NC Judge Dismisses Medicaid Transformation Contract Claims

NC Judge Dismisses Medicaid Transformation Contract Claims

At a time when North Carolina residents are all thinking about healthcare costs, proposed transformation of the NC Medicaid system makes headlines.

Although those changes have received both bipartisan support and criticisms, unsuccessful bidders for the new Medicaid contract remain unhappy with the outcome. Earlier this week, those bidders received another blow in court.

North Carolina’s Medicaid “transformation” has been a bipartisan effort a long time in the making.

In 2015, the N.C. General Assembly passed legislation designed to transition Medicaid and N.C. Health Choice from a “fee-for-service” system to “managed care” system. With the “fee-for-service” system, the state itself paid for Medicaid recipients’ individual healthcare costs. This system could lead to unpredictable healthcare costs, depending on each individual Medicaid recipient’s care.

With the “managed care” system, on the other hand, the state passes that “burden” onto insurers. That’s a victory for North Carolina. The new system provides certainty: the state will pay a specific, predetermined “per-person” rate no matter what.

The new system is also a victory for private insurers, because of the potential monetary windfall each year. Should the costs exceed the rate, the companies suffer a loss. Should the costs stay under the cap, however, the companies will see a profit. (The state does set rules to ensure that the potential windfall isn’t too substantial, though.)

While it’s unlikely that anyone would call the new system flawless, it is an example of bipartisanship in North Carolina. Former governor Pat McCrory (a Republican) and Gov. Roy Cooper and the Department of Health and Human Services (“DHHS”) Secretary Mandy Cohen (both Democrats) have consistently supported the effort.

For unsuccessful bidders, however, the contract process has served as proof of an unfair playing field.

Despite its political bipartisan support, the new Medicaid contract also comes with controversy. Approximately 1.6 million people will move into plans under the “managed care” system when it starts at some point next year. And with such a significant number of plan participants, the price tag to the State for the private contracts is steep.

Ultimately, the state awarded five companies approximately $6 billion per year to implement the new plan. Stated simply, $6 billion is a lot. That’s more than $16 million over the course of a year. Consequently, the bidding for those contracts was competitive. Or, according to the unsuccessful bidders, it should have been.

The state awarded contracts to five companies: AmeriHealth Caritas North Carolina, UnitedHealthcare of North Carolina, WellCare of North Carolina, Carolina Complete Health, and BlueCross BlueShield (BCBS) of North Carolina. 

NC medicaid transformation is a hot-button issue right now.
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Unsuccessful bidders included Aetna Better Health of North Carolina, Optima Family Care of North Carolina and My Health by Health Providers. Earlier this year, those bidders filed suit, alleging that the state improperly awarded BCBS of NC a significant portion of the $6 billion on the table.

Specifically, they alleged that one DHHS employee involved in the bidding process was dating a BCBS executive. They also alleged that another employee took a job with BCBS shortly after the contract award. Finally, the insurers alleged that a third employee worked for BCBS of NC before joining DHHS. All in all, the unsuccessful bidders contended that the bidding process was not fair.

Earlier this week, a North Carolina judge dealt those insurers a blow in their challenges to the bidding process.

Earlier this week, Administrative Law Judge Tenisha Jacobs sided with DHHS and BCBS of NC, dismissing the claims in full. DHHS praised the decision in a statement shortly after the decision, calling it an affirmance of “the integrity and fairness of the department’s managed care procurement process.”

The unsuccessful bidders, however, indicated that their fight hasn’t finished. “After 18 months of trying to have our concerns heard by OAH, time is of the essence as North Carolina transformation Medicaid is scheduled for implementation in less than a year,” an Aetna spokesperson said in a statement.

“We look forward to the opportunity to present our concerns about the state’s procurement process in Superior Court to help ensure that Medicaid beneficiaries in North Carolina have the most qualified and experienced health benefit plan to help them achieve optimal health outcomes.”

What Does This Medicaid Change Mean for You?

As of now, it’s hard to tell (and depends on who you ask).

While the NC Medicaid transformation received support from both sides of the aisle, it wasn’t free from criticism. And most of that criticism focuses on what the changes mean for North Carolinians who rely on Medicaid.

Opponents of the transformation expressed concern at the introduction of private, for-profit insurance companies into the Medicaid system. According to those opponents, that transformation could lead to higher administrative costs. As a result, they claim, insurance companies might have incentives to decline care to Medicaid recipients to limit their costs (and maximize their profits).

Photo courtesy of National Cancer Institute on Unsplash

Opponents of the changes also question whether adding a middle man will translate into any benefit. When the House originally passed the bill, Republican Rep. Nelson Dollar (Cary) expressed this concern. “If we want competition, let it be with the provider of the services,” he said at the time. “Why more than double the administrative costs we are currently paying by adding middle men between doctors and patients? I just don’t see where the value is.”

Finally, critics continue to fault North Carolina for being just one of 14 states in the country to decline to offer expanded Medicaid.

Ultimately, what the upcoming changes mean for North Carolina residents isn’t clear. But it likely won’t be long until Medicaid recipients will find themselves working with private insurance providers rather than the state for healthcare coverage. Only time will tell whether the critics’ fears of a bloated process will come true.

Looking for more news about legal and medical issues in North Carolina? Stay tuned to our Law and Health sections for daily updates.