- Associated Press - Tuesday, January 12, 2016

RALEIGH, N.C. (AP) - With North Carolina’s path to overhauling Medicaid finalized last fall, the race is on for state health officials to meet a tight schedule so a new managed-care system can take effect by 2018 or 2019.

The head of the new Division of Health Benefits, which is tasked with carrying out the overhaul, told a legislative oversight committee Tuesday that her office is on track to meet deadlines in March and June.

Though her office now has only two employees, five more should be hired by the end of the month, operations director Dee Jones said, with a total of 20 workers by the end of June. Two consultants also have been hired.

The legislature and Gov. Pat McCrory agreed in September to replace the fee-for-service system, in which Medicaid reimburses doctors and hospitals for each service performed on a patient, with a system in which the state contracts with commercial managed-care companies or local hospital or doctor networks.

The statewide and regional “prepaid health plans” will receive fixed monthly amounts for each patient they treat. The new system is meant to bring more cost stability for Medicaid, which serves more than 1.8 million state residents - mostly poor children, older adults and the disabled.

Jones’ office must provide the oversight committee with a formal report that includes recommendations on additional changes to Medicaid law by March 1. The expected changes also apply to NC Health Choice, the federal-state insurance program for children in low-income families with working parents.

By June 1, the division must submit formal requests to alter how Medicaid and NC Health Choice comply with the new payment and treatment method to federal Medicaid regulators. The Centers for Medicare and Medicaid Services must approve the changes, but that could take a year. The law directs the managed-care contracts to begin 18 months after federal approval.

“This is both a complex and time-critical operation,” said Rick Brajer, secretary of the Department of Health and Human Services, which oversees Medicaid.

Some committee members peppered Jones with questions about the two consultant hirings, which could cost the state more than $2 million. They’ve been unhappy with previous high-priced consultant contracts within DHHS criticized as open-ended or vague.

The no-bid contracts were necessary to meet the upcoming deadlines in the law, Jones said. The consultant contracts demand specific results, with financial penalties for failing to meet them on time.

“We have no desire to do anything that’s not transparent,” Jones said.

North Carolina Medicaid is expected to spend $14 billion for the year ending June 30. The state budget projected the state’s share would be more than $3.7 billion.

Through November, however, the state has spent about $139 million less than had been budgeted, according to a presentation for the committee. That’s in part because enrollment is growing less than projected. Medicaid Finance Director Trey Sutten said enrollees also are consuming fewer services and prescription drugs than anticipated.

Although enrollment and services for older adults and the disabled have been ticking up recently, Sutten said, Medicaid officials are still “very confident that we will finish the year within budget.”

While Medicaid has been prone to cost overruns in recent years, its finances ended up in the black during 2014 and 2015.

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