House, Senate negotiators say they will pursue 'hybrid' Medicaid model

"I think we're close to getting something done," said Sen. Louis Pate, R-Wayne, one of the lead negotiators for the Senate.

Through more than three years of negotiations and two legislative sessions, one of the biggest sticking points in the Medicaid discussion has been who would provide insurance for 1.8 million poor and disabled North Carolinians – roughly 18 percent of the state's population. Senate leaders had advocated for large managed care companies, or MCOs, in a bid to control costs as tightly as possible; House members had backed provider-led entities, or PLEs, created by local hospitals or physician groups.

Under what negotiators for both chambers say is a tentative agreement reached this week, both managed care companies and provider-led organizations will play a role. The latest Senate plan would allow Medicaid patients to choose whether they want to have their care handled by a large insurer or by a local group that would act as both health care provider and insurer.

"There are still details to be worked out," cautioned Rep. Donny Lambeth, R-Forsyth, a budget chairman and leading negotiator for the House on Medicaid.

"Had we stayed firm on both positions, we would have adjourned and gone home without a deal again," Lambeth said. "We've moved to both the MCOs and PLEs operating that Medicaid program in combination."

Officially, the House voted Wednesday to not concur with the Senate version of House Bill 372, the "Medicaid transformation" bill. That triggers a conference committee to work out differences between the chambers.

Both the House and the Senate have long agreed state needs to move away from a system where doctors and other health care providers are paid a fee for each service they provide. Rather, those overseeing patient care will be asked to take on the risk associated with caring for patients. In such a "capitation" system, an insurer gets a flat fee for each patient and makes money by keeping that person healthy – and limiting their use of medical services.

The question has been what that system would look like.

According to several House Republicans, a key breakthrough came during a closed-door caucus meeting Tuesday night during which members voted overwhelmingly to back a hybrid plan like the one put forward by the Senate rather than stick to the pure provider-led model that the chamber had been championing.

That doesn't necessarily mean negotiations will be smooth sailing. Along with Lambeth, Rep. Nelson Dollar, R-Wake, has been appointed co-chairman of the group negotiating the bill with the Senate. On the floor of the House Wednesday, Dollar appeared to continue arguing for a more locally-driven model.

"We have the expertise in North Carolina to build on the successes we've seen," he said. "We can build a North Carolina solution that's going to work well and serve us well in the future."

However, Pate and Sens. Ralph Hise, R-Mitchell, and Tommy Tucker, R-Union, said their understanding was that negotiations would go forward based on creating a hybrid plan.

"It was a big sticking point in the budget," Tucker said.

Originally, senators had included Medicaid reform language in their version of the state's $21.74 billion spending plan and vowed not to move forward on other spending items until a deal on Medicaid was reached. Earlier this month, senators pulled Medicaid out of the budget and agreed to run it as a separate bill, but the negotiations remain somewhat linked. Medicaid has been part of the logjam that has delayed a budget agreement that had been due by July 1.

Two of the biggest Medicaid items remaining to be settled is how quickly the state will move away from its fee-for-service model – House members have argued for a timeline closer to five years, while the latest Senate measure calls for a nearly three-year implementation period – and how the state would oversee the new system.

Senators have called for a whole new department to oversee Medicaid, taking the reins away from the Department of Health and Human Services. House members have argued that the bureaucracy should, by and large, remain as it is.

Lambeth also said questions remain about how to handle certain populations within the Medicaid system, such as those whose primary issue is a mental health diagnosis or older patients who are eligible for both Medicaid and Medicare.

Still, he characterized work on the bill as "85 percent complete" and said that the remaining details should be easier to work out now that a major sticking point is resolved. His Senate counterparts agreed.

"We should be able to move very quickly," Hise said Wednesday afternoon.