by Katherine Restrepo
Director of Health Care Policy, John Locke Foundation
Plans for North Carolina’s Medicaid reform have changed quite a bit.
One year ago, Governor McCrory proposed a Medicaid reform that would have statewide managed care organizations (MCOs) compete to provide health care services to North Carolina’s Medicaid patients. Each patient would be risk-adjusted for individual health status. These MCOs would be awarded fixed contracts from the state to have providers deliver care and would bear full risk in the event of cost overruns. Taxpayers would only be on the hook for Medicaid enrollment fluctuations.
One year later, the Medicaid reform gears have shifted towards a less risky and more flexible initiative: Accountable Care Organizations (ACOs). Under the ACO framework, medical providers clinically integrate to manage care for Medicaid beneficiaries. This structure aims to reduce fragmented care, thereby reducing unnecessary health care utilization over time.
Each ACO must manage a Medicaid population of at least 5,000 people. Provider reimbursement will be dependent on whether providers achieve quality health measures via delivery of standardized services within a set budget.
The ACO benchmark budget will be projected based on previous medical claims of a Medicaid population within the ACOs geographic region of the state. All ACOs will share with the state any savings or losses (see below).
Now, suppose an ACO has an annual benchmark of $100 million. The ACO comes under budget at $90 million. If providers have met the quality health measure guidelines, the state will award them the lesser of either 60% of the total amount under budget ($6 million) or 15% of the allotted budget ($15 million).
Let’s throw in an example of an ACO that ends up over budget after year 1. If an ACO spends $110 million and fails to meet its targeted patient health outcomes, the ACO will be held fiscally accountable to a degree. It must pay the lesser penalty of either 60% of the amount over budget ($10 million) or 5% of the allotted budget ($5 million).
With each passing year, ACOs will take on more risk.
ACOs are primarily responsible for managing physical health needs, although reform stakeholders have addressed the possibility that ACOs may be pressured to help manage prescription drugs for mental health patients down the line. Physical health, mental health, and long-term support services represent the three pillars of Medicaid reform.
Certain Medicaid populations will not fall under the fiscal responsibility of ACOs, as it has been stated that providers have only so much control over the physical wellbeing of their patients. Understandable. It is also understood that ACOs may achieve savings equivalent to only a drop in the Medicaid bucket over the next five years. However, if patients with chronic illnesses along with catastrophic cases (where medical care exceeds $50,000) are excluded from an ACO’s responsibility, will significant savings be achieved even as ACOs bear more risk over time?
It is a step in the right direction that providers are taking on risk for such patients. And as providers are taking on more responsibility, so should patients. Overall, however, it looks as if the new reform proposal strays from the original proposal in which budget predictability ranked top priority.
What lies ahead still remains one big unknown.
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