THE BLOG
08/26/2014 05:34 pm ET Updated Oct 26, 2014

With Budget Agreement, Medicaid Reform Should Be Next Compromise in North Carolina

After months of back and forth, North Carolina's legislators have finally agreed on a budget for the next fiscal year.

Finding a place of compromise is commendable -- especially when compared to our nation's federal representatives, who have only managed to pass an annual budget a small handful of times since 1952. But the budget accord earlier this month was silent on a critical issue that can wait no longer: reforming the state's Medicaid program.

Though there was hope for agreement on a reform plan before the General Assembly passed its budget and adjourned, it appears that the intent to reconvene to talk Medicaid in November -- just after election season -- will be the only language on comprehensive reform coming out of the session.

Reforming Medicaid in a way that will ensure budget predictability and quality care for some of North Carolina's most vulnerable residents is a formidable challenge, and has been a top discussion point in Raleigh for well over a year. Following the reveal of Governor McCrory's initial plan in April of 2013, a revised recommendation was put forth by a special Medicaid Advisory Commission and the North Carolina Department of Health and Human Services (DHHS). Most recently, both the Senate and House have weighed in with some back and forth on a reform plan.

The Senate's proposal would rely on a managed care model for Medicaid. Capitated payments would be made to insurers or provider organizations, which would then be responsible for using this fixed monthly amount to care for enrollees. Insurance companies would be given two years to adapt, while provider-led organizations would have slightly longer.

Under the House plan, Accountable Care Organizations (ACOs) -- groups of providers who band together and agree to be held mutually accountable for the cost and quality of the care they deliver -- would form the basis of the Medicaid program. Under this proposal, backed by Governor Pat McCrory and informally by many of the state's provider groups, reform would be fully implemented by 2020.

While the two plans differ in meaningful ways, both have one commendable and widely agreed upon goal: restoring budget predictability to the state's health care obligations. Budget overruns by the Medicaid program cannot continue to burden the state's taxpayers, while simultaneously crowding out other critical funding priorities.

With this common end in mind, compromise should be well within reach. Action on reform will ultimately hinge on finding agreement across two key dimensions: (1) the appropriate model for achieving budget predictability while ensuring quality of care is not sacrificed, and (2) the timeframe for implementing such a change.

Reasonable compromise in these two areas might involve a relatively rapid move to an ACO-based model, whose risk-bearing and payment method would then evolve over the longer term to look more like managed care.

Medicaid ACOs could start off by sharing with the state government the cost savings they achieve through careful care coordination, while being held partially responsible for overruns above a pre-specified target. Over the next 5 to 7 years, these organizations could be gradually shifted to a per-member-per-month, capitated payment, eventually bearing all financial risk for cost overruns. Critically, carefully designed and frequently re-evaluated quality metrics core to the ACO concept -- those endorsed by the National Committee for Quality Assurance might be a good starting point -- would ensure the quality of Medicaid patients' care is not sacrificed in the process.

Such a proposal would inevitably be criticized as too slow by some and too rapid by others. But compromise is defined by mutual concession. The last year has been largely filled with meaningful debate on what is best for North Carolina and how to get there. Lawmakers have centered on some reasonable ideas. With the end fully agreed, the means should be something on which our elected representatives can, through thoughtful and respectful democratic debate, quickly find common ground. We should expect nothing less come November.

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