— To hear Gov. Pat McCrory tell it, big changes are coming, and coming soon, to how the state runs and pays for the $14 billion Medicaid program, which provides health insurance for the poor and disabled.

"I'm going to have to bring up some fairly controversial proposals to change Medicaid, or we're going to have some very, very serious issues in North Carolina," McCrory told a recent gathering at a Cary Chamber of Commerce event. "That's coming in the next three or four months."

When he spoke to the North Carolina Board of Education earlier this month, McCrory blamed the fact teachers and state workers wouldn't get a raise this year on Medicaid overspending, again suggesting big changes were coming.

And during a recent appearance of the Sunday morning talk show N.C. Spin, during which he said that lawmakers had given him authority to push ahead with requesting that the federal government approve changes to the state Medicaid program.

"There's one piece of legislation I got put in the budget that's a secret, don't tell anyone. We got permission to ask for that waiver," McCrory said, adding that the state needed more flexibility in how it managed the program.

But among his many recent references to ways to control the program's costs, there have been few specifics and a complex warren of federal and state legislation boxes in the governor. In reality, there are few, if any, substantial changes McCrory can push through without the blessing of state lawmakers and the federal bureaucracy.

A perennial problem

Medicaid covers roughly 1.6 million of North Carolina's 9 million residents. The bulk of those served are children or the parents of children from low-income families, along with pregnant women, the elderly and disabled. The lion's share of the $14 billion cost for the program comes from the federal government, but overruns in North Carolina's smaller share have eaten up savings found elsewhere in the state budget over the past decade.

Cost overruns have been a thorn in the side of governors and legislative budget writers alike. Even a 1 or 2 percent error in forecasting costs over the next year can cost hundreds of millions of dollars. Lawmakers were forced to come up with about $500 million to bail out the program during the fiscal year that began July 1.

As he came into office, McCrory made grappling with Medicaid and the massive computer systems that track recipients and payments to health care providers, a top priority.

Back in March, he sketched out a plan under which the state would use one or more private companies to manage the state's Medicaid population. It would have essentially been a shift toward managed care, a system under which a provider gets a flat fee for each patient for which they care. Whatever the insurer doesn't spend is profit, and the company absorbs the cost of every patient who requires more care than his or her allotment.

That plan landed with something of a thud at the legislature. Lawmakers saw the proposal as potentially abandoning Community Care of North Carolina, a homegrown company that helps doctors and hospitals keep tabs on Medicaid patients. The company helps make sure patients make their doctor's appointments, keep up with medications and otherwise stick with treatment programs needed to keep them healthy.

Rep. Justin Burr, R-Stanly, a senior budget writer in the House and co-chairman of the legislature's oversight committee on health care, acknowledged lawmakers were cool to that proposal. They had learned, he said, from experience in the mental health arena, in which the state had remade the state's safety net for those with mental illness several times since the 1990s.

"It seems like every three or four years, we just throw everything out and start over again," Burr said.

That, he said, could not be the model for the broader Medicaid program. Whatever the state does, he said, has to be something it sticks with for decades to come.

As the legislature grumbled about the nascent shift toward managed care, McCrory's Department of Health and Human Services was gathering input in two different ways. Companies were responding to a request for information, an invitation from the state to tell North Carolina how to remake the Medicaid system. Unsurprisingly, managed care companies pushed for models close to their own businesses practices, while doctors and hospitals more comfortable with North Carolina's fee-for-service system stressed incremental steps.

At the same time, DHHS Secretary Aldona Wos and Carol Steckel, who as head of the Division of Medical Assistance is the state's Medicaid chief, went on a listening tour across the state. As with lawmakers, the reaction with skeptical from doctors, nurses and health care experts, who did not see a potential move toward manage care as improving patient care.

"We're just enormously successful already, and it seems silly to bring in companies that have problems in other states," said Adam Searing, a lawyer and public health expert who heads the liberal-leaning North Carolina Health Access Coalition.

Searing's optimism about the current state of Medicaid runs counter to the narrative put forward by the governor, who often refers to Medicaid as "broken," blaming it for a drain on statewide budget resources. He frequently points to an audit of the Medicaid program that found persistent cost overruns, although health policy experts say the audit doesn't present a complete picture of the challenges faced by the program.

Searing points out that Community Care of North Carolina received an award from The Health care Leadership Council, a national group of health care chief executive officers, for its management of the state's Medicaid population. Over a recent three-year period, Searing said, North Carolina's Medicaid costs grew more slowly than just about anywhere else in the country.

Now the wrestling match between high-stakes reform and go-slow fixes appears ready to ratchet up again.

What can he really do?

Top officials with DHHS are about to embark on another "listening tour," according to a set of slides that Sandy Terrell, the Division of Medical Assistance's acting chief operating officer, presented at the North Carolina Institute of Medicine's annual conference this month. It's unclear where and to whom the agency will be listening. Also unclear is what Terrell meant when she wrote that there would be "changes within the Division of Medical Assistance."

DHHS refused a request to make Terrell or anyone else available to talk about pending changes in Medicaid, saying that an announcement was coming.

In response to a request for clarification, Ryan Tronovitch, a spokesman for McCrory, said that the governor was working "to fix a broken system that is hurting our ability to fund other areas of state government like education, public safety and transportation. The governor will focus on a plan that takes a holistic approach to health care – one that improves the system for providers, and one that is predictable and sustainable for generations to come."

That language is very similar to language that McCrory himself used to describe his push for a managed care solution to Medicaid this spring.

Asked directly what he meant during a news conference last week, McCrory did not commit to any specific plan of action.

"We're looking at all options," he said. "It would be too early for me to tell what exact conclusion we'll come up with. Our first goal, which we succeeded with in this legislative session, was getting a waiver, which got at least through the door to work with the administration and work with the legislature."

In fact, what lawmakers did in that "secret" budget provision was give McCrory permission to come up with draft plans for reforming Medicaid, but they rolled back his ability to apply for waivers – government-speak for changes to the basic Medicaid program – without explicit permission from the General Assembly.

"I'm continuing to have dialogue with Washington representatives regarding the implementation of Medicaid and the management of Medicaid cost, including following through on some of the waivers that we've asked for," McCrory said.

Lawmakers also created a five-member panel to oversee Medicaid reform and help draft recommendations. McCrory is to appoint three members of that panel; the speaker of the House and president pro tem of the Senate would each appoint one member. As of the close of business on Sept. 20, 2013, no members of that panel have been appointed, meaning a key cog in the legislature's vision of Medicaid reform does not even exist yet.

An accounting coming?

"We are currently setting up many meetings with all the people impacted by the Medicaid implementation," McCrory said during the news conference last week.

It's unclear who those meeting are with.

A spokeswoman for Blue Cross and Blue Shield of North Carolina said the insurance company had not been included in any recent Medicaid discussions, despite being by far the state's largest private insurer.

"Our conversations with them lately have not been plentiful," said Don Dalton, vice president of public relations for the North Carolina Hospital Association.

Dalton said it was still clear the state is pursuing a switch to managed care – a switch his association opposes – but few details have emerged.

Other sources in the health care community declined to speak on the record for fear of endangering contractual relationships with the state or earning the ire of state officials.

On background, multiple lobbyists and policy analysts who work in the health care arena echoed Dalton's remarks, saying the state is continuing to look at ways to move to a managed care system, although they too say that communication with the department has been sparse and sporadic as of late.

That may be understandable as DHHS has been dealing with a number of public crises.

DHHS has been the source of a number of stories about fat contracts or salaries granted to politically connected and/or questionably qualified individuals. The agency is also struggling to correct problems with NC FAST, a system that is failing to deliver food stamp payments to needy families, and a troubled IT system that is supposed to pay those who provide Medicaid services.

NCTracks is also supposed to provide data state officials, including lawmakers, need to analyze the Medicaid budget and track how much the state is spending. Such information would let North Carolina avoid surprise cost overruns, but some legislative staffers say the data they are getting today isn't as the information they got from a prior system.

"We've got to make sure we're managing our money effectively and that NC FAST and NCTracks are working right," Burr said.

Burr will help run an Oct. 8 meeting of the legislature's Joint Legislative Oversight Committee on Health and Human Services. That committee is set to meet all day and is expecting to hear information on the computer systems, salaries and well as the administration's Medicaid reform plans.

If McCrory can put together some sort of Medicaid reform push, he may run smack into political realities next year.

Lawmakers will not return to their full session until May 2014, an election year, and the current turmoil at DHHS may make garnering a consensus difficult, according to some analysts.

"Even if he (McCrory) had something that was really innovative, he and Secretary Wos have squandered so much of their goodwill and credibility it's going to be difficult for them to move something," Searing said.