Health Cost Reform in North Carolina

In the Arena: North Carolina’s Health Cost Reform

It seems it was only last year we were bemoaning America’s $3.5 Trillion health system. Well, according to the latest analysis from the U.S. federal actuaries, we were off by $.15 Trillion, because Americans spent $3.65 Trillion in 2018; that’s $150 Billion more than the prior estimate. And, by the way, $3.65 Trillion is larger than the gross domestic products of all the countries in the world except the US, China, Japan, and Germany. That means we’re spending more on healthcare here than the United Kingdom and India spend on everything.

So while the U.S. is frequently compared to other countries for the quality or cost of our healthcare system – and not faring too well on either dimension, just this week WalletHub released their analysis of 2019’s Best & Worst States for Health Care, where Americans receive the best and worst healthcare – comparing the 50 states and DC – across 43 measures of Cost, Accessibility and Outcome. Across their 43 “CAO” metrics, a perfect score of 100 would represent the best healthcare at the most reasonable cost. As a benchmark, Minnesota led the nation with the #1 overall rank – a total score of 63.79, a “Cost’ rank of 2, an “Access” rank of 4, and an “Outcomes” rank of 9. California was in the lower half at #30, with a total score of 51.19, cost rank of 39, access rank of 42, and outcomes rank of 20. Then along comes North Carolina, which overall ranked #50, with a score of 42.63, a cost rank of 50, an access rank of 50, and an outcomes rank of 33. Obviously, North Carolina’s healthcare system has problems.

Before I go further, we need to put North Carolina in perspective: In 2018, the population of Los Angeles (the most populous county in the country) was 10.1 million – residing in 4,751 square miles. The population of the State of North Carolina – the nation’s ninth most populous – is just a little larger at 10.2 million – spread out over 53,819 square miles – over 11 times larger. The State’s largest city is Charlotte, with a population of 826,097. And the minimum wage is $7.25 an hour.

To try to address the “unsustainably high healthcare costs” of the North Carolina State Health Plan, which covers 727,000 state employees, teachers and retirees, the State’s Treasurer, Dale Folwell, working with Blue Shield, devised a plan he calls the “Clear Pricing Project.” The State Health Plan currently spends about $3.3 billion a year ($4539 per beneficiary) – with 80% coming from taxpayers, the other 20% from the insureds themselves. In addition to keeping the Plan from becoming insolvent by 2023, Folwell’s goal is to save state health plan beneficiaries up to $60 million on their 20% premium contribution. The Plan is also designed to increase transparency and cut spending, and aims to “take the power to negotiate rates away from hospitals and set rates based on what Medicare pays providers, plus a 96% markup,” according to Citizen Times’ “Fact check.”

Not surprisingly, only 27,000 out of 61,000 providers and 4 out of 126 of North Carolina’s hospitals have signed onto this new plan, with the assistant director of finance for Moses Cone Hospital in Greensboro emailing state officials with his advice to “burn in hell.” Another system that hasn’t signed on is Novant Health, which has stated on its website: “Novant Health is in favor of reducing costs and improving outcomes – which we’ve proven we can do as we move to value-based care – where the incentive is to get people well and keep them healthy. Last year, Novant Health saved over $26 million through one of its value-based employee health programs, improving the health of more than 80,000 lives. We are currently managing over 450,000 lives in various value-based arrangements – but not the state health plan. We stand ready to help any employer, including the state of North Carolina, achieve similar results.”

As of August 5th, the second deadline to sign onto the plan that goes into effect January 1, 2020, has rolled by, according to the Winston-Salem Journal. Obviously, so far the standoff is working for the providers who’ve increased their markup over Medicare from 77% to 96%, and the University of North Carolina has, to date, also walked away from a 100% markup.

While the pre-primary debates rage on and President Trump continues to author Executive Orders enforcing “transparency,” the action to watch is in North Carolina – which has got to be one of the hottest arenas in the country for Health Cost Reform.

by Mimi Grant, President, Adaptive Business Leaders (ABL) Organization – Round Tables and Events for CEOs of Healthcare and Technology Companies