DHA 722 Week 4 Medicaid and State Health Policy Example

One Program, Many Choices: How North Carolina's Medicaid Decisions Reach Four Rural Hospitals and Their Patients

[Student Name]

University of Phoenix

DHA/722: Policy and Regulation in Health Care

Week 4 Assignment

[Instructor Name]

[Date]

The rural hospitals, enrollment counts, payments, plan relationships and local program details are composites written for a model paper; state policies are described in general terms, and research findings come from the sources cited.

The regional vice president's meeting with one of the state's Medicaid managed care plans began with numbers. The four rural hospitals had $2.3 million in Medicaid claims more than ninety days old, and denials had doubled since private plans took over most of the state's Medicaid enrollment. The plan's representative listed documentation problems; the hospitals' billing staff listed changing rules. Both sides agreed that the state's choices had changed how Medicaid worked in the region. This paper examines those choices.

A Federal-State Partnership

Medicaid is jointly financed and run by the federal government and the states. Federal law sets minimum requirements for who must be covered and what services must be offered, and the federal government pays a share of costs that is higher for poorer states. Within those rules, states choose much of the rest: optional groups, optional benefits, payment rates and how care is delivered.

Waivers

States can go further through waivers. Section 1115 of the Social Security Act lets the federal government approve demonstrations that test new approaches, provided they further Medicaid's objectives and do not increase federal costs. North Carolina used this authority both to move to managed care and to fund services addressing social needs.

North Carolina's Move to Managed Care

In 2021, North Carolina moved most Medicaid enrollees from fee-for-service to managed care, in which private plans receive a fixed monthly payment per enrollee and manage their care. Supporters expected better coordination and more predictable budgets. For the rural hospitals, the change meant contracts with several plans, each with its own authorization and billing rules.

Does Managed Care Save Money?

National evidence is sobering. Duggan and Hayford studied state and local managed care mandates from 1991 to 2003, a period when enrollment in managed care grew from 11% to 58% of recipients, and found that shifting enrollees into managed care did not reduce Medicaid spending in the typical state; savings appeared mainly where states had paid providers generously under fee-for-service, since plans saved chiefly by paying lower prices (Duggan & Hayford, 2013).

What Managed Care Means for Rural Hospitals

That finding matters for the region. North Carolina's fee-for-service rates for rural hospitals were already low, leaving little room for price savings. Instead, the administrative burden rose: more authorizations, more denials and slower payment. The rural hospitals added three billing staff to manage the plans. Patients felt the change too: some found that their longtime specialist at the academic center was out of network for their assigned plan, and others received letters about plan choices they did not understand. Enrollment counselors at the hospitals spent much of the first year helping patients switch plans so they could keep their clinicians.

Paying for Social Needs: The Healthy Opportunities Pilots

North Carolina's waiver also allowed Medicaid to pay for nonmedical services in three regions, including one covering much of the eastern part of the state, through the Healthy Opportunities Pilots. Enrollees with qualifying health and social needs could receive food boxes, housing navigation, transportation and help with interpersonal violence.

Evidence From the Pilots

Berkowitz and colleagues compared 13,227 pilot enrollees with 73,469 Medicaid beneficiaries who reported social needs but lived in counties without the pilots; 89% of enrollees received at least one service, mostly food, and while spending rose at enrollment, its trend then fell by about $85 per person per month relative to the comparison, reaching expected levels by month eight and falling below them after, with emergency visits also trending lower (Berkowitz et al., 2025). Paying for food and housing cost Medicaid more at first and less later, a pattern budget rules often fail to reward.

What the Pilots Mean for the Region

Two of the region's four counties were in the pilot area. A community organization served as the local hub, contracting with food banks, housing agencies and transportation providers and paying them with Medicaid funds, a new role for groups that had relied on grants. Clinicians there could refer patients for food and housing help, and the hospitals' care managers reported fewer emergency visits from frequent users. The two counties outside the pilot area had no such option, a difference driven entirely by state program design.

Medicaid Expansion

The largest choice came in December 2023, when North Carolina expanded Medicaid to low-income adults. Expansion reduced uncompensated care at the rural hospitals and gave uninsured workers coverage. National evidence suggests the stakes for hospitals are high: Lindrooth and colleagues linked Affordable Care Act expansion from 2008 to 2016 to stronger hospital finances and a much lower risk of closure, most of all in rural areas and in counties where many adults had lacked coverage before (Lindrooth et al., 2018).

Federal Changes Constrain State Choices

State choices depend on federal rules. Federal legislation in 2025 requires states to impose work requirements on many expansion adults and restricts provider taxes that states use to fund their share. North Carolina's expansion law also contains a provision ending expansion if the federal matching rate falls, so federal decisions could reverse a state choice. For the rural hospitals, this means that the coverage gains of the past two years are not secure. State legislators, who approved expansion with bipartisan support, will face new decisions as federal rules take effect, and hospitals will be among the voices they hear.

Effects on the Rural Hospitals

Taken together, the state's choices brought more covered patients, new administrative burdens, social needs services in some counties and dependence on continued federal support. Medicaid now pays for about 22% of the rural hospitals' patients, up from 16% before expansion.

Recommendations: Working With Plans

The region will negotiate standardized authorization rules with the plans, track denials and payment times by plan, escalate chronic problems to the state and share data on rural access in contract discussions, asking each plan to name a rural liaison.

Recommendations: Social Needs

The region will advocate for statewide extension of social needs services and, where the pilots operate, integrate referrals into discharge planning. The evaluation's finding that savings appear only after several months will be part of the argument, since short budget horizons can end promising programs before their savings arrive.

Recommendations: Enrollment

With work requirements approaching, the region will train staff to help patients document work or exemptions and renew coverage, and track coverage losses among its patients by county, so it can see quickly if rural enrollees are losing coverage faster than others.

Measures

Measures include days in accounts receivable by plan, clean claim rates, denial rates, Medicaid enrollment and renewal among patients, social needs referrals and uncompensated care.

Conclusion

Medicaid is one program shaped by many state choices. North Carolina's move to managed care added burden without clear savings, its social needs pilots showed promise and expansion strengthened rural hospitals, all within federal limits that are tightening. The region's task is to manage plan relationships, extend social needs services and protect coverage.

References

Berkowitz, S. A., Archibald, J., Yu, Z., LaPoint, M., Ali, S., Vu, M. B., Dave, G., Flower, K. B., & Domino, M. E. (2025). Medicaid spending and health-related social needs in the North Carolina Healthy Opportunities Pilots program. JAMA, 333(12), 1041-1050. https://doi.org/10.1001/jama.2025.1042

Duggan, M., & Hayford, T. (2013). Has the shift to managed care reduced Medicaid expenditures? Evidence from state and local-level mandates. Journal of Policy Analysis and Management, 32(3), 505-535. https://doi.org/10.1002/pam.21693

Lindrooth, R. C., Perraillon, M. C., Hardy, R. Y., & Tung, G. J. (2018). Understanding the relationship between Medicaid expansions and hospital closures. Health Affairs, 37(1), 111-120. https://doi.org/10.1377/hlthaff.2017.0976