Medicaid Transformation vs. Expansion – What’s the Difference?

Blog | September 10, 2019


Written by James Coleman


With Medicaid transformation on the horizon, and Medicaid expansion a major issue of debate in the North Carolina General Assembly (NCGA), all things Medicaid have been hot topics among health care leaders, state policymakers, and affected consumers. With both happening at the same time, it is important to delineate their differences. Below is an overview of the debate concerning Medicaid expansion and a breakdown of what is going on with Medicaid transformation in North Carolina.


Medicaid Expansion

Since the passage of the Affordable Care Act in 2010, states have been given the option to expand coverage of Medicaid to low-income adults at or below 138% of the federal poverty level. So far, 36 states and the District of Columbia have expanded Medicaid coverage to low-income, working-age adults who would not have qualified for the program under previous Medicaid eligibility requirements.


North Carolina is among the 14 states that have not expanded Medicaid, with expansion being a hot button issue and a point of contentious debate in the NCGA.1 Opponents argue that expanding Medicaid would add to state budget deficits, reduce Medicaid payments to providers, and take away Medicaid resources from traditional enrollees such as children, pregnant women, and the elderly, to the benefit of able-bodied adults.2 Proponents argue that expanding Medicaid would offer medical coverage to 500,000 people who need it to receive medical treatment and medications, inject tax dollars back into the state, protect families from medical debt and bankruptcy, and create jobs.3 In the current legislative session of the NCGA, there has been a huge push by proponents for expansion.4 Perhaps the biggest supporter, Governor Roy Cooper, vetoed the most recent budget proposal from the NCGA because of its exclusion of Medicaid Expansion in June 2019.5 The stalemate over the state’s budget and Medicaid expansion is approaching the two-month mark, and the prospect of Medicaid expansion inclusion in the budget is up in the air. In addition to the governor’s efforts, bi-partisan proposed legislation to expand Medicaid is being considered by the NCGA. A comparison of both bills was covered in a previous NCIOM blog post.



Medicaid Transformation

In 2015, the NCGA enacted legislation (SL 2015-245 and SL 2016-121) directing the North Carolina Department of Health and Human Services (NCDHHS) to transform North Carolina’s Medicaid system from a fee-for-service payment system to a managed care system. The purpose of Medicaid transformation is to improve integration of services, improve care management, and to address unmet social needs that contribute to poor health.6 Through a managed care system, Medicaid eligibility requirements and provided services will remain the same and NCDHHS will continue to provide oversight for Medicaid and NC Health Choice programs. However, NCDHHS will now contract with statewide health care entities to manage prepaid health plans (PHPs) for the provision of health services for Medicaid enrollees. NCDHHS received federal approval from the Centers for Medicare a& Medicaid Services to transform Medicaid in October 2018, and an initial launch of managed care is planned for February 2020. 7–10


Below are the changes coming to North Carolina Medicaid with the transition to managed care:

  • Approximately 1.6 million of North Carolina’s 2.2 million Medicaid and health Choice program beneficiaries will be enrolled in a standard plan.
    • Those enrolled in the standard plan will be provided integrated physical health, mental health, and behavioral health care through PHPs.
  • The following statewide entities will manage the PHPs:
    • AmeriHealth Caritas North Carolina, Inc.
    • Blue Cross and Blue Shield of North Carolina
    • Carolina Complete Health
    • UnitedHealthcare of North Carolina, Inc.
    • WellCare of North Carolina, Inc.
  • Some Medicaid and Health Choice program beneficiaries will be exempt or temporarily excluded from enrollment in a standard plan.
    • Those who are exempt and will remain in the fee-for-service system (Medicaid direct) are:
      • Family Planning Program enrollees
      • Those designated Medically Needy
      • Health insurance premium payment program enrollees
      • Program of all-inclusive care for the elderly enrollees
      • Refugee Medicaid
    • Beneficiaries that are temporarily excluded but will be enrolled at a later date are:
      • Dually eligible Medicaid/Medicare beneficiaries
      • Children in the Foster Care/Adoption system
      • Community Alternatives Program for Children enrollees
    • Medicaid beneficiaries who are members of federally recognized Native American tribes and beneficiaries who have significant behavioral health needs or intellectual disabilities will be enrolled in specialized managed care plans in 2021.
      • Until tailored plans are established in 2021, these Medicaid beneficiaries will have the option of either keeping Medicaid Direct or enrolling in a managed care standard plan.


For more information on Medicaid transformation, see the following previous blog posts:


What is it?


What’s the context and what’s coming next?


What does/will it look like?


Healthy opportunities pilots


Data and quality of care:


Types of health plans:


What’s a PHP and why should we care?




  1. Burns M, Leslie L. After years of debate, NC Medicaid expansion plan clears first legislative hurdle. WRAL.
  2. Restrepo K. Medicaid Expansion. John Locke Foundation.
  3. Expanding Medicaid in NC. North Carolina Justice Center.
  4. Hoban R. New General Assembly budget includes many health care features, but no Medicaid expansion. North Carolina Health News. Published 2019.
  5. Specht P. Roy Cooper will veto GOP-backed state budget. Will lawmakers override him? The News and Observer. Published 2019.
  6. North Carolina Department of Health and Human Services. North Carolina’s Proposed Program Design for Medicaid Managed Care. Raleigh, NC; 2017.
  7. Riley B. Important Changes Coming to NC Medicaid. North Carolina Justice Center. Published 2019.
  8. Yorkery B. What is Medicaid Transformation? North Carolina Institute of Medicine. Published 2018.
  9. North Carolina Department of Health and Human Services. NC Mediciad. NC Medicaid Managed Care Prepaid Health Plan Contract Awards Fact Sheet.; 2019.
  10. North Carolina Department of Health and Human Services. NCDHHS Extends Open Enrollment for Medicaid Beneficiaries, Announces Statewide Move to Managed Care in February. Published 2019. Accessed October 9, 2019.