RALEIGH — The state wasted $635.3 million on community mental health services because of poor planning and monitoring by the state Department of Health and Human Services, according to a report presented to legislators Monday.
The $635 million amounts to about 25 percent of the $2.4 billion spent on new community services from April 2006 to February 2009. Medicaid, the government health insurance program, paid most of the costs. The state picks up about one-third of the bill for Medicaid, which means, according to the report, that $226.2 million in state money was wasted.
The report by the legislature's Program Evaluation Division describes a department unprepared for the onslaught of private contractors that would take advantage of its inadequate planning and limited oversight. The experience offers a lesson to DHHS and other agencies that start programs, said Carol Ripple, a principal evaluator for the division.
The department was slow to realize that a service called community support was overly lucrative for contractors at the state's expense. When it started, the state paid contractors about $61 an hour to provide community support, a service mainly performed by high school graduates. The state later tried to control costs by cutting the rate to $40 an hour.
Community support, assistance with everyday activities that would help people with mental illness remain active in the community, was the most basic offering in an array of about 20 mental health services the state launched in March 2006. The state started the services to offer a broader range of treatment while relying less on hospitals.
The state included more intensive programs for the mentally ill, such as emergency services and programs for people with severe illnesses. But community support ate up most of the money.
In the first year, community support accounted for 97 percent of the spending on new mental health services; the other 18 services accounted for 3 percent.
During March 2007, the peak month for spending, community mental health services cost $116.6 million, with the community support bill totaling $108.3 million.
Even after administrators realized in fall 2006 that costs were escalating, DHHS did not make key decisions on cost controls until February 2007, Ripple said.
DHHS does not have technology that would allow for the quick detection of problems similar to runaway community support spending, DHHS secretary Lanier Cansler said. The department is investigating how much it would cost to install a computer system that would provide better and more timely information, he said.
DHHS was not prepared for the "cottage industry that sprang up around the holes that were left in the plan," Cansler said. The department now makes certain it considers "every possibility" when it designs a program, he said.
Cansler said he did not know why DHHS failed to act for several months after learning of the runaway spending. He speculated that the department was trying to get permission from the federal government to make changes in the program.
The department should have thought about how the community services would be used, House Minority Leader Paul Stam, an Apex Republican, said Monday night.
"Good intentions are not enough when you legislate," he said. "You have to think ahead to how things will be implemented. When there is no disincentive for people to use a service, they will use it to the max."
An investigation by The News & Observer last year determined that the state wasted $400 million on community support. Government audits found workers were billing for repeatedly taking clients to the gym, sitting with children while they were in school, and taking them shopping.
The experience with community support shows that agencies need to take time for planning, test programs before launching them widely and make sure administrators can get timely information on programs' use and costs, Ripple said.
"It takes time to implement a program well," she said.
State administrators and legislators have been trying to control community support for about three years. Community support costs have dropped sharply from their March 2007 peak, but legislators are now talking about phasing out the service and having DHHS restructure or replace the program.
Administrators never anticipated that community support costs could run out of control as they did, Cansler said.
"Our response now is to make sure we never have this happen again," he said. "Community support services will be the poster child for making sure we better manage programs in the future."
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