In July 2017

If you pay attention to the news, it sometimes seems hard to find a story about North Carolina politics where the word “bitterly” isn’t placed directly in front of “divided” when describing the state of things in Raleigh.

Thankfully, there’s one issue most Democrats and Republicans can agree on before returning to their name-calling and brinkmanship: Cardinal Innovations Healthcare Solutions is a major headache.

Cardinal is a local-management entity, a wonderfully Orwellian term for an operation that coordinates spending for disabled North Carolinians, as well as manages Medicaid and other public funding for mental health and substance-abuse services. There are six other entities in the state, but Cardinal is the biggest with 850,000 clients in the Piedmont. It plans to get even bigger, if it ever gets the greenlight to absorb Eastpointe Human Services and its 280,000 clients in eastern North Carolina.

These organizations are creatures of the state, in one sense no different from a regional water authority. There are lots of lines of accountability, which means, at least in theory, they answer to everyone, which means, of course, just the opposite in practice. Cardinal is the brashest of the bunch, more ambitious than its peers, and more willing to poke a stick in the eye of the bureaucrats and politicians who no longer like the way Cardinal is using its government-issue toolkit to control spending and provide services to North Carolinians. A few months back, for example, the N.C. House voted 109-0 to place closer oversight on these management entities, including the salaries for their top executives. While the bill would cover all these LMEs, Cardinal is the target, after news reports last year that CEO Richard Topping made $635,000 in base salary, or about four times the pay of Gov. Roy Cooper. Cardinal has been a little tone-deaf in other areas as well, moving its offices from Kannapolis into the swanky NASCAR Plaza in Charlotte.

Not to be outdone — or outshone — State Auditor Beth Wood released a performance audit in May that takes Cardinal to task for potential mission creep, excessive salaries, employee bonuses and some eyebrow-raising spending on conferences and travel. Wood says the behavior “erodes the public’s trust in Cardinal’s ability to deliver quality health care to a vulnerable population.”

It’s important to note that Cardinal manages public spending of nearly $700 million a year, so the questionable outlays on junkets and other perks — about $500,000 over two years — is just a rounding error. That’s one of Cardinal’s defenses, but that, too, avoids the criticism that Cardinal has become an arrogant nation unto itself. Along with coordinating care for Medicaid clients, Cardinal does similar work for North Carolinians with developmental disabilities, and their advocates are quick to contrast Topping’s pay package, since pared back, with the difficulties they encounter getting appropriate services for loved ones. Unlike Medicaid recipients, the voices of the disabled are heard loud and clear at the legislature.

Medicaid is a budget beast, a $14 billion program of which the state pays about $3.6 billion a year. North Carolina’s embrace of managed care for the behavioral part of the program underscores the challenge of trying to slow spending growth in these costly areas. The idea is simple: Cardinal gets a set amount per Medicaid enrollee each month (an average of $133), and then it uses those funds to pay for everything from inpatient psychiatric services to counseling and prescriptions. Cardinal keeps what it doesn’t spend — about $70 million over the last two years — ideally reinvesting those funds into new programs or maintaining reserves to cover losses down the road.

While the proponents of managed care (and I count myself among them) are quick to point out that the arrangement creates an incentive to keep people healthy, let’s not kid ourselves. Ultimately, managed care works and saves money by limiting trips to the doctor, ideally on the front end through preventive care, but all too often multiplying on the back end with red tape for specialists and advanced care. It’s not perfect. Health care is often messy and frequently cruel. Not everyone gets better. As policymakers and the public, we fool ourselves in thinking otherwise.

It’s easy to flog Cardinal, but it is the symptom, not the disease. What they’ve done is by design, a perfect example of what happens when a third party takes over a critical function of the state. The powers that be are eager to pocket the savings, but they don’t want to accept responsibility for the way the bottom line gets padded.

I love a good state audit, with its outrage over bonuses and executive pay packages, but Wood is looking at the wrong end of the telescope here. Cardinal said that it was pleased that the audit didn’t find any deficiencies with its performance in meeting the needs of its clients. Woods’ slightly snarky response: It didn’t find any because that wasn’t the audit’s intention. Which of course raises the question: Why the heck not?

Quite possibly in the next few years, there will be a larger transition, in which most of Medicaid is placed under managed care. Then, Cardinal and its ilk will control an even larger part of our health care infrastructure. Before that happens, Wood ought to do a real audit, one focused on the people who get the services rather than the lifestyles of those at the top who orchestrate the care.

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