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Court ruling clears way for overhaul of NC Medicaid. You'll soon be able to enroll.

The (Raleigh) News & Observer logo The (Raleigh) News & Observer 2/24/2021 Will Doran, The News & Observer (Raleigh, N.C.)

Feb. 24—RALEIGH — North Carolina's wide-reaching transformation of its multibillion-dollar Medicaid program is still on track to start up in the next few months, due to a court ruling in the state's favor.

After years of delays, last summer Republican state lawmakers and Democratic Gov. Roy Cooper finally came to an agreement on Medicaid transformation — which is not the same as Medicaid expansion, a more politically controversial topic. Then the state began selecting the private companies to be given contracts in the new system as managed care organizations, or MCOs, to administer Medicaid funds instead of state government.

A group of hospitals that didn't get awarded MCO contracts sued over the way the NC Department of Health and Human Services handled the process. But last week, after both sides made their arguments, a judge ruled in favor of the state, DHHS announced Tuesday.

"North Carolina's approach to managed care has received national recognition and focuses on improving the health of North Carolinians through an innovative, whole-person centered and well-coordinated system of care that addresses both the medical and non-medical drivers of health," DHHS wrote in a press release about the court ruling.

Nearly every state already uses the managed care model for Medicaid. North Carolina had planned to make the switch several years ago but it kept getting delayed, until last year.

It must now begin no later than July, and open enrollment for people on Medicaid is expected to begin March 15.

Medicaid is a taxpayer-funded health care system that provides insurance to around one in every five North Carolinians. It serves more than 2 million people — mostly children, low-income people and people with disabilities.

A recent state audit found that DHHS potentially misspent millions of dollars due to poor oversight of the Medicaid program. In an interview Tuesday, Dave Richard, who leads DHHS' Medicaid program, said officials are already implementing some changes to address those issues — and that the switch to managed care should only help with accountability and oversight.

"With the health plans in place, there will be additional layers of eyes," he said.

Billions of dollars at stake

The managed care model gives doctors and health-insurance workers more flexibility to treat patients not just for their immediate needs but for their long-term health issues.

For example, consider someone who comes to the emergency room frequently for heat stroke, racking up large bills for taxpayers via Medicaid. This new system would allow their doctors and MCO to figure out that the problem is that they don't have air conditioning, and use Medicaid money to buy them an AC unit in hopes of stopping future hospital visits. In the current system, however, outside-the-box solutions like that are banned.

There are also new financial incentives for the system to treat people's long-term issues and prevent them from needing as much care: The MCOs get a certain amount of Medicaid funding at the beginning of the year, and they get to keep anything they don't spend, up to a point.

So the competition to get an MCO contract was fierce.

"This also happens to be the largest procurement in North Carolina history," said Matt Wolfe, a lawyer for the group of hospitals that had sued over the state's contracting process, in last week's court hearing. "At stake ... is over $30 billion over 5 years."

DHHS awarded MCO contracts to large national insurance companies, not local hospitals.

That's what led to the lawsuit from the group Wolfe was representing, called My Health by My Providers. The group's CEO, Lisa Farrell, said in an interview Tuesday that the group is still deciding whether to appeal the ruling.

The legislature's original plan for the program, Farrell said, was to have it led by providers like the hospitals in her group — which include Duke Health, UNC Health Care, WakeMed in the Triangle and Atrium Health in Charlotte.

But then Cooper unseated Pat McCrory in the 2016 governor's race and installed new leadership at DHHS, Farrell said, and DHHS seemed to change what it was looking for.

"At some point along the way, with the change in leadership, the position on provider-led entities has changed," she said.

But Wake County Superior Court Judge Michael O'Foghluda dismissed My Health's arguments. He ruled from the bench in favor of DHHS and against My Health, DHHS officials said in a press release Tuesday. That means that pending any other legal action, the transformation to managed care is still on schedule.

DHHS wrote in the agency press release that it's "pleased that yet another court ruling has affirmed the integrity and fairness of the department's Medicaid Managed Care procurement process."

A similar lawsuit against the contract process, filed by health insurance giant Aetna, was also recently dismissed. It's currently under appeal.

Farrell said that regardless of where the legal battles go, there should be another round of contract awards in several years. When that happens — if not before — she said she hopes the state goes back to more local providers like hospitals, instead of large insurance companies.

The legislature wanted it that way to foster competition, she said, adding: "I think the worst outcome of all would be that this model is lost."

For more North Carolina government and politics news, listen to the Under the Dome politics podcast from The News & Observer and the NC Insider. You can find it on Spotify, Apple Podcasts, Stitcher, iHeartRadio, Amazon Music, Megaphone or wherever you get your podcasts.

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