State Issues

2017 End of Session Legislative Summary

Our preliminary 2017 North Carolina end of session legislative summary is now available. This document, along with our bill tracker, will continue to be updated as the Governor takes action on legislation pending his review and after the legislature reconvenes on August 3rd and again in September to handle veto overrides and the adoption of conference reports for legislation that is being negotiated between the House and Senate. 

MEDICAID

What’s at Stake?
North Carolina’s Medicaid program provides insurance coverage for 1.8 million lives and accounts for over $13 billion in state spending each year, making it the second-largest category in North Carolina’s budget after education. Medicaid covers low-income individuals, children, pregnant women, the elderly, and people with disabilities and is funded jointly by the federal and state government.

Currently, the state’s Medicaid program is structured as a “fee for service” model, meaning providers are billed by procedures or care provided. Recent years have shown that his model is unsustainable, and now stakeholders are focusing on whole-person care, where an emphasis is placed on staying well, managing chronic diseases, and avoiding care in high-cost care settings (e.g. emergency rooms).

Hospitals and health systems represent roughly 19% of total state Medicaid expenditures, but have historically been the target for cuts in the state budget.  

What’s Happening Now

While the outcome of expansion and reform efforts are largely dependent upon the outcome of federal health care reform efforts, DHHS Secretary Cohen has been moving forward efforts to overhaul the state’s Medicaid system. Along with a statewide tour of public feedback meetings, the Department also requested public input on the North Carolina Medicaid and Health Choice Transformation plan that is currently pending with the Centers for Medicare and Medicaid Services. Duke Health submitted a response to the Request for Public Input in May.

On August 8, DHHS released a detailed proposed design for transforming the state Medicaid and NC Health Choice programs to managed care, as directed by the General Assembly in 2015. The new managed care design covers services for physical health, behavioral health, intellectual and developmental disabilities, and substance use disorders while also addressing unmet social needs and their effect on overall health. The proposed design also lays out a transition timeline for how certain aspects of today’s Medicaid program, such as beneficiary appeals and care management, will transition to managed care. The paper describes in detail how data will move throughout the system, how contracts with providers and plans will remain consistent with North Carolina law protections, and DHHS will hold plans accountable for quality care and other standards.  

CERTIFICATE OF NEED

What’s at Stake?
Certificate of Need (CON) laws require coordinated planning and state approval for new health care services, equipment, and facilities. North Carolina is one of the more stringent CON states out of 36 who still have some form of the law. In our state, 25 services ranging from replacing MRI machines to adding new inpatient beds must go through a CON regulatory process, managed by the State Health Coordinating Committee, or SHCC. Hospitals have historically been against changes to CON, saying the law helps control costs for those who provide 24/7 care, often to uninsured or underinsured patients. Some services, including emergency and trauma care, are provided in response to community need, regardless of payment.

What’s Happening Now
Aside from the Senate budget proposal, there are a number of stand-alone Certificate of Need reform bills pending this session, including one proposal to eliminate the law entirely. As has been the case in previous sessions, most of the energy in support of repeal and reform is in the Senate while the House remains committed to keeping the law as is.  
 

TAXES, NONPROFIT TAX STATUS, AND RELATED ISSUES

What’s at Stake?
Both Duke University and Duke Health System are nonprofits that receive an exemption under the North Carolina Tax Code for sales taxes. Under the current system, nonprofits pay sales taxes at the time of purchase but then apply for and receive a sales tax refund from the state twice a year. For Duke University, the refund is approximately $20 million annually. For the Health System, the number tends to fluctuate but also averages about $20 million annually. Duke University and Duke Health System are separate taxable entities for the purposes of the refund.

What’s Happening Now
Many lawmakers in the NC Senate have taken the viewpoint that the nonprofit designation should not be available to any nonprofit that competes with the private sector. In 2013, the legislature placed a $45 million cap on the refund amount a nonprofit could receive. This was done over the objections of the greater nonprofit community even though the cap did not immediately affect anyone in North Carolina, including Duke. In 2015 and 2016, there were several attempts by the senate to reduce the cap significantly. Duke opposed each effort to do so. Fortunately, the nonprofit community banded together to defeat these efforts with strong support from leadership in the House. 

While there is no specific proposal this session to reduce the nonprofit sales tax cap significantl, there have been discussions by legislators to revisit the issue in some of the tax reform or tax-related legislation that will be considered towards the end of the 2017 long session. There is also a study bill pending which would authorize the legislature to consider providing local governments with new taxing authority for nonprofit property. Although the nonprofit community has repeatedly defeated the effort, a number of Republican Senators are pushing for reforms that would place sales tax refund and property tax status at risk.