The following words are from House Bill 1181, passed by the North Carolina House and endorsed by Governor McCrory. “It is the intent of the General Assembly to transform the State’s Medicaid program from a traditional fee-for-service system into a system that provides budget predictability for the taxpayers of this State while ensuring quality care to those in need.” Translation: Instead of paying for whatever health care is used, they want to budget a fixed amount and make doctors and hospitals absorb any additional costs. They want doctors to save money by keeping patients healthy more so than treating them after they are sick.   If their plan works everyone wins. If it fails, our poorest citizens will bear the burden.

Unlike the ObamaCare law, HB 1181 is short – only three pages. In few words, it proposes changes far more radical than ObamaCare. Doctors, hospitals and other health care providers who agree to serve Medicaid patients would be required to affiliate with an “Accountable Care Organization” or ACO. The ACO would get a fixed amount of money per month for each enrolled Medicaid recipient and it would pay the health care providers. The bill doesn’t say how or how much ACOs would pay providers. The Department of Health and Human Services and an advisory committee of health care providers would design a totally new payment system.

With an eye toward improving both quality and cost, the bill requires “Mechanisms to encourage personal accountability for Medicaid beneficiaries’ participation in their own health outcomes”. That phrase implies some unspecified means of encouraging and supporting Medicaid recipients toward the same behaviors that would be good for the general population: less tobacco use, avoidance of alcohol and drug dependence, less obesity, more exercise, early diagnosis and early treatment. Those would be steps in the right direction but the law answers none of the key questions about how and when these behavior changes will be created or the cost of doing it. If the idea is to have the ACOs pay for creating behavior changes and simultaneously provide reductions in spending then a magic wand will be required. Prevention of expensive health crises is a great idea and it will save money but it is necessary to do the prevention before you save the money. Previous Democratic administrations contributed to our mental health problems by closing state psychiatric hospital beds to save money without adequately funding outpatient services to replace them. Their mess still remains to be cleaned up. Republicans could easily make a similar mistake with Medicaid by cutting spending before achieving the behavior changes.

By contrast, ObamaCare is more complex because it allows multiple systems of health care delivery such as fee-for-service, HMO and ACO to co-exist and compete with each other based on cost and quality. It also allows individuals to choose from health plans with almost all doctors and hospitals or plans with very limited panels of providers. The second kind may save money but limit patient choice. The Republican plan has only one ACO in each region and no other choices.

Ironically, ObamaCare depends on a free market for its success. The Republican Medicaid model is a single payer system that allows one fixed price set by the government and only one payment model, the one mandated by the ACO. In order to succeed it needs to change the personal behaviors of Medicaid recipients through programs many Republicans would call “nanny state” if they were applied to the general population.

The remarkable change in Republican thinking came when they faced the need to sustain and improve services while reducing costs – exactly the same as the motivation for ObamaCare. The House of Representatives and the Governor want to place a huge bet on their ability to deliver good health care through central planning and budgeting. If they pass the bill their idea faces two major tests. Test number one, will they hire competent leadership? The current DHHS leadership is not up to this task. Selection of the right leader for Medicaid is the most important personnel decision that the Governor will make.  Test number two, will they provide adequate startup funding to create the patient behavior changes that will be required for success? If state government passes both of those tests, their idea may work. If they fail either one, it is doomed.

The ACO concept has been around for about a decade and the first attempts at implementation are part of the ObamaCare rollout. ACOs are similar to HMOs but with much more input from health care providers. If the North Carolina Medicaid ACOs succeed they may also become ObamaCare ACOs. The principles are the same and if it works in Medicaid, it may also work in the individual and corporate insurance markets.

It remains to be seen whether the Senate will pass the bill. We can hope that the legislature and the administration will craft successful Medicaid reform and that ObamaCare will succeed too. The two plans have similar goals. If our legislators from both parties were listening to each other they would learn that they are on the same team – and they might even find ground for agreement.