THE BLOG

For Medicaid Reform in North Carolina, Try Accountable Care Organizations

10/18/2013 05:09 pm ET | Updated Dec 18, 2013

North Carolina's policymakers have a health care problem.

No, there hasn't been some massive disease outbreak at the state legislature, as much as recent Moral Monday protesters might welcome one. The problem doesn't even have to do with Obamacare.

The issue is this: spending on North Carolina's Medicaid program continues to eat into the funds available to other statewide priorities. Policymakers are finding it increasingly difficult to justify the size of this essential line item in the state budget when it continually threatens to crowd out things like education, transportation, and agriculture.

Largely because of these cost concerns, North Carolina is in the midst of planning a controversial Medicaid redesign. After a laudable multi-month effort seeking direction from stakeholders, Governor Pat McCrory and officials from the Department of Health and Human Services have begun to take their plan public. It involves contracting with a small number of managed care companies to administer the Medicaid benefit. These health plans would be paid a set amount to take care of each beneficiary. Running over-budget would become the problem of private companies, not the state.

Most agree that there's room to improve North Carolina's approach to Medicaid. And, on its own, controlling rising costs doesn't strike anyone as a terrible idea. Where concerns begin to surface is whether the managed care approach will preserve access and quality of care for the state's low-income patients.

Managed care struggled to gain traction when first introduced in the 1990s. In a few places, costs did seem to be successfully restrained. But some patients worried that providers were "skimping on care." Others were upset by newfound restrictions on the doctors they were able to visit. Public backlash was significant.

But what if there were a way to lower costs while simultaneously improving -- or at least maintaining -- quality and access? Wouldn't this be a great thing for the state? Something we could all get behind?

Policymakers and health care professionals have had nearly 20 years since the introduction of managed care to come up with improved models for spending less money on health care. Accountable Care Organizations, or ACOs, are one such new idea. An ACO is a group of health care providers who band together, agreeing to be held collectively responsible for the cost and quality of care delivered to patients. In return for this commitment, the providers involved get a cut of the cost savings that they achieve.

Patients in an ACO aren't forced to see any one set of providers, although they're sometimes given financial incentives to visit better, lower-cost doctors. This lack of "ring-fencing" addresses some access concerns. And ACOs add another critical ingredient to the managed care formula: measuring and rewarding providers not just on the basis of reducing cost, but also on maintaining or increasing the quality of care. The organizations accomplish this by measuring provider performance on a set of doctor-defined metrics meant to determine whether thorough, appropriate care is being delivered for a patient's specific condition.

ACOs have become poster children for innovation and out-of-the-box thinking. The organizations are incentivized to catch problems before they get big and costly, so investment in health information technology to identify at-risk patients has been universal. Some have created new roles like the "health coach" to teach patients good eating habits and make sure medication is taken properly. Others have rolled out programs that give patients who can't drive free rides to the grocery store and the doctor's office. Perhaps most impressively, doctors have actually started to talk to one another in an attempt to coordinate care for their patients.

Having racked up prominent early successes, both in the private sector and Medicare-run demonstrations, many states are now beginning to apply the ACO model to their Medicaid programs. Oregon has rolled out Coordinated Care Organizations -- the state's own-branded Medicaid ACOs -- in an attempt to generate $11 billion in savings over the next decade. Maine, Massachusetts, Minnesota, New Jersey, and Texas are also experimenting with the concept. Programs with ACO-like qualities have even been successful in North Carolina, including the award-winning Community Care of North Carolina.

North Carolina would be wise to consider the ACO as one -- if not the primary -- component of its Medicaid reform package. By creating the right incentives for providers, the state could realize the cost savings that the Republican governor and legislature are intent on achieving. Balancing this with an intentioned focus on quality, access, and patient safety are commonsense checks to cost containment efforts that should sit well with the largely Democratic objections to the current reform plan.

Better health for the state's most vulnerable doesn't have to be the highly partisan, polarizing mission it has recently become. Medicaid ACOs might just have something to like for everyone.