Deep Medicaid cuts suddenly on table in N.C.

Legislature demands cut of $350 million, but federal standards for services remain in place.

Staff writerAugust 5, 2011 

  • What: The Medical Care Advisory Committee

    Where: McKimmon Center at N.C. State University, 1101 Gorman St., Raleigh

    Time: 9 a.m. to noon today

The legislature set an aggressive target to cut more than $350 million from the state's share of Medicaid spending this year, but chances for meeting the goal with the plan legislators approved were slim.

It takes time to get federal approval for any changes in Medicaid services, so the state won't see the impact of the legislature's cuts for months. Under orders from the legislature to manage Medicaid with the money budgeted, Lanier Cansler, secretary of health and human services, has to squeeze more savings into less time.

So Medicaid cuts may be deeper than anyone thought just a month ago.

"The challenges of the Medicaid budget this time are probably more significant than we've faced before," Cansler said.

Because Medicaid is a state and federal program, the state needs federal approval before it limits or eliminates patient services or changes rates it pays providers. The Medicaid budget is $12.8 billion this year, though the federal government picks up most of the cost. The state pays about $3 billion.

Medicaid could end up $20 million to $30 million short of the budget goal just because of the months it takes for the federal government to approve changes, Cansler said.

He's asking the Medical Care Advisory Committee, a federally required group, to step up its meeting schedule through October to offer the department guidance on where else to find savings or make cuts.

"I think our goal is try to make sure we are able to sustain the safety net in a way that gives people the services they need while still trying to comply with what the General Assembly has required us to do," he said.

"There's hardly any decision we're going to make budgetarily in Medicaid that isn't going to impact a provider, that isn't going to potentially cost jobs, but more importantly, that isn't going to reduce or eliminate some service that someone may be needing or depending on," he said.

The committee will begin its task today, and there's time set aside for public comment.

Medicaid is one of the state's biggest expenses. Legislative budget writers, facing a $2.5 billion shortfall and determined not to extend temporary tax increases, made deep reductions by cutting rates for hospitals and other providers, demanding $90 million in savings from a managed care-style Medicaid program and a reduction, if not elimination, of waste and fraud.

Legislators said they knew it was possible that Cansler would have to make more cuts to meet the budget.

"I personally was concerned when the budget was being put together that this was coming," said. Sen. Pete Brunstetter, a Winston-Salem Republican and a chief budget writer. "I think all the dynamics that Lanier was citing were apparent or were potentially apparent."

Legislators discussed whether it would be best to specify all the cuts themselves or put more responsibility on Cansler to make some decisions, Brunstetter said.

The Senate's budget specified more cuts to optional services, particularly in the second year of the two-year budget. The Senate budget writers proposed more than $73 million in cuts to optional services next year by limiting or eliminating adult dental care, adult physical, occupational and speech therapy, eye care and glasses, and other services. Identifying items on the chopping block brought out their defenders.

"Every one of those has a constituency," Brunstetter said. "When we came out with the list of reductions, we got the response you might expect."

Those specifics were not in the final budget.

Sen. Stan Bingham, a Davidson County Republican who helped write the budget, said he thought it best to give Cansler the authority to make the cuts because he knows more and has advisers to help him with specifics.

"We kind of grieved over this, trying to do as little damage as we could," Bingham said.

Advocates for poor and working class residents warned the legislature it was taking too much out of health care. State spending on Medicaid is matched by the federal government, so the cuts come to about $1 billion a year.

"This is all the result of a devastating budget cut that the legislature passed," said Adam Linker, a policy analyst with the Health Access Coalition, an advocacy group for poor and working class people.

Advocacy groups are worried about more cuts to optional services, Linker said.

"The size of the cuts are so huge," he said, "there's no way you can get at balancing the budget without cutting something painful."

lynn.bonner@newsobserver.com or 919-829-4821

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