A new Senate plan to overhaul the state’s Medicaid program drew immediate fire from doctors and hospitals who do not like that the proposal would open the state to commercial managed care for people using the government insurance.

The legislature is trying to change Medicaid so the state knows each year about how much the program will cost. The $13 billion program that covers about 1.7 million low-income children, select parents, disabled and elderly people has run over budget the last four years. Legislators say Medicaid absorbs money they’d rather spend on other priorities.

The state wants to make the Medicaid budget more predictable and to have a program that treats the “whole person,” said Sen. Louis Pate, a Mount Olive Republican.

A day after key legislators trumpeted the similarities in the House and Senate plans, it became clear Wednesday that a gulf separates the two concepts.

Gov. Pat McCrory has endorsed a House plan that would have only provider-led Medicaid networks operating in the state.

In a statement, McCrory's communications director Josh Ellis said, “the Senate’s proposed bureaucratic reorganization is impractical and undermines the progress that has been made during the past year and a half. This legislative overreach also raises some serious constitutional issues and should not be raised in the closing days of the short session.”

The N.C. Medical Society and the N.C. Hospital Association objected to inviting managed care companies into the state program and allowing them to take Medicaid funds as corporate profits.

The hospitals like some things about the bill, said Cody Hand, an N.C. Hospital Association vice president. But providers can do a better job of managing patients and money than managed care companies, he said.

The N.C. Academy of Family Physicians came out forcefully against the bill, saying it ignores 16 months of work developing a plan that would work for the state.

Managed care puts an additional regulatory and administrative burden on providers, said Gregory K. Griggs, the group’s executive vice president.

“The Senate’s plan is not only a wasteful use of scarce Medicaid resources, but also a blow to small business owners providing primary care across our state,” he said.

Many options considered

The state has toyed with a number of options for Medicaid changes, including statewide commercial managed care, regional managed care, accountable care organizations where provider networks would share Medicaid care savings and losses with the government, and provider-led managed care. As it is now, state and federal governments are on the hook when Medicaid costs more than predicted. Legislators want to gradually make providers responsible for all the costs if they spend more on care than the state thinks they should.

The Senate plan harkens back to a plan for regional managed care organizations that a DHHS advisory committee briefly discussed.

The Senate plan would have provider-led and commercial managed care organizations compete for enrollees, with the provider-led plans being responsible for their cost overruns by 2018. Under the House proposal, provider networks wouldn’t be fully responsible for budget overruns until 2020.

“We think the Senate plan is more inclusive and will give better results to the outcomes of Medicaid and better health care to the citizens that rely on Medicaid,” Pate said. Committee discussion will continue Thursday.

Senators said they looked to Florida as an example of where provider-led networks and commercial HMOs manage Medicaid.

The Senate proposal would cover all Medicaid recipients, including elderly people in long-term care arrangements and people with mental illnesses. And it would mean major and unpredictable changes for the regional government mental health offices that operate as managed care organizations.

The House and the McCrory administration want to preserve the state’s mental health managed care system.

Adam Sholar, the lobbyist for DHHS, said the department was concerned about “the potential destabilizing effect” some of the changes could have on the mental health system.

And Sholar questioned whether the state could get federal permission for all the changes on a schedule compatible with the bill’s “aggressive time line.” The federal government pays about two-thirds of the state’s Medicaid costs. The state must get federal approval to make big changes in its Medicaid plan.

Ending DHHS oversight

The Senate would also take control of the Medicaid program from the state Department of Health and Human Services and give it to a new Department of Medical Benefits that would be run by a paid board of directors. The Medicaid director would work for the board.

The board would be weighted toward members with corporate experience but exclude providers or people employed by hospitals or universities. That provision drew criticism from Democratic senators and the Medical Society lobbyist.

The board would set up regions where HMOs and provider networks would operate, said Sen. Ralph Hise, a Spruce Pine Republican who works on the DHHS budget. The board could limit the number of providers accepting Medicaid in a region.

“The other plans out there definitely don’t do enough to address the cost growth and whole-person care,” Hise said.

Rep. Nelson Dollar, a Cary Republican, said the House and Senate share a goal of reforming Medicaid, but the House proposal would preserve the mental health offices and “the unique aspects” of the Medicaid system that work.