What is Medicaid Transformation?

Blog | June 19, 2018


By Berkeley Yorkery

Change is coming to Medicaid in North Carolina. The North Carolina General Assembly (NCGA) passed legislation (SL 2015-245 and SL 2016-121) to reform the state Medicaid and NC Health Choice programs. The stated intent of the legislation was to transform Medicaid and NC Health Choice to:


“(1) Ensure budget predictability through shared risk and accountability.


(2)Ensure balanced quality, patient satisfaction, and financial measures.


(3) Ensure efficient and cost-effective administrative systems and structures.


(4) Ensure a sustainable delivery system.”


The NCGA plan meets these goals primarily by moving from our current fee-for-service Medicaid payment system to a managed care system with capitated contracts.


What is Medicaid Managed Care?

Currently North Carolina’s Division of Medical Assistance pays for all eligible physical health services on a fee-for-service basis directly through payments to enrolled providers and health systems. Under Medicaid transformation, North Carolina will contract with prepaid health plans (PHPs) to provide physical health benefits and services for a capitated, or fixed, amount per enrollee.


Medicaid managed care is not new to North Carolina. Currently North Carolina’s Medicaid program uses managed care in a limited way: for primary care case management through Community Care of North Carolina), the LME/MCO system for behavioral health services, and the Program of All-Inclusive Care for the Elderly (PACE) (limited availability). However, the use of PHPs for coordinating all Medicaid benefits and services to enrollees will be new [1].


Who will Medicaid Managed Care Cover?

The Medicaid program serves approximately 2.2 million eligible individuals [2] with low incomes who meet at least one other eligibility category (children, pregnant women, parents with dependent children, people with disabilities, or the elderly. The majority of these (1.9 million) are children and families who will be enrolled in MCOs upon program launch. [3].


Certain Medicaid populations have been selected for delayed enrollment. 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.


When is this happening?

Before North Carolina can change anything about the state Medicaid program, approval must be granted by the federal Centers for Medicare and Medicaid Services (because Medicaid is a federal program that is jointly funded by the federal government and states, and operates in accordance with federal law). The state submitted the initial waiver application June 1, 2016. Approval was not granted before changes in administration at the federal and state level. The state submitted an amended waiver application November 20, 2017, and is currently awaiting approval from the federal government. Once the federal government approves North Carolina’s waiver, the legislation passed by the NCGA requires the new managed care system to be operational within 18 months.


In this monthly blog series, we will explore Medicaid Transformation in North Carolina.

Next Month: Proposed Program Design for Medicaid Managed Care in North Carolina


[1] 38 states use MCOs to provide Medicaid benefits.

[2] Average monthly enrollment in SFY 2018. (https://dma.ncdhhs.gov/documents/reports/enrollment-reports/medicaid-and-health-choice-enrollment-reports)

[3] Healthy Moms Healthy Babies Website. (https://www.hmhb.org/)