Yesterday afternoon, by a vote of 65-40, the North Carolina House of Representatives delivered a historic Medicaid reform compromise, House Bill 372: Medicaid Transformation and Reorganization. Governor Pat McCrory signed the legislation into law earlier today.
“Under the current system, we wait until people get sick to provide care and pay for tests — not outcomes,” said Governor McCrory. “This new system will focus on keeping people healthy and delivering care where it makes the most sense for patients. We’re going to accomplish this reform by paying providers based on improving patient’s health — not how many services patients receive.”
The bipartisan legislation begins the process of restructuring the State’s chronically troubled Medicaid program with a new focus on quality of care, access, patient satisfaction, and efficiency. Medicaid, which marked its 50th anniversary this year, is an important partnership between the state and federal government that offers funding for medical and other health-related services for our low-income citizens.
This compromise between the House and Senate will transform the State’s current Medicaid and NC Health Choice systems to a new healthcare delivery model that will allow competition between providers and commercial insurers to ensure budget predictability and high quality care to those in need.
“Now is the time to reform Medicaid,” said Representative Donny Lambeth, Chairman of both the House Committee on Health and the House Committee on Appropriations. “The healthcare market has changed over the past 20 years, and North Carolina has struggled to keep pace. Past Legislators have wrestled with Medicaid budgets that have grown dramatically over the past decade, and many have taken proactive steps to help contain the program’s growing costs – but now it is essential to restructure to sustain the program.”
Under this plan, Medicaid will shift from the old “fee-for-service” structure to a new “capitated” healthcare model, meaning that doctors and hospitals are reimbursed per patient when they enroll — encouraging providers to manage costs by focusing on preventive care. The new model will allow individual patients to select their own pre-paid healthcare plan from up to four in any given region, operated by both provider-led entities (groups of doctors and hospitals) and commercial insurers. These managed-care plans will be responsible for all services except for dental.
“Many states across our great nation, and the national Medicare Program, are moving away from the traditional fee-for-service model of reimbursement to one based upon population,” added Representative Lambeth. Prior to being elected to the North Carolina House, Lambeth worked for Wake Forest Baptist Health as president of Lexington Medical Center and Davie Hospital, and before that as President of NC Baptist Hospital. Representative McGrady and Representative Lambeth both served as chief negotiators for the House on the Medicaid Reform Conference Committee.
The legislation exempts dually-eligible beneficiaries, but directs the Department of Health and Human Services to create a stakeholder committee to develop a plan for managing the health services of this group in need. North Carolina will continue the public management of behavioral health services through Local Management Entities-Managed Care Organizations (LME/MCOs). The reform also creates an “Innovations Center” to provide technical assistance to doctors and hospitals to help them succeed in the new model.
“I am very pleased that the House and Senate have reached a compromise that allows us to provide more financial stability for our State and our taxpayers,” stated Speaker Tim Moore. “Now it is time to move to a model that places a higher priority on quality healthcare and long-term sustainability. Many other states are transitioning to similar plans, and North Carolina needs to be proactive.”
North Carolina’s $15 billion Medicaid program is the second largest expenditure in the state budget (after Education funding), accounting for 17.5% spending from the General Fund. The Medicaid reform plan must first be approved by the federal government before it can be implemented.
For a comprehensive discussion of Medicaid reform, please be sure to read George Mason University’s “The Economics of Medicaid: Assessing the Costs and Consequences,” edited by Jason J. Fichtner and “Medicaid Reform: Options For North Carolina” from Wake University’s Mark Hall, Professor of Law and Public Health, and his research assistant Edwin Shoaf.