Legislators have set some laudable goals for reforming the state’s Medicaid system. Medicaid, as a reminder, is a health insurance program that primarily covers children, pregnant women, people with disabilities, and low-income seniors. Like all large organizations, especially those in the world of insurance, Medicaid in North Carolina could stand some modernizing. Policymakers say they want to create a well-integrated structure for patients and providers while delivering accountability and predictability to taxpayers and budget writers.
That is the rhetoric. This week, however, the Senate passed a Medicaid reform bill that meets none of these measures. In fact, this proposal will not work for patients receiving care, it will not work for the doctors and nurses who deliver care, and it will not create more predictability for the state.
The fundamental flaw in the bill is introducing a highly complicated scheme into an already complex program. Dismantling our current Medicaid networks and building a new structure with so many moving parts will invite fraud, abuse, waste, and inefficiency. It will also shift local control to large private corporations. Ultimately, state bureaucracies will have to expand under this bill to provide increased oversight, to pursue lawsuits, and to chase down hefty fines against private insurance companies.
Here is a basic outline of the legislation: a newly created Department of Medicaid would end its coordination with nonprofit physician networks and instead contract with three large Medicaid managed care insurance companies; local provider-led networks could form and compete for Medicaid business; the state will receive bids from these insurance companies and providers for a set amount of Medicaid funds over a limited time period. If an insurance company goes over budget then it eats the loss. If an insurance company comes in under budget it keeps the profit. Needless to say, shareholders do not like to see losses. That’s where this plan gets messy.
Private Medicaid managed care companies have a long history of delaying and denying care as a way to cut costs and increase shareholder profits. In 2007, Amerigroup, a company that has expressed interest in the North Carolina market, was fined $190 million for filing 18,000 false Medicaid claims, and in 2008 the company settled a $234 million lawsuit for discriminating against pregnant women and other high-risk patients. In 2010 Amerigroup was fined for not properly enrolling newborns in their mothers’ health plans. In 2007 another Medicaid managed care company that wants a piece of our state’s business, Centene, was fined in Georgia for taking longer than two weeks to authorize critical medical services for patients. The company had to repay $8 million to Kentucky for improperly failing to cover preventive care provided in schools. And when Centene started losing money in the Bluegrass State the company pulled out before the end of its three-year contract.
The Senate bill is also a bad deal for doctors, nurses, and hospitals. In the first year of implementing Medicaid managed care in Kansas, Amerigroup, Centene, and United HealthCare all failed to meet contractual goals for timely payment of claims. And while these caregivers can form “provider-led entities” under the legislation, such arrangements are undermined from the outset. The regional provider groups, for example, must meet the same solvency requirements as private insurance companies. They must also stay within strict budget limits in their first year of operation. If they provide too much care at too much cost then, just like the insurance companies, they take a financial hit. Saying that a collection of struggling rural clinics must compete for business on the same terms as a billion-dollar corporation is no competition at all.
Finally, the most shortsighted feature of this plan is that it does not expand coverage. If we accepted Medicaid expansion to cover 500,000 more people then North Carolina would generate 43,000 new jobs and receive more than $20 billion in federal funds to finance reform.
Everyone agrees that we should improve Medicaid in our state. But the Senate reform bill will increase the program’s problems while dismantling what currently works in the system.
Adam Linker is co-director of the North Carolina Justice Center’s Health Access Coalition, a statewide nonpartisan consumer advocacy organization.