North Carolina’s Medicaid Transformation Design

Blog | July 23, 2018


By Berkeley Yorkery


This post is part of a monthly blog series, in which we will explore Medicaid Transformation in North Carolina.


North Carolina’s Medicaid Transformation waiver is awaiting approval from the federal Centers for Medicare and Medicaid Services. Once approved, the state hopes to move quickly, with enrollment of those eligible beginning within 12-18 months.


Proposed new design for a transformed Medicaid program in North Carolina

In the waiver application, DHHS proposed a new design for Medicaid in North Carolina. Instead of reimbursing health systems and providers directly, under Medicaid managed care DHHS will contract with Prepaid Health Plans (PHPs) to deliver health services to enrollees [1]. PHPs will receive a monthly capitated payment for each enrollee. DHHS will provide monitoring and oversight of the PHPs, which will be required to meet quality and outcome metrics and other requirements.


Why move Medicaid to managed care?

Thirty-eight states have Medicaid managed care programs. By contracting with managed care organizations, called prepaid health plans (PHPs) in North Carolina, states shift some of the financial risk to PHPs and, in the process, gain more budget predictability.


Shifting to PHPs also creates incentives that do not exist in the fee-for-service Medicaid program. Because MCOs receive a set amount per enrollee regardless of cost of care, the MCO makes money by reducing costs. In order to ensure that PHPs do not just reduce utilization of services, states write contracts holding PHPs accountable for various requirements including network adequacy, quality of care, outcomes, program integrity, and others.


Who will deliver care?

PHPs will develop networks of providers to ensure access to services, provide care coordination to improve health outcomes, and implement initiatives to achieve state quality objectives. Primary care providers (PCPs) who want to see Medicaid enrollees will contract directly with one or more PHP networks. PHPs will start by reimbursing providers using fee-for-service payments but will be encouraged to move towards value-based payments in future years.


Enrollment in Medicaid Prepaid Health Plans

Under Medicaid managed care, eligible Medicaid and NC Health Choice enrollees will be required to select a PHP or be automatically enrolled in one. DHHS is developing a streamlined, user-friendly eligibility and enrollment system that will be available online, by telephone, in-person or by mail. Individuals will choose both the PHP they want to enroll in and identify their primary care provider with the assistance of enrollment brokers and/or county DSS offices [2].


Background: Click here for more on “What is Medicaid Transformation




[1] Certain Medicaid populations have been selected for delayed enrollment and will remain in DHHS administered Medicaid. Children in foster care and adoptive placements are scheduled to enroll in year two, followed in year three by beneficiaries with certain behavioral health diagnoses and Medicaid beneficiaries in long-stay nursing homes. In year five, Medicaid CAP/C and CAP/DA waiver beneficiaries and individuals receiving Medicaid and Medicare will enroll in PHPs. Some populations are excluded from the Medicaid managed care program (see

[2] Primary care providers (PCP) who want to see Medicaid enrollees will join one or more PHP networks. Enrollees will then be able to select a plan based on which PHP network their preferred PCP belongs to.