Medicaid boon or Frankenstein monster? Study parses NC reform

May 27--Medicaid reform is the $12 billion question in North Carolina, as legislators debate the best way to control costs for the federal-state insurance program for low-income residents, most of them children.

A recent issue brief from the Wake Forest University law school offers a good overview of the options they're considering, as well as what our state might learn from reform programs in Oregon and Ohio.

With conflicting bills before the N.C. General Assembly, "North Carolina stands at a crossroads on Medicaid reform," write Mark Hall, professor of law and public health, and research associate Edwin Shoaf.

One approach calls for contracting with managed care organizations (MCOs), which are similar to and often owned by insurance companies. They get a fixed fee per patient per year, which makes Medicaid budgeting predictable. Cost overruns have been a big concern for state legislators.

But the authors say that national research shows Medicaid MCOs have done little to reduce costs or improve quality of care. In North Carolina, nonprofit MCOs such as Cardinal Innovations Healthcare Solutions handle Medicaid spending for behavioral health. "The mental health MCOs are under pressure to consistently reduce costs to remain under budget," the authors write. "They struggle with whether they can keep costs low enough to stay in business," with mixed results on quality monitoring.

Another approach turns to Accountable Care Organizations (ACOs) led by physician groups or hospitals. North Carolina has about two dozen operating in 75 counties, including Gaston County's CaroMont Health, the report says. They serve Medicare or private insurance companies. "These current ACOs are in early stages of development that are testing new payment methods and quality improvement programs," the authors write. "All of them appear to reflect the core ACO goals of accountability for quality, patient-centered care, and provider control of health care."

The drawback? So far North Carolina's Medicare ACOs "have not generated substantial savings" and don't provide the predictability of MCOs, the authors say.

Reform efforts in Oregon and Ohio point the way toward a system that could merge the two models, according to Shoaf and Hall.

"By combining the two contrasting ideas of MCOs and ACOS, do we create a better-functioning Medicaid system, or a Frankenstein's monster?" they ask. "... By themselves, neither MCOs nor ACOs have yet achieved a strong track record of making health care organizations and providers accountable for both costs and quality. But, a combination of both approaches could achieve the General Assembly's key goals, as long as administrative expenses and profiteering are minimized."

Helms: 704-358-5033;

Twitter: @anndosshelms. This blog post is done in collaboration with Kaiser Health News, an editorially independent program of the Kaiser Family Foundation.

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