BREAKING: Medicaid Transformation – and Millions in Taxpayer Savings – Approaches Finish Line

June 26, 2020

North Carolina is on the cusp of a major change to our health care system that will deliver millions of dollars in savings to taxpayers and improve the health of those on Medicaid.

The House and Senate both passed legislation this week to fund Medicaid transformation. The bill was supported overwhelmingly with votes from both parties.

As you may remember, back in 2015, the General Assembly passed legislation to move the state-run Medicaid program from a fee-for-service model to a managed care model. When it came time to fund the program, however, Governor Cooper vetoed the bill for reasons largely unrelated managed care.

So, what is managed care? Basically, it’s a different kind of payment structure that incentivizes positive health outcomes.

Here’s how it works: the state pays managed care organizations (MCOs) a set monthly fee for each person served by the Medicaid program. It’s the job of the MCO to coordinate and manage people’s care. Because they are paid a set fee, it is in the MCO’s interest to make sure a person’s care is well-managed, that health care services are utilized efficiently, and that people are kept healthy.

If the MCO does poorly and the costs exceed their monthly payment, then it’s a financial loss. If they do well – if individuals are kept healthy and services are properly utilized – then it’s revenue.

One of the main ways that MCOs ensure better health outcomes is by proactively tackling “drivers of health” such as food insecurity, transportation, housing and education. Addressing these factors on the frontend is often better and far less expensive than dealing with the health consequences on the backend.

A study from April 2019 found that without this transformation, the costs over four years are expected to be $6.6 billion. When the move to managed care is implemented, the savings are expected immediately and would likely rise to over 11 percent by year four – that’s hundreds of millions in savings for taxpayers.

A bipartisan bill to fund Medicaid managed care will soon head to Governor Cooper’s desk. We look forward to this becoming law so that important services can get delivered to communities without delay.

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