By Jaymie Baxley
State health officials fielded questions and criticism from lawmakers on Tuesday about recently implemented cuts to Medicaid reimbursement rates for health care providers.
The cuts, which took effect Oct. 1, were made after the state Senate and House of Representatives reached a stalemate over Medicaid’s annual “rebase,” the amount of funding needed each year to cover changes in the number of people covered by the program and the cost of caring for them.
Both chambers have agreed to provide the $319 million that the N.C. Department of Health and Human Services says it needs to fully fund the rebase. The legislature already provided the department with $600 million when they passed their limited “mini-budget” in June, but the department had said more was needed.
Even though both chambers agree on spending the extra dollars, the House is opposed to the Senate’s insistence on tying those funds to an accelerated timetable for lowering taxes, along with a separate allocation of $103 million for the construction of a children’s hospital in Apex.
That’s transformed Medicaid funding into a bargaining chip in more extended budget negotiations.
Rather than wait for the House and Senate to overcome their impasse, NC DHHS moved forward with rate reductions, some as high as 10 percent, to adjust for the shortfall.
During this week’s meeting of the General Assembly’s Joint Legislative Oversight Committee on Medicaid, NC DHHS Secretary Devdutta Sangvai acknowledged that the cuts were “extremely difficult for our provider community, especially those in rural areas and underserved areas.”
“I want these providers in particular to know that we depend on them to deliver care to Medicaid beneficiaries, and we know that lower reimbursement rates strain the ability to do so,” he said.
But several members of the committee voiced frustration with the department’s handling of the rate cuts, arguing that they could have been postponed while lawmakers worked toward a compromise.
“I’ve never seen this happen with HHS since I’ve been here, where they reduce rates before we got through the year,” said Rep. Donny Lambeth (R-Winston-Salem), a co-chair of the committee who has been in the legislature for 12 years. “We reconcile towards the end of the year, and that’s what I thought we would do this year.”
Lambeth, who was a hospital president before he ran for office, went on to call the cuts “unnecessary,” and questioned why the department did not attempt to reduce administrative costs before slashing reimbursement rates.
Jay Ludlam, head of the state’s Medicaid program, responded by pointing out that NC DHHS had “let go a large number of contracts and contractors” in an effort to save money while leaving some of its vacant positions unfilled.
“We are doing what is within our control,” he said.
Sympathy, scrutiny for providers
Rep. Sarah Crawford (D-Raleigh) asked Ludlam if NC DHHS had considered what impact the cuts will have on facilities that house Medicaid participants with severe and profound needs.
The issue hits close to home for Crawford. She’s the CEO of TLC, a Raleigh-based nonprofit that operates multiple group homes for people with profound disabilities who require 24-hour personal care.
“It will be more costly to have those individuals in hospital beds than it is in ICF or Innovations beds,” she said, referring to intermediate care facilities and the residential settings supported through North Carolina’s Innovations Waiver program. That’s a Medicaid program that provides community-based services for people with intellectual and developmental disabilities so they can avoid institutionalization.
Ludlam said the department has not calculated the cost of housing displaced enrollees with I/DD because it does not yet know “what the full impact will be.” Still, he acknowledged that the state could “see higher levels of acuity and potentially higher costs” if the cuts remain in effect.
“We do agree that lower rates mean that providers are likely to not see as many Medicaid beneficiaries, that beneficiaries will be turned away from care, [and] that they will seek higher levels of care, which potentially could be more costly for the state,” he said.
Ludlam said the department had hoped to avoid reducing reimbursement for providers. He noted that NC DHHS “was requesting provider rate increases” just last year.
Sen. Gladys Robinson (D-Greensboro) said she could “appreciate the predicament” that the department is facing. At the same time, she expressed concern about providers struggling to keep their doors open under the new rates.
“I’ve heard from providers who are concerned about the cuts and if they will be able to sustain services, and I don’t know what the answer is,” she said, adding that some primary care providers are “threatening not to take Medicaid patients.”
Ludlam told Robinson that NC DHHS had not observed a decrease in the number of providers who accept Medicaid in the two weeks since the cuts were implemented. It will take time, he said, for the drop to be reflected in the department’s data because “providers don’t tend to disenroll” from the program before they start turning patients away.
“It’s devastating, honestly,” Ludlam said. “This is not the direction we would want to go, but this is where we are with our budget and our forecasted spend this year.”
Sen. Ralph Hise (R-Spruce Pine) said that while “every provider thinks” they’re underpaid for Medicaid-covered services, some of those services are “quite profitable,” especially for large hospital systems. He wondered if NC DHHS could root out providers who are being “overpaid” through the creation of an all-payer claims database — something that more than 20 other states have done.
Ludlam said such a database could help North Carolina gain a clearer picture of how health care dollars are spent across the system. He noted that the idea had been discussed by the state’s Primary Care Task Force, which he chaired last year, but members could not reach consensus on recommending it.
Proponents, he added, believed that having a shared, statewide view of payment and utilization data would allow policymakers and providers alike to see how different sectors compare, identify cost pressures and determine whether North Carolina is truly improving health outcomes while reducing spending.
In 2017, the North Carolina Institute of Medicine convened a task force on creating such a database that recommended creation of one, even as industry players were cool on the idea. The concept has never been pursued in earnest by lawmakers.
‘We had an understanding’
Rep. Donna McDowell White (R-Clayton), a co-chair of the oversight committee, condemned the cuts, calling them “shocking” and “hurtful.”
She said lawmakers had spent months working with NC DHHS and the governor’s office to find a way to delay the reductions until spring, offering several budget proposals to prevent disruptions in care.
“We thought we had an understanding with the governor’s office. We thought we had an understanding with you all,” she said. “So I’m very disappointed today that all the work that has been put on to not hurt the people of North Carolina” had failed to stop the cuts.
White, a nurse, warned that the lower rates could have dire consequences for vulnerable residents and the providers who care for them.
“When we look at agencies possibly having to close down, when we look at agencies having to not be able to admit the sickest and the most fragile of our communities — the I/DD population, the disabled population and our aging population — when we look at all of those services possibly being reduced, possibly being shut down, and then we’ve got to start all over again, I cannot imagine that,” White said.
She urged the department to show “a little bit of patience” and continue working with lawmakers to find a solution.
“We can do better than this, and we can start today,” White said.
Later in the meeting, Ludlam reiterated that the decision to move forward with the cuts was “incredibly difficult.”
“Unfortunately, we don’t operate with the budget we wish we had,” he said. “We operate with the budget we do have, and we’ve had to act like a business and reduce costs in order to manage the budget that was appropriated.”
But it is not too late, he said, for lawmakers to intervene and restore funding before the reductions cause lasting harm to the state’s health care system.
“We designed our response to be reversible, and so we have committed to reversing those provider rate cuts, really as soon as practically possible, if the money is appropriated,” Ludlam said.
The General Assembly is set to reconvene in Raleigh on Monday, although it is not yet clear if the Senate or House will move to vote on their dueling bills to provide the additional Medicaid dollars.
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