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Health

Will North Carolina Be Ready for Medicaid Transformation?

North Carolina’s 2.36 million Medicaid recipients are in for a big change next July. That’s when the state’s Medicaid system will be transformed into a managed care program run by private health care companies.

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Photo by Ashkan Forouzani

Right now, only behavioral and mental health care is handled by managed care companies like Cardinal Innovations Healthcare. Cardinal serves 20 counties in the state, but that’s likely to change. Five counties, including Mecklenburg, say Cardinal has done such a poor job they want to switch to another provider.

But under the state law requiring transformation, all medical care — including doctor visits, hospital stays and prescription drugs — will be coordinated by private companies. And controversy over Cardinal Innovations could raise questions about whether North Carolina will be ready to embark on Medicaid transformation next July.

On Monday night, Stanly County joined four other counties that want to fire the managed care company for poor performance. The move came only hours after Cardinal submitted a plan to correct problems in Mecklenburg and Forsyth counties.

Department of Health and Human Services’ Deputy Secretary Dave Richard told WFAE he’s optimistic about Cardinal’s new plan to reduce wait times for treatment. And he says Cardinal has been told DHHS will impose financial penalties if it falls short. Cardinal says it has yet to learn the specifics of potential penalties.

But DHHS has been responsible for overseeing Cardinal for five years. And the department’s oversight role will increase enormously under transformation.

Under the plan, Medicaid recipients without behavioral or mental care needs will sign up with one of five managed care companies chosen by the state. So will those with mild or moderate behavioral problems. They’ll choose between plans offered by Carolina Complete Health, Wellcare, United Healthcare, Blue Cross and Blue Shield and AmeriHealth Caritas.

Those with severe mental and behavioral issues will transfer all their care a year later to one of the companies which currently provides behavioral health care — including Cardinal Innovations.

All managed care companies will be paid a set amount for each patient they serve, and they’ll get to keep any money they don’t spend. State lawmakers say that will cut the cost of unnecessary care.

The theory is that companies will have an incentive to spend more on preventative care so they don’t have to spend money on expensive treatments for avoidable illnesses. But companies will also have an incentive to cut other costs, so the need for accountability and oversight will grow.

That worries state Auditor Beth Wood. In a May 2019 audit of the DHHS oversight of the managed care companies currently providing behavioral care — like Cardinal — she found the department didn’t have formal policies and procedures for evaluating performance or for designing corrective action plans and imposing penalties when necessary.

Under Medicaid transformation, Wood noted “the risk to the state will increase exponentially.”

Managed care companies currently get about $3.2 billion annually from the state, she wrote in the audit. She projected that would jump to $13.9 billion under Medicaid transformation, “which will increase the risk that quality services are not provided, costs are unreasonable, and performance standards are not met.”

Richards says DHHS’ oversight capabilities are better today than when Wood issued her report. He points out that DHHS has added key staff with deep experience in managed care and contract oversight in anticipation of transformation. And, he says, standards in the new contracts will be tougher than those imposed on managed care companies by other states.

But Richards says DHHS has told counties that once transformation starts, it will become increasingly difficult for them to “disengage” from the managed care companies which currently handle behavioral health care. After the state decides how it will divide up its Medicaid budget, he says, making changes could “destabilize” the system.

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