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General Assembly Restructures North Carolina Medicaid

General Assembly Restructures North Carolina Medicaid

Health Care Law Note
(September 21, 2015)

UPDATE September 23, 2015:  The Committee Substitute House Bill 372 discussed in this article was passed by the General Assembly, and was signed into law by Governor McCrory on September 23, 2015.  Therefore, the North Carolina Medicaid statutes were amended as discussed below as of that date.

This article is an update to the summary of House Bill 372, "Pending Legislation to Restructure North Carolina's Medicaid Program"

On September 17, 2015, a joint House/Senate conference committee issued a Proposed Conference Committee Substitute for House Bill 372 to restructure North Carolina's Medicaid and Health Choice programs ("Committee Substitute").  The Committee Substitute kept many of the provisions of the Sixth Edition of the bill (described in the previous article dated 9/8/15), but made several significant changes.

DHHS to Retain Responsibility
Unlike the previous edition, the Department of Health and Human Services (DHHS) would retain control of Medicaid and NC Health Choice.  Instead of their being transferred to a new "Department of Medicaid," the Committee Substitute would create a new "Division of Health Benefits" within DHHS. 

The provisions establishing a Joint Legislative Oversight Committee remain largely unchanged.

DHHS Responsibility for Capitated Rates
The capitated rates must still be risk adjusted and shall include a portion that is at risk for achievement of quality and outcome measures.  However, unlike the prior edition, DHHS would also set the capitated full-risk rates instead of the capitated rates being negotiated with contractors.  DHHS would also set rate floors for reimbursement of in-network primary care and specialty physicians, as well as pharmacy dispensing fees.  However, the Committee Substitute is silent as to reimbursement rates paid to other provider types, leaving open the possibility that reimbursement could vary from plan to plan.  The medical loss ratio under the contracts would be set by statute at 88%, pending the issuance of federal regulations, instead of being subject to negotiation.

Contractor Structure
The structure of the contractors also changed somewhat from the previous edition.  Under the Committee Substitute, contractors administering Medicaid benefits would be known as "Prepaid Health Plans" (or PHPs), which could be either "Provider-led Entities" (PLEs) or "Commercial Plans." Both PLEs and Commercial Plans would be subject to licensure by the NC Department of Insurance. 

PLEs must be majority-owned by persons or entities whose "primary business purpose" is the ownership or operation of one or more Medicaid and Health Choice providers, and the majority of their governing board must be composed of individual providers (physicians, psychiatrists, physician assistants, or nurse practitioners).  This marks a change from the prior edition, in which members of the governing board could be non-individual providers such as partnerships, groups, or associations.

As with the prior edition, there would still be three statewide contractors (either PLEs or Commercial Plans), and several regional contractors (PLEs only).  But the Committee Substitute would set the number of regions at six, and set the maximum number of regional contractors at ten. 

Participation by Providers
The Committee Substitute also goes further than the prior edition regarding providers' right to participate: providers could only be excluded from a PHP's network for (a) failure to meet objective quality standards, or (b) refusal to accept network rates.

Exceptions to Capitated Contracts for Mental Health, Dental
The Committee Substitute still generally requires capitated, full risk contracts for all Medicaid services statewide.  However, the Committee Substitute contains exceptions for dental services, and for mental health services to recipients currently served by an MCO or LME (those individuals will be excluded from capitated contracts for the first four years.

Vote by House, Senate
The Committee Substitute is currently on the legislative calendar in both the House and Senate for September 22, 2015 and has a good chance of passing.

The full text of the Proposed Conference Committee Substitute bill can be found on the General Assembly's web site at:

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