Sesame Street asks: Can you tell me how to get to North Carolina?

“One of these things is not like the other; one of these things doesn’t belong.  Can you tell which thing is not like the other before I finish my song?”

This catchy little ditty from the beloved show Sesame Street teaches children how to spot differences in everyday objects. It also brilliantly demonstrates what’s wrong with North Carolina Medicaid and offers guidance on the path legislators in the Tar Heel state should take.

In February, North Carolina Gov. Pat McCrory and the North Carolina Department of Health and Human Services (DHHS) recommended to the Medicaid Reform Advisory Committee that North Carolina Medicaid should be revamped using a shared savings accountable care organization (ACO) model instead of their original plan to introduce capitated managed care focused on care coordination and budget predictability.  In May, House leaders submitted a bill that moves from Medicaid fee-for-service to forming Medicaid ACOs.  The Senate, however, countered with a budget that would require DHHS to stop pursuing the ACO model and move to full-risk capitated plans to care for the state’s Medicaid population. The debate rages on.

North Carolina’s annual Medicaid budget is $13 billion and requires an additional $400 million per year above that according to 2013 data. This spending has increased by 90% in the last 10 years.  To remedy this startling and unsustainable trend, look no further than North Carolina’s neighbors that have moved to managed Medicaid, providing better care at lower cost.

For example, Georgia uses managed care for many of its beneficiaries. With its Medicaid and PeachCare budget totaling $7 billion, it’s almost half that of North Carolina’s. Are the disadvantaged in North Carolina sicker than those in other states? No, they are not. The difference is Medicaid managed care. In refusing the coordinated care and budget predictability of managed care, North Carolina stands alone.  Other states like Florida, Virginia, Kansas, Kentucky, South Carolina, Tennessee, Texas, and now even Maine are considering or already have moved from a fragmented system toward mainstream use of risk-based plans that actually save money while providing coordinated, high-quality care to Medicaid beneficiaries. Which of these things is not like the other?  It’s North Carolina.

The House recently revised their bill to recognize the need to go to capitated risk-based care. Legislators inserted the concept of phasing in capitation for the ACO structure, but it remains unclear what services would be covered under the capitated payments and when the ACOs would be fully at risk.  This is an attempt to neutralize the concern about budget predictability, but it’s just not enough. To close the budget gap without raising taxes, provide more resources for teacher salaries, and ensure that the poorest and sickest receive quality care at lower costs, the North Carolina state legislature should adopt REAL reform via managed Medicaid, and not some illusory accountable care organization “savings” model.


Jeff Myers is the president and CEO of Medicaid Health Plans of America, the national trade association representing the Medicaid managed care industry.

Morning Consult