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Late Wednesday night, the Senate released its version of the Governor’s $20 billion recommended budget for FY 2014-2015.  Here’s a first look at how the Senate attempts to put a leash on the state’s Cadillac Medicaid program. 

It’s no secret that Medicaid voraciously consumes a good chunk of the state’s DHHS budget.  Of the general fund’s $5 billion allocated to DHHS, Medicaid typically devours a solid $3 billion.  But if we step back and account for Medicaid’s total cost — state and federal funds combined — taxpayers are paying for a $14 billion program. 

When looking at the very first provision under the HHS budget’s Section XII (Department of Medical Assistance), Medicaid seems to be sitting in the hot seat.  The fact that the Senate proposes to pull the program out of DHHS and make it a completely separate entity indicates this program is indeed a piece of work and terribly mismanaged.  Will a $5 million price tag to bring in third party oversight increase efficiency?  Who knows.  After listening to committee meetings yesterday morning, Senator Pate (R — Wayne) believes this maneuver will be worth every penny.   

As far as Medicaid reform plans go, the Senate is back to promoting a plan that would force any provider-led organization or commercial managed care group to bear full-risk when managing and delivering care to Medicaid beneficiaries.  If they are able bring about this reform, then should any contracted entity exceed its budgeted resources for serving those on Medicaid, it would have to make up for its losses on its own.  Taxpayers would only be on the hook for shifts in Medicaid enrollment. 

It also seems as if the Senate wants Community Care of North Carolina (CCNC), the state’s primary care medical home model responsible for treating Medicaid patients, to jump onto the risk-bearing game plan.  The budget suggests that the medical home model’s contract could be in question once 2015 hits. (See line 12, pp. 99). 

Injecting financial responsibility could certainly increase budget predictability if Medicaid populations are properly managed.  For this to happen, care coordination would have to perform beyond the level of simply managing prescription drugs and getting patients to their appointments on time.  It would instead need a team of care managers to quarterback patients for primary, specialty, and long-term care, even in hospital settings.

While it has been widely reported that North Carolina’s average annual growth rate in Medicaid spending from 2007-2010 was the slowest rate in the nation at 3.5% — well below the national average — this figure has changed for the worse.  According to the Kaiser Family Foundation, the state has dropped in rankings from 2010-2012 as growth in expenditures has climbed back up to 6.1% (these figures do not factor in administrative costs, either).

Program mismanagement and other forms of waste continue to plague the system, making Medicaid cost a fortune.   So the Senate has resorted to cuts to provider reimbursement (2% reduction) and optional services for the elderly, blind, and disabled populations and the medically needy — those with costly medical expenses but who do not meet Medicaid’s income eligibility levels.  The media has lambasted such initiatives.  

But in today’s News and Observer, Senator Hise offers an explanation:

Under the provision, elderly people who qualify for a benefit called State/County Special Assistance would no longer automatically qualify for Medicaid. The Senate’s budget document says nearly 12,000 people would be dropped from the program. But Hise, citing DHHS staff, said only about 5,200 to 5,300 aged, blind and disabled people would be cut from the insurance program. People have other options for health insurance, he said, including the health insurance exchange established under the federal Affordable Care Act. The exchange would also be an option for the 3,342 medically needy people the budget cuts from Medicaid, he said.

Yes, cuts can be difficult for those who truly need assistance.  But if a majority of these individuals will be eligible for private, subsidized coverage on the federal health insurance exchange, then for most, the change should end up giving them a much better deal than the uniform Medicaid benefits they currently receive.  Numerous studies conclude that those on Medicaid fare worse than the uninsured and those with private coverage regarding health outcomes and access to care.  Medicaid is intended to help the most vulnerable populations achieve better health outcomes, but it in fact does just the opposite.

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