases sponsored by AHRQ. By comparing HCUP data on North Carolina with that of South Carolina, Lewis reports only a slight decrease in inpatient utilization for Medicaid patients — in both states. Of most concern, Lewis says, is the fact that inpatient utilization declined slightly more in South Carolina, which does not have a statewide medical home program. This proves that North Carolina could not have saved the amounts the consultants cited, Lewis writes.

The consultants concluded that North Carolina had reduced its cost substantially “without mentioning the federal data showing the relative cost position of the relevant population to be the highest in the region,” and they concluded that “Medicaid inpatient utilization trends had declined substantially, without mentioning the federal database of Medicaid inpatient utilization trends showing the opposite,” Lewis writes. (Managed Care Magazine)

So if South Carolina gets better results without CCNC, is CCNC cracked up to accomplish what they claim?

The Senate has a simple answer. Competition. Managed care companies ought to compete for Medicaid business with CCNC’s ACOs. Competition, not a closed system, produces a better result at lower prices.

House members who ran as free market conservatives should embrace competition in Medicaid. It’s time to act.