State health officials are coming to grips with some of the administrative issues in North Carolina’s Medicaid program.

By Rose Hoban

It’s been a rough week for North Carolina’s Medicaid program.

State health officials admitted that the former Medicaid head made a unilateral decision last summer that could cost the state millions; they told lawmakers that Medicaid officials still cannot predict whether the program will be on budget; and officials also told lawmakers they’re having problems retaining experienced workers in the program.

But Department of Health and Human Services Sec. Aldona Wos told lawmakers at Tuesday’s Joint Legislative Oversight Committee on Health and Human Services meeting that she is moving Deputy Secretary Robin Cummings over to the Division of Medical Assistance, which runs Medicaid, to provide internal leadership as they continue to look for a new Medicaid director.

The previous Medicaid director, Carol Steckel, left last October after only eight months on the job.

And Wos’ office last week revealed plans to spend millions on management consultants to advise on how to strengthen the administration of the Medicaid program and improve the process for forecasting expenditures.

Botched waiver

One of the biggest bombshells for the Department of Health and Human Services this past week was the revelation that Medicaid might end up paying benefits for people no longer eligible for the program because of an administrative oversight.

Under new rules created by the Affordable Care Act, states now need to calculate income eligibility for Medicaid recipients using “modified” adjusted gross income (MAGI), which could mean that some recipients make a little too much to continue qualifying for the program.

But a letter submitted last summer by Steckel asked federal officials for three months’ grace in implementing the new MAGI rule. Federal officials responded, granting that waiver in late September, just as Steckel was leaving her position.

“This was not vetted inside the department or DHHS at that time, and it should have been,” Wos admitted to lawmakers.

“The practical impact is that all the new applicants coming in are going to be using this one standard, modified adjusted gross income. And then the people who have been on before, during those three months, may or may not use modified adjusted gross income, but the department would have to maintain that separate eligibility standard within the computer system and the operational framework,” legislative analyst Ryan Blackledge told lawmakers.

There was a problem with that though: Steckel did not have authority to ask for that waiver without approval from the General Assembly, which would have to adjust the budget. And few DHHS officials outside of the Division of Medical Assistance were told about the change.

Acting Medicaid director Sandra Terrell told lawmakers that the change would affect an estimated 4,400 people each month, many of them children, and cost at least $2.8 million.

Medicaid Chief Financial Officer Rod Davis also told lawmakers that if the problem did not get rectified by April, each month’s new crop of Medicaid recipients would end up costing the state more and more, a tab that could end up being as much as $45 million over the course of the year.

Terrell also said the people who would need to do the paperwork to resolve the problem are the same county caseworkers who have been inundated with clearing a massive backlog in food stamp applications.

These workers, she said, “are also required to perform Medicaid re-determinations while receiving an approximately 38,000 additional applications from the federal exchange.”

“Looking forward, the department will explore all options to assist the county case workers with this extreme workload.”

Budget remains uncertain

The biggest question for many lawmakers is where the state’s Medicaid budget stands. At this point in prior fiscal years, legislators were told about looming deficits; last year’s long session began with lawmakers knowing that the program would be more than $100 million over budget.

But this year, lawmakers still have no idea how much budget deficit to prepare for, if any. And Tuesday’s oversight committee meeting began with a presentation on the Medicaid budget that left unanswered all of the questions which, last month, lawmakers were told would be answered by now.

Pam Kilpatrick from the Office of State Budget and Management told lawmakers that Medicaid had spent 50 percent of it’s budget by Dec. 31 – halfway through the 2013-14 fiscal year – and used 50 percent of its $3.46 billion appropriation. She also said Medicaid has spent more than last year, but also has taken in more money in receipts than last fiscal year, putting the program on better footing.

But Kilpatrick also told lawmakers that it’s “hard” to tell them what’s happening with Medicaid, in part because the data coming from the NCTracks system is incomplete and that much of the financial “risk” in Medicaid comes in the second part of the fiscal year, from January to June.

“Medicaid claims account for about $11 billion of the total budget for Medicaid. DHHS is estimating at this point, based on what they know, that there’s approximately $85 million to $125 million of claims for services that have been provided, that those providers have not been reimbursed,” Kilpatrick said.

She also noted that with the implementation of the Affordable Care Act, some previously eligible, yet-uncovered people will start receiving Medicaid.

“How claims will also be affected depends on what happens not just with who is eligible but how many people actually become recipients of Medicaid, the volume and the types of services they’re receiving and how much those services actually cost.”

Kilpatrick also said the most uncertainty in receipts occurs in the last quarter of the fiscal year, from April to the end of June, just as legislators are making their budget for the coming fiscal year.

“It’s the time when rebates are at their greatest. We’re relying on assessments coming back from the providers and a lot of sources that the agency has to collect from and (they are) on pins and needles as they open the mail and receive those dollars coming back in,” she said.

Help wanted

Last week, DHHS released a report from management consultants Ernst & Young that concluded that the agency needs help with forecasting budgets.

“The current Medicaid forecasting process does not now have an effective governance structure in place or rigorous testing and scrutiny of model integrity,” the report read. It also said the program has “forecasting methods and assumptions which can result in an unreliable Medicaid forecast and potentially preventable errors.”

The Ernst & Young report also said the agency lacks adequate personnel to do complicated predictions about coming expenses, and that this might be an ongoing problem.

“Based on our discussions and our understanding of the current environment, and given the Governor’s recent measures to control cost, DHHS and DMA may be financially limited in their ability to hire such talent, and to educate its current employees in such technical topics,“ the consultants concluded.

Critical staff needs at the Division of Medical Assistance (DMA). Chart courtesy NC DHHS
Critical financial staff needs at the Division of Medical Assistance (DMA). Chart courtesy NC DHHS

Human Resources director Mark Gogal told lawmakers that DHHS consistently runs a vacancy rate that nears 20 percent and that currently, vacancies are trending up.

The Division of Medical Assistance, which runs Medicaid, has had a sharp uptick in turnover this past year, with 81 vacancies out of a total of 413 positions.

“The changes in the skill set and competencies needed for our positions are due primarily to technology and program-added changes,” Gogal said. “The reality is that our internal employee salaries are losing ground to the applicable market rates, and that’s primarily because of a lack of consistent salary increase.”

He said financial and IT roles are particularly hard hit, with a 22.5 percent vacancy rate for IT. (see charts.) He also told lawmakers that health benefits lagged behind the private sector and that the long time required for state workers to vest in retirement plans made state employment less attractive.

That surprised some lawmakers.

Critical staff needs at the Division of Medical Assistance (DMA).
Critical IT and business needs at the Division of Medical Assistance (DMA). Chart courtesy NC DHHS

“I know that benefits for state employees, at least where I came from was always looked at as being the top class of benefits. Sounds like that’s not the case anymore,” said Rep. Donny Lambeth (R-Winston-Salem). “It sounds like there’s not as much value in the benefits as maybe there used to be.”

“My own example, being new in state government, with regards to, for example, vesting for retirement, it’s now a 10-year vesting period,” responded Gogal. “In private industry, it’s usually a much shorter period of time; it could be within a year, five years or even immediate.”

“We’re not going to be able to keep up with what we’re losing,” he concluded.

In the wake of this exchange, Wos gave a spirited defense of state workers.

“What is the vision in the state for the state employee?” Wos asked. “At the end of the day, we want to achieve having world-class leaders inside of our departments and our agencies.”

“With what we are expected to do to lead our state and to be responsible to the taxpayers and the citizens, how can you possibly expect that to happen unless you have a vision facing forward that we expect to have world-class talent inside of state government,” Wos said.

Committee Co-chair Justin Burr (R-Albemarle) told Wos that he and others were looking to draft legislation that would give DHHS the ability to “hire those quality employees who will be there for the long haul.”

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