Human Services

Introducing Competition and Choice for Medicaid in North Carolina

On September 23, 2015, Governor Pat McCrory signed into law landmark reform legislation for the North Carolina Medicaid program. The legislation will transition the state from a fee-for-service to a fee-per-individual model for more than 1.9 million Medicaid beneficiaries. Because North Carolina is one of the 20 states that have not expanded Medicaid under the provisions of the Affordable Care Act (ACA), North Carolina will join the three other states that have introduced competition and choice into the fifty-year-old program.

The reforms were spurred after Medicaid spending exceeded NC budget estimates for five of the past six years, amounting to two billion in overages. The new law will not only provide more budget predictability, it will incentivize positive health outcomes and introduce the first ever quality and data metrics component to the program.

The new framework will create six regional networks of doctors and hospitals (Accountable Care Organizations and Provider Led Entities) as well as Managed Care Organizations to enter into contract with the state to provide care for Medicaid beneficiaries. In turn, state program administrators will monitor healthcare provider’s hospitals to ensure the program is providing quality health care, as well as what medicines, treatments and procedures are most effective in managing common and chronic conditions.

Instead of the traditional ‘fee-for-service’ reimbursement model where providers are reimbursed for each doctor visit or medical procedure, the new law will allow the state to work with contracted healthcare providers and reimburse a per-enrollee flat fee, with a scaled increase in reimbursement for sicker patients. Only Florida, Louisiana and Kansas have implemented similar reforms (and also did not opt to expand the program under the ACA) and have since experienced greater cost control and an increase in positive health outcomes.

Full implementation of the reforms are predicted to take between three and five years, and has begun with the creation of the North Carolina Division of Health Benefits (formerly the Division of Medical Assistance) which will oversee the development of the federal proposal for program design. Once the proposal is complete it will be brought to the General Assembly for review, then presented to the Centers for Medicare and Medicaid Services (CMS) for consideration and final approval.


In Depth: Human Services

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