Changes Coming to North Carolina Medicaid in 2019

Nelson Mullins Riley & Scarborough LLP

Nelson Mullins Riley & Scarborough LLP


Even without expanding Medicaid under the Affordable Care Act, North Carolina has over 2.1 million residents who are Medicaid beneficiaries, and a half million of these have complex behavioral health needs.  According to a recent Health Affairs article by former CMS Administrator Mark McClellan and colleagues at the Duke Margolis Center for Health Policy, North Carolina ranks 33rd in overall health, with 14.7% of residents living below the poverty line and over one million residents uninsured. 

In response to chronic budget overruns and alleged mismanagement of the North Carolina Medicaid Program, North Carolina’s General Assembly enacted legislation in 2015 requiring the state to transition its Medicaid fee-for-service program to a managed care program.  In October 2018, the Centers for Medicare & Medicaid Services (“CMS”) approved North Carolina’s request for a section 1115 Medicaid demonstration waiver, effective for five years starting on January 1, 2019.  The approval permits North Carolina to transition to Medicaid managed care and to implement other programs to transform the Medicaid program.  Details about the transition have been emerging over the past two years; here’s what we know so far.

Transition to Medicaid Managed Care

Following an RFP process begun in 2018, the North Carolina Department of Health and Human Services (“North Carolina HHS”) awarded Prepaid Health Plan (“PHP”) contracts to the following four entities to offer such plans to Medicaid beneficiaries across the state:

  • AmeriHealth Caritas North Carolina, Inc.
  • Blue Cross and Blue Shield of North Carolina
  • UnitedHealthcare of North Carolina, Inc.
  • WellCare of North Carolina, Inc.

In addition, a single regional PHP contract was awarded to Carolina Complete Health, Inc., a provider-led entity comprised of the North Carolina Medical Society, the North Carolina Community Health Center Association, and insurer Centene Corp.    

These five PHPs will contract with North Carolina Medicaid for a combined $30 billion over the next five years.  North Carolina aims to transition at least 70% of Medicaid health care payments to alternative payment models during this time frame.  However, those having complex behavioral health needs will not transition to specially-tailored Medicaid managed care plans until at least July 2021, based upon North Carolina HHS’s latest estimate.

What’s in Store for Beneficiaries and Providers

According to North Carolina HHS, beneficiaries will be able to choose their PHP (with help from an enrollment broker if needed) and will be subject to the same eligibility rules, have the same services and supplies covered, and pay the same co-pays as under the current Medicaid program.

Providers will have the opportunity to contract with multiple PHPs, an opportunity to negotiate rates (floor rates apply), and the ability to participate in Advanced Medical Home programs with tiered payments.  Additionally, providers will be able to build relationships with the PHPs, use a PHP provider assistance line, have appeal rights, and work with a North Carolina HHS provider ombudsman if they encounter problems with a PHP.  There also will be a centralized provider enrollment and credentialing process for providers and a single statewide drug formulary that all PHPs must use.

Proposed Timing of Transition

This map shows the six regions into which North Carolina has been divided for purposes of Medicaid PHPs and the dates on which those regions are projected to begin the shift from Medicaid fee-for-service to Medicaid managed care. 

  • Phase 1 - Regions 2 and 4 will roll out in November 2019
  • Phase 2 - Regions 1, 3, 5, and 6 will roll out in February 2020

However, one of the provider-led groups that was not awarded a PHP contract (My Health by Health Providers, a consortium of the state’s 12 largest health systems and Presbyterian Health Services of New Mexico) appealed North Carolina HHS’s rejection of its application.  That appeal was denied on April 5, and My Health by Health Providers has appealed the denial to the North Carolina Office of Administrative Hearings (“OAH”) and has asked OAH to order North Carolina HHS to stop proceeding with the roll out until the appeal has been heard.  Although North Carolina HHS previously indicated that the appeal would not affect the managed care roll-out dates, in other states such appeals have in some cases resulted in delayed roll outs.

Next Steps

Assuming there is not a delay in the roll out dates, providers and the PHPs likely already are negotiating contracts, and the contracting process is expected to be completed during the summer.  From July through September, beneficiaries in Phase 1 counties will select a PHP, and those who do not select a PHP will have one automatically assigned to them based on factors including where they live, assignments of family members, and their historical relationships with a primary care provider or an Advanced Medical Home.  Beneficiaries in Phase 2 counties will select a PHP between October and December 2019.

Other Medicaid Program Changes

Additional Section 1115 Medicaid Demonstration Waiver Features

North Carolina’s approved Medicaid demonstration waiver enables several additional features to be incorporated into the new managed care delivery system, including:

  • The Healthy Opportunities Pilot, a program to be conducted in two to four of the six regions throughout the state, is aimed at improving health and reducing health care costs by paying for evidence-based social and community interventions addressing housing, transportation, food, and interpersonal safety and toxic stress (otherwise known as “social determinants of health”).  North Carolina is the first state to receive federal approval for this type of pilot program.
  • Medicaid Advanced Medical Home programs will provide enhanced primary care and care coordination for beneficiaries.  Under this program, primary care providers will take on care management for a group of patients for a per-member-per-month payment.
  • Integration of physical and behavioral health care, including the provision of more intensive behavioral health benefits through Tailored Plans (serving those with serious mental illness, serious emotional disturbance, serious substance use disorders, intellectual or developmental disabilities, and traumatic brain injury), and implementation of a specialized health home model to assure appropriate case management for beneficiaries in these Tailored Plans.
  • To further mitigate the effects of the opioid crisis, North Carolina HHS will increase access to inpatient and residential substance use disorder treatment, in part by, for the first time, permitting such treatment in Institutions for Mental Disease (inpatient residential treatment programs having more than 16 beds).

Proposed Legislation to Expand Medicaid

North Carolina House Bill 655, entitled the NC Health Care for Working Families Act, was introduced on April 9.  The bill would require some Medicaid recipients between ages 19 and 64 to work, and it also would require the state’s health care systems and PHPs to pay an expected $758 million annually for the state’s 10% share of the additional administrative costs (the federal government would pay for the remaining 90%).  Despite this cost share proposal, the North Carolina Healthcare Association and the North Carolina Medical Society both support the bill because it would increase access to care. CMS has indicated it will not consider Medicaid expansion proposals that include a work requirement unless the proposals first are approved by a state legislature, so the North Carolina General Assembly must agree upon and enact legislation surrounding this proposal before any such expansion could proceed.

Still to Come

We haven’t yet seen proposed contracts between PHPs and either North Carolina Medicaid or health care providers, and North Carolina HHS has not yet revealed its final per member per month rates for Medicaid Advanced Medical Homes.  It’s also unclear whether the technological and personnel infrastructure at North Carolina Medicaid and the PHPs will be sufficiently robust to handle the number of transactions that will occur as a result of the transition (recall the snafu that accompanied 2013’s rollout of North CarolinaTracks, North Carolina Medicaid’s then-new billing system).  Check back here for periodic status updates as we learn more about the upcoming transition.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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