Failed Medicaid expansion negotiations reveal N.C. hospitals' might

In the final hours of North Carolina's legislative session, state Republican leaders were on the cusp of securing a deal to expand Medicaid and bring health care coverage to hundreds of thousands of the state's poor.

• With bipartisan support, the Senate had passed one version of expansion.
• The House had passed another version.
• All they needed to do was negotiate.

As time ran short, lobbyists hovered outside leaders' offices as the chambers sent proposals back and forth. Observers whispered that the leaders were closer than ever to securing a deal once and for all.

Yes, but: The deal fell apart.

What happened: Republicans and Democrats alike tell Axios that a driving force behind Medicaid's latest failure in our state is a group that represents the state's hospitals: North Carolina's Healthcare Association.

• The association fought to block the Senate's plan, which would have expanded Medicaid as soon as next year, in part because it would loosen the state's "certificate of need" laws — something the association said would be a blow to hospitals' revenues.
• Republican Senate leader Phil Berger has argued its inclusion was needed to expand health care access in the state.

Hospitals won out, for now. Neither bill moved forward because, despite the Senate's offer to soften the regulatory change, hospitals would only back the House's plan, which omitted the change altogether.

• "The House of Representatives has no intention of moving [the Senate's bill] nor an appetite for changes to the CON law," Steve Lawler, who leads the hospital association, wrote in a June letter to its members. "Attempts to negotiate CON changes with the Senate are not only counterproductive to our messaging on our Medicaid priorities but undermine our support in the House."

Why it matters: Berger had long been the biggest hurdle to expanding Medicaid until he quietly reversed his position and introduced legislation this year. That the hospital association is at the center of the legislations' latest failure reveals a new challenge, and it points to the sweeping influence it has over North Carolina lawmakers and the legislative process.

• "Hospital leaders know that no vote will come on Medicaid expansion this year unless they compromise on competition, but the powerful hospital lobby hasn't yielded out of fear for their profits," Gov. Roy Cooper said in an editorial earlier this month, referring to the association's blocking of the regulatory change included in the Senate's plan.

The other side: Lawler disagrees that the organization is at fault.

• In an interview with Axios last week, Lawler said the association is "not involved with the legislative process" and they are for expansion but believe that the Senate's bill was "harmful" and "not acceptable."
• Changes to certificate of need, which restricts the unnecessary duplication of medical facilities, was the key reason the association objected to the Senate's bill. North Carolina has one of the strictest certificate of need laws. Changing it could lower health care prices and increase health care facilities, according to supporters.
• "Medicaid expansion should not come with strings attached that would jeopardize the future for hospitals, our state’s safety net," Lawler wrote in a letter to Cooper, Berger and Moore earlier this month. "We are not elected to office and therefore we are not the ones standing in the way of passing legislation."
• House leaders also dispute that hospitals are at the heart of the proposal's demise, saying the deal ultimately fell apart because the two chambers couldn't come to an agreement.

State of play: Medicaid expansion still has a shot at becoming law in North Carolina.

• Political leaders and the hospital association say discussions are ongoing and they want the policy to be enacted, or for the legislature to at least vote on a proposal.

Context: The Affordable Care Act of 2010 offered states the chance to broaden coverage to people making up to 138% of the federal poverty level — or around $38,000 a year for a family of four.

• North Carolina remains one of just 12 states that has yet to expand Medicaid since the program began in 2014.
• If it passed, an estimated 600,000 more North Carolinians would be covered.

The big picture: North Carolina is out front in a new movement among Republican states where political winds on the issue are changing.

• In Georgia, as first reported by Axios Atlanta's Emma Hurt, new conversations about a path forward have been happening behind the scenes among Democrats and Republicans.
• The shift doesn't stop there: A former Alabama governor publicly urged his fellow Republicans to pass it for the benefit of rural parts of the state. Bipartisan legislative movement on expansion this year has given advocates in Wyoming hope. Texas is seeing "cracks" in Republican opposition the measure, and Tennessee's lieutenant governor has suggested possible openness.

What's next: House Speaker Tim Moore said he wants to be sure that hospitals agreed to changes to the key reason for their opposition to the Senate's plan — certificate of need — before his chamber votes, in another signal of the hospitals' influence, the Associated Press reported.

• Moore has indicated a proposal could come together before the end of the year, and Berger has said he’s optimistic it could happen in next year’s legislative session.
• "There remains a window to get something done," Berger said. "But quite frankly, as long as the hospitals remain as intransigent as they are, I don't see that we're going to make any progress."

What we're watching: "Neither the House or the Senate were able to reach an agreement, and then they went home, but they went home with the understanding that the hospital community could come back with a proposal," Lawler told Axios. "They'll move the process forward, so once we provide the leadership our proposal — which again it's not us telling the Senate and the House what to do.”

• "Then it becomes up to our elected officials to get this across the finish line," Lawler said.

What they're saying: Republican State Treasurer Dale Folwell, who has repeatedly described hospitals as a "cartel," told Axios that "facts don’t matter" to Lawler, as "evidenced by this latest data on Medicaid expansion." Folwell pointed to the Senate's plan as a step in the right direction.

• "If you're in favor of Medicaid expansion, you should be highly ticked at Steve Lawler," Folwell said. "If you're against Medicaid expansion, you should be highly ticked at Steve Lawler."