RALEIGH — The General Assembly set aside more than $500 million this year to handle the ever-increasing costs of Medicaid, which legislators and Gov. Pat McCrory said prevented them from giving raises to state employees and teachers a few months ago.
Now legislators already are getting worried even a 13 percent increase in overall state Medicaid spending compared to previously expected needs won’t be enough to cover the treatment of 1.7 million mostly poor children, older adults and the disabled. It threatens to again jeopardize employee raises and other spending that has been curtailed since the Great Recession.
“We have other demands on the state budget,” Sen. Tommy Tucker, R-Union, said this week. “It’s getting harder and harder to explain to our constituents why we can’t fund some things.”
Tucker made the comments as state budget officials and Health and Human Services Secretary Dr. Aldona Wos told a legislative oversight panel it was too early to tell whether Medicaid data portended a shortfall this year. But lawmakers were troubled by information they provided.
The state spent 26 percent of the funds the budget law allocated to Medicaid through the first quarter of the fiscal year, the three months ending Sept. 30, the state budget office said. Although the first-quarter percentage spent a year ago was 31 percent, this year’s figures didn’t include provider claims delayed due to problems with the state’s new Medicaid billing system, the office said. The state would pay one-third of the amount of the estimated $350 million to $400 million in pending claims.
Medicaid spending also is historically weighted toward the second half of the fiscal year, Assistant State Budget Officer Pam Kilpatrick said.
“We’re looking at different ways to try to get a handle on this, but in the first quarter I don’t think we’re prepared to say what we think the end of the second quarter or third will look like,” Kilpatrick told Tucker.
Rep. Donny Lambeth, R-Forsyth and the retired president of North Carolina Baptist Hospital, said at Tuesday’s meeting that it didn’t take a sophisticated model to determine all of DHHS, which includes Medicaid, could easily face a shortfall of $350 million to $500 million. “That’s something we all should be concerned about,” he said.
There are new challenges that make projections difficult, including how much Medicaid services will increase as more of the new federal health care overhaul law takes effect. An improving economy could also scale back Medicaid enrollment and ease funding demands.
The state Medicaid office is now asking federal regulators to sign off on dozens of Medicaid plan charges, many of which will result in cost savings. About $3.5 billion of the $13 billion the Division of Medical Assistance is projected to receive this year to operate Medicaid come from the state.
The new billing system called NCTracks is also supposed to provide detailed analytic information to better project Medicaid trends. A division official said Tuesday it would be December before information is available – news that bothered Sen. Pete Brunstetter, one of the chamber’s chief budget-writers.
“I am very uncomfortable with where we are on the Medicaid budget,” said Brunstetter, R-Forsyth. “It only takes a few percentage points of deviation on the Medicaid budget to put the entire state budget” in a grave situation, he added.
The legislature had to locate up to $496 million before the most recent fiscal year closed June 30 to cover a Medicaid shortfall. It was attributed in part to a miscalculation of expected federal funds that Wos’ office pointed out in May occurred when Democratic Gov. Beverly Perdue’s administration was in charge.
Legislative Democrats said Republicans are as much to blame for recent shortfalls.
Perdue and her DHHS Secretary Lanier Cansler told GOP budget writers in 2011 that unrealistic cost-saving demands combined with massive enrollment increases during the recession were setting Medicaid up for a shortfall. In October 2011, the agency warned a legislative oversight committee of a $140 million shortfall that later grew.
“It was (the Republicans’) budget that was out of whack. It wasn’t our budget,” said Senate Minority Leader Martin Nesbitt, D-Buncombe. Still, Nesbitt acknowledged budget forecasting is extremely difficult for Medicaid because it’s an entitlement program that must serve all citizens who qualify for services.
A performance review by State Auditor Beth Wood’s office in January, however, criticized the Division of Medical Assistance for failing to appropriately manage Medicaid costs within their control and keep an accurate picture of current finances.
McCrory and Wos are assembling a Medicaid reform plan they say will provide financial stability. Wos wouldn’t say Tuesday whether she would recommend shifting Medicaid to a manage-care model, where private companies would be paid a specific amount monthly for each patient.
Potential relief could be a long way off. The proposal, expected by mid-March, still would have to be approved by the legislature and federal regulators. A reform framework laid out by McCrory and Wos last spring said incremental implementation wouldn’t start until July 2015.