Members of the Medicaid Reform Advisory Group listen to a presentation at Thursday’s meeting. From l to r: Sen. Louis Pate (R-Mt. Olive); Richard Gilbert, MD; Chair Dennis Barry; Peggy Terhune, PhD; Rep. Nelson Dollar (R-Cary)

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Members of the Medicaid Reform Advisory Group listen to a presentation at Thursday’s meeting. Members of the panel include (left to right) Sen. Louis Pate (R-Mt. Olive). Dr. Richard Gilbert, Chair Dennis Barry, Peggy Terhune and Rep. Nelson Dollar (R-Cary). Image via NC Health News.

By Rose Hoban, NC Health News

Members of a high-level group formed to make key decisions about the future of North Carolina’s Medicaid system met for the first time Thursday, in a meeting that provided the public with a look at how plans for the health care program are evolving.

The Medicaid Reform Advisory Group, a five-member panel, met in a crowded room off of the cafeteria at the old Dorothea Dix Hospital in Raleigh. The panel, along with a standing-room-only crowd, heard presentations from members of the team brought into the Department of Health and Human Services to devise a Medicaid update plan.

Those health officials revealed a new vision of a state divided into six or seven regions where medical networks and insurance companies would compete to manage the care of North Carolina’s more than 1.7 million Medicaid recipients.

If nothing else, the crowd got a glimpse into the complexity of managing Medicaid, the difficulty of forecasting expenditures and the difficulty of deciding what changes to make to the program in the future.

Presenters also provided a vision of a program that has problems, particularly in the provision of services for people with physical and mental health disabilities, but that in many ways is more financially stable than other Medicaid programs around the country.

“I think we are moving through the process and we are going to see where the consensus develops,” said Rep. Nelson Dollar (R-Cary), the House of Representatives’ appointee to the panel. “I think that the advisory panel is going to be open to hearing everybody’s ideas and proposals and recommendations for what the framework should be for Medicaid reform, and move them forward.”

Divvying up the state

When originally proposing a plan to reform Medicaid this spring, Department of Health and Human Services Sec. Aldona Wos posited the idea of three or four statewide “comprehensive care entities” that would compete across the entire state to provide care to all the varied populations on Medicaid: low-income children and pregnant women, people with mental health and developmental disabilities and poor elderly living in nursing homes.

A map of six proposed Medicaid provider regions was displayed at the meeting Thursday. Image via NC Health News. Click to view full-size image.

But DHHS officials began downplaying that idea at the meeting, talking more about a plan that would have managed care entities providing services in as many as seven distinct regions of the state.

“As Secretary Wos and other members of her administration started engaging stakeholders, adjustments to that model began to be made and continue to be made,” said Mardy Peale, an advisor to Wos. “The model continues to evolve and take shape as we listen and utilize quantitative data analysis to inform our decisions.”

Consultant Bob Atlas explained that each region could have more than one entity competing to provide care, telling the panel that it’s easier to organize networks for care for smaller regions than for the entire state.

Electronic versions of the maps can be found here.

“There may well be multiple ones of these [entities] per region to give beneficiaries a choice,” Atlas said. “We want them to maybe compete with one another, to attract beneficiaries.

We don’t want them out with salespeople marketing to beneficiaries; we want them to be competing on quality and value.”

A map proposing seven Medicaid provider regions displayed at Thursday’s meeting. Image via NC Health News. Click to view full-size image.

Panel-member Peggy Terhune questioned Atlas sharply on the plan to divide up the state into regions. Terhune is the head of Monarch, one of the largest providers of care for people with mental health and developmental disabilities in the state.

“You can live over here and need to be over here because that’s the best place for you to get care, and I don’t want a line to get in the way,” said Terhune, who talked about the frustration some in the disability community have had getting care outside the geographic boundaries of their local management entities. “I have seen the lines get in the way.”

Members of the mental health and disability communities had embraced the idea of statewide networks.

“I hate it,” said Mary Short, who attended the meeting with her developmentally disabled adult daughter, Katie. “I want to be able to choose.”

Short explained that Medicaid recipients who have “slots” in the Community Alternatives Program that allows people with disabilities to receive services at home have had particular trouble because their CAP slot is tied to where they live.

“If you regionalize Medicaid, it takes away your choice of hospitals and doctors who are specialists with the [intellectually disabled] population,” said Short, who worried that if Katie were placed in one region she might not be able to get services from a doctor who practices in another.

“You can’t move, because if you move, you lose your CAP slot, and you end up on a waiting list,” she said.

Atlas also floated the possibility that the current mental health local management entities could expand to provide all Medicaid services, including physical health services, not just mental health.

The heads of two local management entities, Pam Shipman of Kannapolis-based Cardinal Innovations and Ellen Holliman from Alliance Behavioral HealthCare in Durham, were at the meeting, but both declined to comment on their organizations’ ability to expand to provide more services.

“I’m not prepared to make any statements right now,” Shipman said. “I just want to take it in.”

Mardy Peale, an advisor to DHHS Sec. Aldona Wos, makes a presentation to the capacity crowd. Image via NC Health News.

Softer rhetoric

Since entering office in January, Gov. Pat McCrory and Wos have stated repeatedly that the Medicaid program is “broken,” with out-of-control spending and massive cost overruns.

But a presentation by Rick Brennan, chief financial officer for the Division of Medical Assistance, which manages Medicaid, painted a picture of a program that’s been successful at holding costs relatively steady, even as the economy was in turmoil.

Brennan showed charts demonstrating how Medicaid rolls had “the largest rates of increase … in the 2008-10 fiscal years, which roughly correspond to the worst economic times.” Brennan’s figures show relatively small increases in enrollment since then: under 1.5 percent over the past two years.

Costs for treatment under Medicaid have also had a “fairly low trend of increase,” according to Brennan. He said that expenditures increased 2.7 percent last year and 2.2 percent the year before. That rate is roughly in keeping with national trends, which have demonstrated some of the slowest growth in health care inflation in decades.

Brennan warned, however, that even small fluctuations in the Medicaid budget can be shockingly large.

“In most environments, most businesses, if you forecast with 99 percent degree of accuracy, you’re doing pretty well,” he said. “But in Medicaid, if we’re 99 percent accurate, that’s a $130 million variance. That’s a pretty steep hitch.”

Brennan admitted that Medicaid forecasters could do a better job, but also noted that to “decrease the burden on the state and our funding mechanisms, we have to be almost miraculous in our forecasting.”

Last year, Medicaid spent a total of more than $18 billion of federal and state dollars to provide care, with the federal government paying close to 66 cents of every dollar spent on the program and the state paying the rest.

But Brennan noted that receipts from federal prescription-drug rebates, assessments on the state’s hospitals and other kinds of payments mean that general-fund dollars are only needed to cover about 21 percent of the costs of the program.

“It’s important to be aware of that, because if any redesign is undertaken, the implications of this will have to be included in that as a major consideration,” he said.

Dollar, a longtime member of the Joint Legislative Oversight Committee on Health and Human Services, admitted that the legislature might be to blame for some of the cost overruns in recent years.

“We budgeted for savings that weren’t achieved because of state-plan amendments that weren’t approved by the federal government in the same [time frame] that we had budgeted for,” said Dollar, who called the Medicaid management “incredibly complex.”

Dollar also put some of the blame for overruns on the management at the Division of Medical Assistance, which miscalculated federal matching rates for certain parts of the program, resulting in overruns of more than $100 million during the last fiscal year.

“It wasn’t the providers fault; that was a management issue,” he said.

NC Health News

North Carolina Health News is an independent, not-for-profit, statewide news organization dedicated to covering health care in North Carolina employing the highest journalistic standards of fairness, accuracy and extensive research. NCHN seeks to become the premiere source for health reporting in North Carolina. Visit NCHN at

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