Traditional N.C. Medicaid fails to keep promises of improved health, lower costs

October 21, 2013

Click here to view and here to listen to Katherine Restrepo discussing this Policy Report.

RALEIGH — Medicaid spending has grown dramatically, while patient health outcomes have declined, as North Carolina has relied on Community Care of North Carolina to serve most Medicaid patients. A new Policy Report from the John Locke Foundation and Florida-based Foundation for Government Accountability highlights five “design flaws” in the CCNC model.

“CCNC has failed to keep its promises of improved patient health care and lower costs,” said report author Jonathan Ingram, FGA Director of Research. “More than half of 53 commonly used Medicaid health performance measures have worsened in North Carolina since 2010. Meanwhile, the state’s Medicaid budget has seen annual budget overruns averaging 11 percent during the past four years.”

The report offers more support for a Medicaid reform approach like the one touted by Gov. Pat McCrory’s administation, said Katherine Restrepo, JLF Health and Human Services Policy Analyst.

“States like Florida, Kansas, and Louisiana already have seen benefits of adopting the type of reforms proposed in the governor’s Partnership for a Healthy Carolina,” Restrepo said. “New details about CCNC’s design flaws should help encourage policymakers to follow these states’ lead in pursuing a Medicaid system that works better for patients, providers, and taxpayers.”

The nonprofit CCNC is a collection of regional networks. They provide some care coordination services to Medicaid patients. About 86 percent of North Carolina’s Medicaid program runs through CCNC or its sister program, Carolina ACCESS. A key feature involves linking patients with a primary care physician dubbed a “medical home,” Ingram reports.

Despite hopes of better management and lower costs, the first CCNC design flaw involves patients’ lack of choice, Ingram said.

“Although patients can generally choose their own primary care physician, all benefits are structured in the same one-size-fits-all ‘Old Medicaid’ model,” he said. “Patients with diabetes, autism, chronic kidney disease, and Alzheimer’s are all treated the same and forced into the same, nonpersonalized Medicaid plan.”

McCrory’s Partnership model, in contrast, relies on multiple public or private groups called “comprehensive care entities” that offer competing plans, Ingram said.

“Patients are able to select plans based on cost, quality, and access to care, and the state pays the CCE a fixed monthly rate for each patient — with rates based on each patient’s health status,” he said. “This framework shifts the risk of waste, fraud, and abuse from the state and the taxpayer to the CCE.”

The second design flaw in the Community Care model is linked to its lack of competition and accountability, Ingram said. “There is no incentive for primary care physicians, medical homes, or CCNC networks to improve patient health or satisfaction,” he said. “Florida, which has more Medicaid competition and accountability, reports better performance on most health measures and higher patient satisfaction.”

CCNC claims to have saved the state billions of dollars. Ingram’s report questions those claims. His third design flaw focuses on “wildly varying assessments” of cost savings from three separate state-hired consultants.

“While estimated CCNC savings vary by up to hundreds of million of dollars in a given year, the Partnership for a Healthy North Carolina model would produce savings that are reliably predictable,” Ingram said. “The savings are built into state contracts with the comprehensive care entities. For example, a similar program in Louisiana built in 3.5 percent savings per member per month for all Medicaid patients enrolled.’

The N.C. Department of Health and Human Services has estimated that the Partnership reform model would save the state up to 8 percent of its Medicaid costs each year. “This represents annual savings of more than $1 billion,” Ingram said.

Design flaw No. 4 addresses the continued increase in health care costs and utilization in North Carolina Medicaid. “It’s expected that Medicaid patients would use more primary care services and prescription drugs under the CCNC model,” Ingram said. “These are supposed to be offset by reduced hospital costs. But emergency room visits actually increased for the most expensive patients under CCNC. This begs the question of where the supposed savings, amounting to hundreds of millions of dollars each year, came from.”

Ingram’s final design flaw focuses on the fact that North Carolina’s current Medicaid “funding scheme makes it impossible to know if it actually saves taxpayer dollars.”

“If CCNC actually is producing the massive savings it has claimed, why is North Carolina’s Medicaid spending so much higher than its neighbors’?” Ingram asked. “North Carolina’s state auditor must have questions about previous savings estimates. She has recommended a ‘scientifically valid study based on actual data’ to determine whether CCNC is really saving money and improving patient health.”

With multiple design flaws, CCNC has failed to achieve its goals, Ingram said. “Medicaid patients and taxpayers in North Carolina are caught in the perfect storm of unsustainable cost increases and deteriorating patient health outcomes, while policymakers lack honest and accurate information needed to develop the state’s Medicaid budget. The program is in urgent need of reform.”

Restrepo agrees. “Replacing CCNC’s failures with pro-patient, pro-taxpayer reforms can transform North Carolina’s Medicaid system into the health care safety net is was meant to be all along.”

The John Locke Foundation and Foundation for Government Accountability’s Policy Report, “CCNC Flaws: Why Community Care of North Carolina is Failing Patients, Taxpayers, and Policymakers,” is available at the JLF website. For more information, please contact Restrepo at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].