Medicaid Transformation

North Carolina is undergoing a major restructuring of the public service system, including Medicaid and State-funded services in the BH/IDD world. While managed Medicaid is not new to the state, this additional effort to implement an 1115 Medicaid waiver for integrated physical and behavioral healthcare will move the entire North Carolina Medicaid system under a managed care model. The Medicaid 1915(c) portion will continue to serve for the Innovations Waiver. All behavioral health services will go under the 1115 waiver when the BH/IDD Tailored Plans are implemented. NC DHHS is also taking this opportunity to expand the framework of Medicaid to include additional roles such as an enrollment broker, care managers through Advanced Medical Homes and an ombudsman. The state is putting a spotlight on the integration of physical and behavioral/IDD care and Social Determinants of Health (SDOH). The overarching goal is to look at the WHOLE PERSON and to recognize that all treatment needs are of equal importance to conditions of living.

Current BH/IDD System

Since 2013, the behavioral health and intellectual and developmental disabilities (BH/IDD) service system has been under a 1915(b)(c) Medicaid waiver. This allows the State to waive the general Medicaid rules to promote innovation in financing and service delivery under specific guidelines that require payers to demonstrate that Medicaid services can be managed with no additional cost to the federal government and possibly with savings and can achieve higher service innovation. Local Management Entities are the designated local payer and became the LME/Managed Care Organizations (LME/MCOs) when the waiver was implemented statewide. Under this waiver, Medicaid services are reimbursed through a per member per month capped rate, or capitation, based on all Medicaid eligible individuals in the LME/MCO catchment area. Each LME/MCO is responsible for provision of medically necessary BH/IDD services for Medicaid beneficiaries in need of those services in their catchment area. The LME/MCOs agree to accept the capitated rate and take on the financial risk that can occur should their monthly capitation be less than what they have paid out to providers for services provided that month. In most cases today, providers are being reimbursed through a “fee-for-service” model. According to the federal website,, fee-for-service is, “A method in which doctors and other health care providers are paid for each service performed.”

State-funded services also continue to be provided through a fee-for-service model, and LME/MCOs are paid by the state on that basis as well. The LME/MCO receives the claim (or bill) for each service from the provider and then submits it to the state. The state reimburses the LME/MCO and the LME/MCO reimburses the provider.

Under the 1915(b)(c) Medicaid waiver, the state opted for a closed network of BH/IDD providers. This means that the LME/MCO must meet a number of federal and State standards and requirements, but is not required to accept every provider into the network. Many would say that this increases the viability of providers. Note that this is in contrast to the 1115 Medicaid waiver that requires an open network of any willing provider.

Mid-Transformation BH/IDD System

In 2018, NC DHHS gained authority from both the federal Centers for Medicare and Medicaid Services and the NC General Assembly to move the mild-to-moderate behavioral health Medicaid beneficiaries from the LME/MCO managed BH/IDD system and to contract with commercial healthcare plans in order to fully implement the state’s vision for Medicaid managed care. This is a ground-breaking change in the way in which the public MH/IDD/SUD service system has operated. The differentiation is being made through the creation of Standard Medicaid Plans and BH/IDD Tailored Plans. Most Medicaid beneficiaries will fall under the Standard Plans, and those with high-intensity BH/IDD needs will fall under the Tailored Plans. Individuals with I-DD needs who are eligible to receive Medicaid Innovations Waiver (1915(c)) services and/or State-funded I-DD services will be under the Tailored Plans. An estimated 155,000 individuals with I-DD diagnoses will use the Standard Plan.

Up to four Managed Care Organizations, or Commercial Plans, and up to twelve provider-led entities or Commercial Plans will be the local/regional payers for the Standard Plan. This is expected to begin in November 2019 in two of the six designated regions for the Standard Plan. It will then be expanded to all six regions in February 2020.

Current Priorities:

i2i Center’s Goal is to Engage With: