A second opinion: the governor soothes irritated health-care providers by backing away from a plan for managed-care companies to run Medicaid.

• Author: Mooneyham, Scott
• Position: Capital Goods

Soon after taking office, Gov. Pat McCrory began talking about making a fundamental shift in how the state handles one of its heaviest responsibilities--oversight of Medicaid, the health-care program for the poor. He bemoaned how hard it was to predict costs and set budgets. "We cannot make good decisions without good information," he complained in February 2013. At that same appearance, N.C. Health and Human Services Secretary Aldona Wos proclaimed, "Cost overruns will not be tolerated or accepted. There is a budget for a reason."

It didn't take long to see what the governor and his top health-care aide had in mind. As some states have, McCrory wanted to turn Medicaid over to private managed-care companies--essentially insurers--allowing them to assume its risks as well as its rewards. Pushing the idea of putting the program out to bid, with the winners receiving a set amount per patient per month, McCrory predicted a big shake-up. Of course, big shake-ups aren't always welcome by those being shaken.

In this case, those rattled and roiled would have been doctors, hospitals and others who treat Medicaid patients. In North Carolina, this is a $13 billion-a-year program. About a quarter of that comes from Tar Heel taxpayers. It represents about 17.5% of the state's general operating budget. That money goes to providers in a simple fee-for-service system. Reimbursement for each service is tied to a percentage of the amount paid by Medicare, the federally operated program for the elderly.

Docs like the system as it is. Sure, they might have to deal with government bureaucrats, but they don't have to fight with or get second-guessed by insurers. In fact, there are no insurers taking a slice off those billions for their profits, which would be the case with a managed-care Medicaid program--even though profit provides an incentive to hold down costs. The promise of keeping those costs in check is what made the idea attractive to the McCrory administration.

But something happened on the way to a managed-care Medicaid program. McCrory discovered he needs doctors and hospitals as much as they need him. Some of that can be explained by simple politics. The sheer size of that side of the healthcare industry means elected officials must handle them with care. There are roughly 180,000 licensed healthcare professionals in the state, about 23,000 of them physicians. With those numbers, doctors and hospitals wield serious political clout in North Carolina.

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