North Carolina Medicaid Benefit Study

May 2001

North Carolina General Assembly

In most states it is common to hear that the Medicaid program offers a "Cadillac" benefit package to its beneficiaries. In many ways this observation is true: Medicaid offers benefits unavailable in private insurance. But it is also true that the catchy use of the "Cadillac" comparison masks important points about Medicaid. For one, federal Medicaid law mandates that states offer certain services that exceed the benefits available through private health insurance plans. States must provide those federally mandated benefits. For another, the poverty and disability status of many Medicaid beneficiaries necessitates including services that are not needed by a generally healthier and wealthier population in a private insurance plan. The North Carolina Medicaid Benefit Study was commissioned by the North Carolina Legislature to look in-depth at North Carolina's Medicaid benefit package. The Legislature wanted an independent expert review to know whether the process by which benefits are added to the Medicaid benefit package makes sense. It wanted to know how well these benefits are managed by the state's Medicaid agency. And the Legislature also wanted to know how North Carolina's benefit package and approach stack up against other state Medicaid programs, and to private insurers in North Carolina. We found that the Medicaid program is managed by dedicated, skilled and professional public servants in both the Executive and Legislative branches of government. No matter how skilled the managers are, however, a state Medicaid benefit package inevitably looks "messier" than a private insurance product. For example, in North Carolina, as in other states, Medicaid benefits are added (and generally not actively managed) when the provider that is paid for the benefit is another public agency, such as a school (for special education services) or an Area Mental Health Authority (for behavioral health benefits). These decisions, which expand Medicaid far beyond commercial insurance, are typically motivated by a desire to access federal Medicaid funds to legitimately subsidize otherwise state-only funded health services. Over time the cumulative effect of these decisions can blur the line regarding whether the benefit package is designed to put a package of needed services around Medicaid beneficiaries or whether it is designed to support public providers with revenue. In our review, we found features in North Carolina's Medicaid benefit process that could be improved, and that some changes could save over $130 million a year. The full report includes dozens of recommendations to improve the integrity of the program, its service to program beneficiaries, and its emphasis on cost containment.
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