In preparation for major changes to Medicaid, Health and Human Services Sec. Mandy Cohen announced the parameters for bidders on the program.

By Sarah Ovaska and Rose Hoban

North Carolina is marching forward with the overhaul of its Medicaid program, with the release Thursday of a detailed request for what it wants to get from managed care companies looking to take over the day-to-day control of low-income patients’ care.

The 60-page request for proposal comes even as the state has not yet received approval from federal regulators to overhaul Medicaid, the federally mandated but state-managed health care system for low-income children, seniors and those with disabilities. Most of the annual $14 billion price tag for the program is paid for by federal dollars. In North Carolina’s case, two dollars come from federal coffers for every one spent by the state.

All told, private companies or commercial managed care companies will earn about $6 billion of that annual total, tallying up to $30 billion over five years.

“It’s 2.1 million folks in the program, right now, and we think it’s about 1.6 million who will move into the program once it’s fully phased into managed care,” said Mandy Cohen, the N.C. Department of Health and Human Services secretary, in a call with reporters Thursday. Many of these are children and pregnant women, people for whom care is relatively cheap.

The remaining 500,000 – such as low-income seniors in nursing homes and people with mental health and intellectual or developmental disabilities – have more complex needs. Cohen said they will be phased into the managed care system in later years.

Changes revealed

Thursday’s release of the RFP was the first hard look at what the state health officials hope the new Medicaid system looks like.

This announcement has been delayed, in large part, because the federal Centers for Medicare and Medicaid Services has yet to give final approval to North Carolina’s plan, which has been three years in the works. Initial projections were that the waiver would have the federal stamp of approval last spring.

“In our ideal world, we would have had the waiver complete before releasing this RFP,” Cohen said. “We have moved the ball a good way down the field where we have a very good line of sight and can see the final details.”

Cohen said she’s confident the waiver approval would come.

“It’s been a collaborative process, just slow,” she said. “This is a lot of federal dollars that are at play here and we want to make sure we have all the details buttoned.”

Managed care companies and regionally run “provider-led entities” have until mid-October to get their proposals to the state, then the department plans to announce its selections in February. Patients will begin to sign up, with care starting by prepaid providers starting in November 2019 in several regions of the state. The whole state will switch over to managed care by the following February.

Medicaid recipients will have four statewide plans to choose from, as well as up to 12 smaller provider-led entities, which could be led by hospital systems or other localized health care groups.

Selected prepaid plans will come on for an initial three years, with the option to renew the contract, and renegotiate rates, for an additional two years, Cohen said.

Seeking budget stability

The major shift in Medicaid management comes at the behest of the N.C. General Assembly, which decided in 2015 to move Medicaid away from being managed by DHHS in favor of contracting the program out to commercial managed care companies or hospital-led health care systems to oversee patient care. Members of the Republican-led state legislature had voiced their displeasure for years about fluctuating Medicaid expenditures and said moving to a system where the state prepays an upfront price for each patient will lead to more budget stability and savings.

Sponsored

North Carolina is the largest state that does not currently have big swaths of its Medicaid program run by managed care companies.

Thursday’s RFPs make up the largest set of contracts the state’s health department has ever sought, with an estimated $6 billion a year in combined state and federal dollars expected to be contracted out, Cohen said.

But it’s not clear how much the move will save, if it even saves anything.

“Talking about cost savings is not something that … I can probably sum up in one sentence. It is a really complex answer about over what period of time are we looking at, related to savings,” she said. “We know that any time you’re gonna make this kind of transition, from one way of paying to another, there’s gonna be an investment of dollars and resources.”

Instead, what federal regulators require of these plans is that they be “cost neutral” and that they do innovative things to provide services to Medicaid beneficiaries.

“We have hopefully made that case to CMS,” Cohen said. “So we do expect to see cost savings compared to what the cost would have been had there been no waiver.”

Because the state is looking to balance cost, services and innovation, Cohen noted to reporters that the RFP isn’t simply about finding the lowest bidder.

“Potential plans are not going to be offering their own price in this process,” Cohen said.

“They’re going to accept a rate set by the department.”

Then, DHHS will evaluate the quality of the proposals based on how robust their networks will be, and how they plan to meet the department’s expectations for providing quality health care.

Pay for doctors and hospitals will remain the same, at least initially, Cohen said. Contracts will require that physicians and other providers who stay in the Medicaid network will receive 100 percent of what they’re getting now.

“So, doctors should not see any decline in what they’re getting in terms of payment per person for the kind of services they’re delivering,” she said. “Hospitals will have a temporary rate floor as well as we move into the managed care program.”

Nor will patients be denied services they need, Cohen said, with the department maintaining control over what’s defined as a medically-necessary service.

Cohen said she has no idea how many of the nation’s large commercial managed care plans will be submitting bids, but many of those plans have set up offices in North Carolina, partnering with statewide organizations, hiring lobbyists and staff.

“We appreciate the thoughtful, collaborative approach taken by Secretary Mandy Cohen and her team at the Department of Health and Human Services throughout the program development process,” said Taylor Griffin, a spokesman for the North Carolina Association of Health Plans, an industry group, in a statement. He called the release of RFPs an “important milestone.”