Senate committee substitute makes the following changes to the 3rd edition. Unless otherwise indicated, deletes the contents of the previous edition and replaces it with the following.

Section 1

Includes the General Assembly’s intent and goals as stated in the previous edition, except no longer includes as a goal of the new Medicaid system improving health outcomes for the State’s Medicaid population. Sets out the principles and parameters that are to govern the organization of the new Medicaid program, including that the new Department of Medicaid (DOM) have full budget and regulatory authority to manage the State’s Medicaid and NC Health Choice program while the General Assembly determines eligibility categories and income thresholds, and that DOM enter into contractual relationships with commercial insurers and provider-led entities for the delivery of all Medicaid health care items and services.

Sets out the timeline for the Medicaid transformation, including but not limited to: (1) designating DOM as the single agency for the administration of Medicaid and NC Health Choice and DHHS and DOM entering into agreements necessary for DOM to supervise the Department of Health and Human Services’ (DHHS’s) administration of those programs by January 1, 2016; and (2) beginning capitated full-risk contracts 12 months after the Centers for Medicare and Medicaid Services approves all necessary waivers and State Plan amendments.

Sets out the required components of the initial request for proposals, responsive bids to the initial request for proposals, and the initial required contracts.

Requires DOM to report monthly beginning February 1, 2016, until January 1, 2019, to the Joint Legislative Oversight Committee on Medicaid (Committee) and the Fiscal Research Division on progress on the Medicaid transformation. Requires the May 1, 2016, report to include proposed changes to the General Statutes that are necessary for the transformation.

Requires DOM to work with the Centers for Medicare and Medicaid Services to try to preserve existing levels of funding generated from Medicaid-specific funding streams to the extent that the levels of funding may be preserved. States actions that must happen if the funding is not maintained.

Requires DHHS, Division of Medical Assistance, to cooperate with DOM to ensure a smooth transition of the Medicaid and NC Health Choice programs and specifies functions that the Division of Medical Assistance must perform. Those functions include creating a Medicaid stabilization team and designating essential positions who will be eligible for bonuses for remaining in their positions.

Enacts new Article 14 in GS Chapter 143B, creating the new Department of Medicaid (DOM). In accordance with the timeline set out in the act, all functions, powers, duties, obligations, and services vested in the Division of Medical Assistance are vested in DOM. Requires the Governor to appoint the new Secretary of the Department of Medicaid (Secretary), subject to approval by the General Assembly. Sets out the Secretary’s powers and duties.

Provides for the following variations from state law: (1) employees of DOM are not subject to the NC Human Resources Act; (2) the Secretary may retain private legal counsel; (3) DOM employment contracts offered under GS 143B-1405(a)(2) are not subject to review and approval by the Office of State Human Resources; and (4) if the Secretary establishes alternative procedures for the review and approval of contracts, then DOM is exempt from state contract review and approval requirements but may still choose to use the state contract review and approval procedures for particular contracts.

Prohibits the Secretary from contracting for goods or services with a vendor that employs or contracts with a person who is a former Medicaid or NC Health Choice employee and uses that person in the administration of a contract with DOM. Defines a former Medicaid or NC Health Choice employee as a person who, for any period in the preceding six months, was employed as an employee or contract employee of the Department, who in the six months immediately preceding termination of state employment, participated personally in either the award or management of a Department contract with the vendor or made regulatory or licensing decisions that directly applied to the vendor. Requires each vendor submitting a bid or contract to certify that the vendor will not use a former Medicaid or NC Health Choice employee in administration of a contract with DOM; knowingly submitting a false certification is a Class I felony.

Establishes the Medicaid Reserve Account (Account) as a nonreverting reserve in the General Fund. The purpose of the Account is to provide for unexpected budgetary shortfalls in the Medicaid and NC Health Choice programs resulting from program expenditures in excess of the amount appropriated for the programs by the General Assembly and that continue to exist after the Health Benefits Authority makes its best efforts to control costs though midyear budget corrections. Sets the minimum and maximum target balances for the Account. Any funds appropriated for the Medicaid or NC Health Choice programs that are unencumbered at the end of the fiscal year are to be credited to the Account. Specifies conditions that must exist before the Secretary may disburse Account funds to manage budgetary shortfalls in the Medicaid and NC Health Choice programs.

Transfers to DOM, effective January 1, 2016, all rules and policies exempted from rule making related to the Medicaid and NC Health Choice programs. Sets out provisions governing any legal actions involving the Medicaid or Health Choice programs that name the Division of Medical Assistance or DHHS as parties. Requires the Commissioner of Insurance to establish solvency requirements for MCOs and PLEs that contract with the Department.

Retains new Article 23B, Joint Legislative Oversight Committee on Medicaid, from the previous edition with the following changes. Specifies that initial appointments to the Committee begin on the date of appointment. Makes conforming changes to refer to DOM instead of DHHS. Provides that GS 120-19.1 through GS 120-19.4 apply to the Committee’s proceedings as if it were a joint committee of the General Assembly. Makes additional conforming changes.

Keeps the repeal of GS 120-208.1(a)(2)b from the previous edition.

Requires the Revisor of Statutes to recodify existing law related to Medicaid and NC Health Choice into a new GS Chapter 108E, entitled Medicaid and NC Health Choice Health Benefit Programs. Effective January 1, 2016.

Makes conforming changes to GS 108A-1, GS 108A-54.1A, GS 143B-153, and GS 150B-1. Effective January 1, 2016.

Repeals GS 108A-54.2(d) which prohibited DHHS, unless directed to do so by the General Assembly, from changing medical policy affecting the amount, sufficiency, duration, and scope of health care services and who may provide services until the Division of Medical Assistance has prepared a five-year fiscal analysis documenting the increased cost of the proposed change in medical policy and submitted it for departmental review, and which made changes to medical policy that affected the amount, sufficiency, duration, and scope of health care services and who may provide services subject to specified conditions. Effective January 1, 2016.

Enacts new GS 108E-2-1 providing that the General Assembly sets the eligibility categories and income thresholds, and prohibits DOM from altering the categories and thresholds. Authorizes DOM to adopt rules regarding eligibility requirements and determinations, to the extent that they do not conflict with parameters set by the General Assembly. Effective January 1, 2016.

Enacts new GS 108E-2-2 providing that counties determine eligibility in accordance with GS Chapter 108A. Effective January 1, 2016.

Amends GS 126-5 to provide that, except as to the provisions of Articles 6 (Equal Employment and Compensation Opportunity; Assisting in Obtaining State Employment) and 7 (The Privacy of State Employee Personnel Records), GS Chapter 126 (NC Human Resources Act) does not apply to employees of DOM. Effective January 1, 2016.

Appropriates $5 million in  recurring funds for 2015-16 and 2016-17 from the General Fund to DHHS, Division of Medical Assistance, to accomplish the Medicaid transformation. Specifies that these funds are a state match for federal funds. Requires DHHS, upon request of DOM, but no later than January 1, 2016, to transfer the funds to DOM to be used for Medicaid transformation.

Section 2

States the General Assembly’s intent concerning the health information exchange.

Appropriates $8 million in recurring funds for the 2015-16 and 2016-17 fiscal years to DHHS, Division of Central Management and Support, for the 2015-16 fiscal year and for the 2016-17 fiscal year to continue efforts on implementing a statewide health information exchange network. These funds must be transferred to the Department of Information Technology. Requires the Secretary of DHHS and the State Chief Information Officer (State CIO) to enter into a written memorandum of understanding under which the State CIO has sole authority to direct the expenditure of the funds until (1) the NC Health Information Exchange Authority (Authority) is established and a Director is appointed and (2) the NC Health Information Exchange Advisory Board (Advisory Board) is established with members appointed. Set out the things that the State CIO must accomplish with the funds. Provides that once the Authority Director has been hired and the Advisory Board has been established with members appointed, the Authority must use the funds to do five specified things, including funding the Authority’s and Advisory Board’s operational expenses, enter into contracts related to the successor HIE Network, and fund the monthly operational expenses incurred or encumbered by the NC HIE from July 1 through December 31, 2015.

The above provisions of Section 2 are effective July 1, 2015.

Enacts new Article 29B, Statewide Health Information Exchange Act, in GS Chapter 90, effective October 1, 2015. Repeals Article 29A, North Carolina Health Information Exchange Act, of GS Chapter 90, effective on the date that the State CIO notifies the Revisor of Statutes that all contracts pertaining to the HIE Network established under Article 29A between the State and the NC HIE, and between the NC HIE and any third parties have been terminated or assigned to the Authority.

New Article 29B provides as follows. States the purpose of the Article and sets out and defines terms that are used in the Article. Requires hospitals that have an electronic health record system, Medicaid providers, and providers that receive state funds for the provision of health services to, as a condition of receiving state funds (including Medicaid funds) to connect to the HIE Network (Network) and submit individual patient demographic information and clinical data on services paid for with state funds. Requires the Authority to give the Health Benefits Authority access to data and information disclosed through the Network. Requires the Authority to provide the General Assembly’s professional staff with requested data and information from the Network after specified information has been redacted. Establishes the state’s ownership of data disclosed through the Network.

Establishes the NC Health Information Exchange Authority within the Department of Information Technology to oversee and administer the Network. Requires the State CIO to employ an Authority Director and allows the State CIO to delegate all powers and duties associated with the Authority operations, staff, and performance to the Director. Sets out the Authority’s 16 powers and duties, including entering into contracts pertaining to the oversight and administration of the Network, enter into written participation agreements (after consultation with the Advisory Board) with covered entities that use the Network, develop a strategic plan for achieving statewide participation in the Network by all hospitals and health care providers licensed in this state (after consultation with the Advisory Board), and report on specified information to the Joint Legislative Oversight Committee on the Health Benefits Authority and Information Technology.

Establishes the nine-member NC Health Information Exchange Advisory Board within the Department of Information Technology to consult with the Authority on the advancement, administration, and operation of the Network and on matters pertaining to health information exchange. Sets our membership requirements and provides for staggered membership terms.

Requires each covered entity (defined in the act as any entity described in 45 C.F.R. Section 160.103 or any other facility or practitioner licensed by the State to provide health care services) that chooses to participate in the Network to enter into a business associate contract and a written participation agreement with the Authority or qualified organization before disclosing or accessing any protected health information through the Network. Allows covered entities participating in the Network to disclose an individual’s protected health information through the Network to other covered entities for any purpose allowed by HIPPA, unless the individual has opted out, and in order to facility emergency medical treatment to the individual. Provides criminal and civil immunity for any health care provider who relies in good faith on any information provided through the Authority or through a qualified organization in treating a patient.

Provides that each individual has a continuing right to opt out, or rescind a decision to opt out, which means disallowing the individual’s protected health information maintained by or on behalf of one or more specific covered entities from being disclosed to other covered entities through the Network. Prohibits the disclosure of the protected health information of an individual who has opted out to covered entities through the Network; however, allows the protected information of an individual who has opted out to be disclosed through the Network in order to facilitate emergency medical treatment when specified criteria has been met. Prohibits a covered entity from denying treatment or benefits to an individual because the individual has opted out.

Includes provisions for the construction and applicability of the Article.

Sets out penalties that a covered entity is subject to for disclosing protected health information in violation of the Article.

Amends GS 126-5 to provide that, except as to the provisions of Articles 6 (Equal Employment and Compensation Opportunity; Assisting in Obtaining State Employment) and 7 (The Privacy of State Employee Personnel Records), GS Chapter 126 (NC Human Resources Act) does not apply to employees of the NC Health Information Exchange Authority.

Section 3

Discontinues the current Medicaid and Health Choice primary care case management (PCCM) program, effective May 1, 2016. Prohibits DHHS from renewing or extending the contract for PCCM services with North Carolina Community Care Networks, Inc. (NCCCN), beyond April 30, 2016. Sets out further actions DHHS must take in eliminating the PCCM program.

Amends GS 108A-70.21, effective May 1, 2016, to no longer require DHHS to provide services to children enrolled in the NC Health Choice Program through Community Care of North Carolina and pay Community Care of North Carolina providers the per member, per month fees as allowed under Medicaid.

Provides that effective May 1, 2016, the rates paid to primary care physicians (defined as those physicians for whom the Affordable Care Act required payment at 100% of the Medicare rate until January 1, 2015, and all OB/GYN physicians) will be 100% of Medicare rates.

States the General Assembly’s findings about how much money will be saved by the discontinuation of the PCCM program and the NCCCN contract, and makes specified appropriations based on those savings to the Division of Medical Assistance to pay for the increased Medicaid rates required by the act, and to fund the local health departments’ continued services related to the Care Coordination for Children, which was previously funded through the contract with NCCCN.

 Changes the act’s short and long titles.

House amendments make the following changes to the 3rd edition, as amended. 

Amendment #6 inserts a new clause into a section making a special allocation of bonds and notes for public instruction for public schools capital assistance to school administrative units in counties whose wealth is less than the state average. The new clause allows allocation also to schools in counties containing a base of the Armed Forces of the United States that have an average daily membership of more than 23,000 students. 

Amendment #11 moves the date of the bond referendum from November 2015 to the time of North Carolina's 2016 presidential primary.