As a once-promising tax scheme to maximize federal Medicaid dollars fades from practicality, budget woes are coming to the fore and creating an impetus for program redesigns.
The administration of North Carolina Gov. Pat McCrory was planning to creating a 3.5 percent tax on Medicaid mental health managed care organizations as a way to save the state an estimated $60 million by bringing in additional federal dollars.
That's been scrapped, however, following a critical federal Inspector General's review of Pennsylvania's managed care organization tax, which appeared to auditors to be impermissible under Medicaid regulations.
"Due to guidance from CMS and the Office of Inspector General's report on Pennsylvania's gross receipts assessment on Medicaid Managed Care Organizations," the administration has "decided not to pursue an assessment on LME/MCOs," said Art Pope, budget and management director for McCrory, a Republican.
"We are considering additional options at this time and working with the Legislature to achieve savings through other methods," Pope said.
With North Carolina taxpayers covering about 35 percent of the state's $13 billion in annual Medicaid costs, lawmakers in the politically conservative state have been trying to find new ways to restrain cost growth.
In 2011, the legislature voted to require hospitals to pay back to the state 25.9 percent of Medicaid dollars, and the Governor is proposing increasing that to 28.8 percent. In contrast with the mental health MCO tax, deemed impermissible because it would have applied to a narrow class of healthcare services, the hospital assessment is considered a broad-based tax permitted under federal regulations updated in 2009.
But hospital advocates maintain that they are by and large reimbursed at less than the costs of the services they provide to Medicaid beneficiaries, with about a third of hospitals losing money last year, according to the North Carolina Hospital Association.
Hospitals have also faced long waiting times for getting paid claims by Medicaid, after a faulty and delayed roll out of the NCTracks Medicaid information system, and the state Department of Health and Human Services is getting ready to pay for backlogged claims from the current fiscal year when the new one starts in July.
Last year, in his first year as Governor, McCrory called for an overhaul of the state current system of 14 regional community primary care networks and 10 mental health managed care organizations. He proposed a system in which "comprehensive care entities" would form provider networks and offer beneficiaries a single point of entry to a variety of care services, while being paid on a risk-adjusted, per-member per-month model.
In March, McCrory unveiled a revised Medicaid redesign that he called a "provider-led accountable care model," in which accountable care organizations would share gains and losses with the state.
Now those ideas are being sorted through and reshaped as the legislature crafts next year's budget, with proposals for regional ACOs, a system of both provider-led and independently -managed ACOs and a reorganization of Medicaid that would make it an agency separate from the Department of Health and Human Services.
While many ideas are still swirling, the North Carolina Hospital Association considers ACOs a viable option for Medicaid. "The proposal to use Accountable Care Organizations is a step in the right direction and would align Medicaid with the innovations already underway for Medicare and privately insured patients," the NCHA said in a media statement.