The NC Senate passed their proposed budget last week spending over $21 billion for each of the next two years.  In explaining their budget, Senate leaders attributed their inability to finance expansions in education, transportation or justice and public safety to the growth in Medicaid spending.  Simultaneously, they argued they were fully funding Medicaid. That is frankly not the case.

In the Senate’s budget, physicians as well as other providers would take a 4 percent rate cut, labeled as a “Shared Savings Withhold.” The NCMS calls it a cut because the state portion of the Medicaid reimbursement would be held in a reserve, the 2:1 federal match would be forgone and you would only have the chance to earn back a fraction of this money sometime in the second year. 

This cut would only apply to specialist physicians until January 2015 when it would then be expanded to include primary care physicians. This deepens the chasm between primary care and other specialties at the same time legislators are calling on all doctors to offer additional ways to control Medicaid utilization and reign in costs.

Cutting rates is the wrong approach if we are ever going to end our state’s Medicaid spending quagmire. Let’s examine the four ways in which Medicaid costs can be controlled.  The first is enrollment. The Federal Government, for the most part, determines eligibility. Even where this is not the case, many legislators are hesitant to reduce enrollment, and we are thankful for their commitment to the neediest citizens of our State. 

Second, you can control rates.  This is the primary target year after year, and the easiest way to appear to achieve “savings.” Legislators believe that doctors and other providers can somehow compensate for rate reductions by increasing the volume of Medicaid patients they see as enrollment continues to increase.

Third is utilization.  You have heard us talk about this area for years. North Carolina is a leader in physician-driven, patient-outcome focused care delivery.  Our model has avoided hundreds of millions of dollars in Medicaid expenditures each year for the last decade. This work has been focused in primary care.  Future savings will be dependent upon specialists becoming a part of that utilization management cooperative.

Finally, you can control costs by imposing some limits on the services offered through the Medicaid program.  Certain services have been the cost-drivers for Medicaid for years. We will continue to encourage a full exploration of this as a potential option to control costs.

The Senate’s proposed budget would maintain the existing level of services, and expand enrollment through normal growth and added “woodwork” enrollment pursuant to the federal Affordable Care Act. At the same time they would reduce reimbursement, and add administrative burdens and costs to care for Medicaid patients. 

We will continue to encourage legislators and our partners to invest in building new and innovative models of care delivery and reimbursement. We also are encouraging legislators to differentiate between provider groups, like physicians, who are working with the State to provide savings and high quality care, from others, who are providing services with no consideration of the financial impact. 

In addition, we are asking the NC House to authorize a shared savings plan allowing physician-led accountable care organizations statewide to partner with Medicaid in the same way that they are working to save money in the Medicare program.  These models of care incorporate primary, specialty and hospital care to ensure the best outcomes for patients while lowering total program spending for a defined population.

We are also asking for NC House leaders to eliminate provisions found in the Senate budget that would:

• Create a fee withhold, or rate cut plan without any potential for physicians to earn back the amounts withheld.
• Reduce the number of office visits allowed without prior authorization (reduction from 22 visits to 10 in the Senate version).
• Codify a relatively recent budget requirement that physicians and other providers pay a $100 fee every three years to enroll in Medicaid.
• Increase the amount physicians are required to collect as co-pays from Medicaid patients (an amount that is often uncollectible and absorbed as a loss by the physician practice).
• Impose a cap or “triage fee” as payment for non-emergency services delivered in an Emergency Department

The NCMS supports Medicaid reform that will ensure quality, is properly funded and will enable a more predictable budgeting model for NC lawmakers.  The way for our State to realize that goal is to continue to expand the partnerships with the provider community, to maximize use of limited resources through quality reform initiatives, evidence-based medicine and shared savings. The status quo is unsustainable. We understand this and can help achieve the utilization savings. 

We hope the NC House and Senate will find ways to build upon North Carolina’s success in saving money through programs that have a proven record of doing so.