New cop on the beat.

• Author: Martin, Edward

Reforming how the state insures the health of almost 20% of its residents can save money and limit budget gaps, Gov. Pat McCrory and lawmakers say. But is this a cure in search of a problem?

At a lectern in dark suit and pale-blue tie, he sounds like a doctor addressing medical students on a spring day at Winston-Salem's Wake Forest Baptist Medical Center. "If we have optimal outcomes, cost will take care of itself," Sen. Richard Burr says as he presents an award to Community Care of North Carolina, citing how the nonprofit group saved the state almost $1 billion in four years of overseeing the health of the poor and disabled. "I can't think of anybody better to receive this award."

Gov. Pat McCrory says he can. In Raleigh, one day after Burr's speech in April 2013, he's also at a lectern. He declares North Carolina's $14 billion annual Medicaid program "broken," trumpeting his plan to hand it over to for-profit insurance companies. "Our total focus is on reform," he says, with no clear role for Raleigh-based Community Care and its statewide network of more than 1,500 health care professionals who've been crucial players in state Medicaid for more than two decades.

Three years later, details of North Carolina's effort to remake Medicaid are being hammered out after months of rancorous debate, culminating in a law passed in September. Beyond the program's essential safety-net role for nearly 1.9 million enrollees, or one of every five citizens, the doctors and hospitals that treat them have an enormous stake. So do all Tar Heels. Medicaid spending takes up about a third of the annual state budget, or $3.7 billion, ensuring the program is a never-ending political lightning rod. The federal government pays the rest of the tab, about $10.5 billion, but states decide who is eligible. So it gets ever-more complicated: While the Obama administration hoped to expand Medicaid coverage in concert with the Affordable Care Act, North Carolina and 18 other states said, "No thanks."

The state Medicaid reform law was molded by insurers and political action committees that supported McCrory and other lawmakers. But consumer advocates and providers on the front lines of the state's $80 billion annual health care economy also had a voice. McCrary's initial plan relied solely on insurers, but gaining the blessing of influential doctors, hospital executives and their boards required compromise. Now, the state's large hospitals will be allowed to insure Medicaid patients through an affiliate company that could compete with traditional insurance giants.

The law's thrust is simple, say proponents and critics. The state will pay insurers a set amount per year to care for each Medicaid recipient. The reform has an alluring rationale: Those bearing the risk can profit if the patient stays healthy with bills totaling less than the state's payment. Conversely, if the patient runs up large tabs by neglecting chronic illnesses like diabetes or makes too many emergency-room visits, the insurer--not the state--is on the hook for extra costs.

The biggest question is whether the reform will ever take place. North Carolina must submit its detailed plan to Washington by June 1, and federal officials face no deadline to respond. Because state legislators declined to expand North Carolina Medicaid, a quick approval seems unlikely. "President Obama will have six months left in office," says Adam Linker, co-director of the...