Posted: August 31st, 2015 | By: Mark Hall and Edwin Shoaf (JD '15)
North Carolina lawmakers are on the verge of finally agreeing on a way forward for the State’s Medicaid system. Until now, Gov. Pat McCrory and leaders of the state Senate and the House have disagreed over how best to privatize the financing system that covers North Carolina’s most vulnerable populations. Some wanted Managed Care Organizations (MCOs) formed by insurance companies, while others wanted Accountable Care Organizations (ACOs) led by hospitals or physicians.MCOs represent fiscal control and budgetary predictability. Their defining features include a corporate governance structure and capitated payment instead of fee-for-service. This payment method means the state will never pay more than an agreed amount per person for the year, leaving the MCO responsible for covering cost overruns. Also, because MCOs tend to be run by larger insurers, they can cover the entire state.
ACOs represent provider independence. Their defining characteristic is ownership or control by medical institutions or professionals that are held responsible for both the quality and the cost of the care they deliver. ACOs traditionally are based on the old fee-for-service payment model, but they are evolving to receive more bundled forms of payment. ACOs tend to be smaller and more regionally focused, which means their governing bodies or ownership are usually a part of the communities.
The General Assembly is now actively considering a legislative compromise that seeks to blend these two ideas. Gone is the old model of the ACO, and in its place rises the Provider Led Entity (PLE) — an idea spearheaded by Forsyth County Rep. Donny Lambeth (who was formerly CEO of N.C. Baptist Hospital). PLEs, at their core, are a combination of MCOs and ACOs. The PLE idea seizes on the most appealing aspect of the ACO, the fact that it is led by health-care providers, but it also replaces the outdated fee-for-service payment model with the more fixed MCO payment method of capitation.
The emerging Medicaid reform proposal would permit more conventional MCOs to compete with these newly established PLEs in a structured regulatory environment. Earlier attempts to base Medicaid reform solely on ACOs bumped up against the problem that there might not be enough statewide competition to give all residents a decent choice. The emerging approach is to mix both statewide MCOs with regional PLEs, which have the potential to expand to be statewide. This blend allows the new program to get underway sooner, and also gives time for new provider organizations to form and grow. This statewide-plus-regional approach should produce enough competition to give people meaningful choices without making those choices too complex or overwhelming.
Still missing from this approach to privatizing Medicaid are detailed quality controls and reporting. Current legislative drafts do not provide these explicit safeguards, but this absence is probably not critical in view of new rules proposed by the federal government for Medicaid managed care that would guard against undue profiteering.
The Medicaid reform approach now emerging from the General Assembly is not perfect. No real-world compromise is. Some experts legitimately question whether there is even a need to reform Medicaid before considering its expansion. Regardless, this is a carefully thought out and workable approach to privatizing North Carolina’s Medicaid system that has long been in development.
A wise person once said, let’s not let perfection be the enemy of the good. What legislative leaders are crafting may not be perfect, but it is a blend of competing ideas that, if enacted, hopefully will be the first step in improving North Carolina’s most important safety net for people in need.