House committee substitute makes the following changes to the 1st edition.

Retains Section 1 of this act, which declares the intent of the General Assembly to transform the state's current Medicaid program to one that provides budget predictability for taxpayers and ensures quality care to those who need it, and designates the goals the program transformation is designed to achieve. Removes from those goals ensuring a successful health information exchange and adds improving health outcomes for the state's medicaid population. House committee substitute makes substantive additions to the 1st edition as follows.

Defines the following terms as used in this act: (1) capitation payment--as defined in 42 CFR 438.2; (2) CMS--The Centers for Medicare and Medicaid Services; (3) Department--the North Carolina Department of Health and Human Services; (4) Provider--as defined in GS 108C-2(10); (5) provider-led entity--a provider, an entity with the primary purpose of owning or operating one or more providers, or a business entity in which providers hold a controlling ownership interest; (6) recipient--an individual who has been determined to be eligible for Medicaid or NC Health Choice; and (7) Secretary--The Secretary of the Department.

Specifies the structure of the delivery system for transforming the Medicaid program is to consist of provider-led entities (PLEs). Requires those PLEs to implement full-risk capitated health plans to manage and coordinate the care for enough program aid categories to cover at least 90% of Medicaid recipients to be phased in over five years from the date this act becomes law. Prohibits including dual-eligible individuals for whom Medicaid pays only Medicare premiums in program aid category coverage. Requires that PLEs cover Medicaid recipients in all 100 counties in the aggregate and ensure appropriate access to care for Medicaid recipients in all 100 counties while building upon the existing enhanced primary care medical home model. Assigns responsibility to the Department of Health and Human Services (DHHS) to implement a process for assigning Medicaid recipients to PLEs. Provides additional details and designates authority to DHHS and PLEs for structuring the delivery of services and care to recipients.

Provides a timeline with designated milestones for Medicaid transformation to occur in the state. The timeline includes, but is not limited to, the following. Requires DHHS to develop, with meaningful stakeholder engagement, and submit to the Centers for Medicare and Medicaid Services (CMS) a request for an 1115 Medicaid demonstration waiver to implement the components of this act within 12 months of this act becoming law. Also directs DHHS to issue a request for proposals (RFP) for PLEs to bid on contracts required under this act within 24 months of this act becoming law and receipt of the waiver approvals from CMS. Requires that within five years of the date that this act becomes law, 90% of Medicaid recipients in the state must be enrolled in full-risk, capitated health plans for all services other than those contracted for through the local management entities/managed care organizations (LME/MCOs), dental services, and pharmaceutical products.

Specifies the mandatory components that DHHS must include in the RFP and in all contracts required under Section 3 of this act (which provides the structure of the delivery system). Prohibits considering a bid that does not, at a minimum, provide coverage for a defined population of at least 30,000 recipients and ensure appropriate access to care for recipients. Specifies individual responsibilities to be met by bidders, and collective responsibilities to be met by all bidders. Also sets criteria and standards to be met by all contracts.

Declares that the General Assembly delegates full authority to DHHS to take all actions that are necessary to implement the Medicaid transformation as described in this act. Requires DHHS to administer and manage the program within the budget enacted by the General Assembly, provided that the total expenditures, net of agency receipts, for the Medicaid program do not exceed the enacted budget.

Directs the Secretary of DHHS to convene a quality assurance advisory committee consisting of experts in the following areas: (1) Medicaid, (2) actuarial science, (3) health economics, (4) health benefits, and (5) administration of health law and policy. Requires that at least one individual on the advisory committee be a member of the North Carolina State Health Coordinating Council. Directs the Committee to advise DHHS on developing and submitting requests for all federal waivers and to support the development and approval of the performance goals that will serve as the basis of the pay-for-performance system. Provides that the committee is to terminate five years from the date of the enactment of this act. Directs DHHS to contract for periodic financial audits of each successful bidder based on the terms and conditions of the contract awarded.

Makes it the responsibility of DHHS to maintain funding mechanisms, working with CMS to preserve existing levels of funds generated from Medicaid-specific funding streams. Requires DHHS to advise the Joint Legislative Oversight Committee created in this act of any necessary modifications to maintain as much revenue as possible within the context of Medicaid transformation.

Directs DHHS to continue implementation of the existing 1915(b)/(c) waiver.

Enacts new Article 23B, Joint Legislative Oversight Committee on Medicaid, in GS Chapter 120. Establishes the 14-member Joint Legislative Oversight Committee on Medicaid (Committee), with seven members of the Senate appointed by the President Pro Tempore of the Senate and seven members of the House of Representatives appointed by the Speaker of the House of Representatives. Requires that a minimum of two appointees from the House and two appointees from the Senate be members of the minority part. Provides criteria regarding term lengths and the filling of vacancies. Declares that the purpose and powers of the Committee are to examine budgeting, financing, administrative, and operational issues related to the Medicaid and Health Choice programs and to DHHS. Requires the Committee to make periodic reports to the General Assembly. Directs DHHS to transmit a copy of any report that it is required by law to make on matters affecting the Medicaid or Health Choice programs to the co-chairs of the Committee. Provides criteria for the organization of the Committee and specifies additional powers of the Committee.

Makes a conforming change, repealing GS 120-208.1(a)(2)b, which designates the powers and duties of the Joint Legislative Oversight Committee on Health and Human Services to examine issues relating to medical assistance.

Appropriates $2.5 million in nonrecurring funds for the 2015-16 fiscal year and $2.5 million in nonrecurring funds for the 2016-17 fiscal year from the General Fund to DHHS, Division of Medical Assistance, to accomplish the Medicaid transformation required by this act. Provides that the appropriations are a state match for an estimated $2.5 million in federal funds beginning in the 2015-16 fiscal year. Appropriates those federal funds to the Division of Medical Assistance to pay for Medicaid transformation. Becomes effective upon appropriation by the General Assembly of funds to implement this act.

Except as otherwise indicated, the act is effective when it becomes law.