After months of waiting, legislators got their first hint of how large the overrun on the health care program could be. They also received a warning that the numbers are subject to change.
By Rose Hoban
After months of asking for data from the Department of Health and Human Services about this year’s Medicaid budget, legislators on an oversight committee finally received an answer: The program that provides health care for more than 1.59 million North Carolinians will be over budget by anywhere from $68 million to $131 million.
Lawmakers also heard several very big “buts” to those estimates and hints that the number could climb higher as the fiscal year draws to a close on June 30.
“We don’t have a Medicaid forecast,” analyst Susan Jacobs from the legislative Fiscal Research Division, told the Joint Legislative Oversight Committee on Health and Human Services Wednesday. She said that her office had only recently been given access to the DHHS data warehouse and were being trained how to extract information from the system.
“We do not have all the information that we need in order to forecast,” she said, echoing what lawmakers have been told for months.
Jacobs also said that there is a backlog on Medicaid applications and claims that still need to be paid. “Once we have complete claims data, the numbers could drastically change,” she said.
Pam Kilpatrick of the Office of State Budget and Management told the committee that if 100 percent of claims are submitted and “70 percent is clearing, then there may be some subset of 30 [percent] that is not being paid, that will be reprocessed,” with providers not yet receiving their payments.
“Do you project that June 30 we’ll know what the shortfall is? Or when will we know what that is?” asked Sen. Gladys Robinson (D-Greensboro).
“We’ll certainly know by June 30,” responded Kilpatrick, referring to the last day of the fiscal year. “The more months that elapse and the more actual data that’s available, the less forecasting we do, therefore the more accurate we get.”
Kilpatrick also told lawmakers that as many as 81,000 Medicaid applications remain outstanding. About 59,000 of those result from the so-called “woodwork” effect, created as people previously not enrolled in Medicaid learned they were eligible when they tried signing up for coverage under the Affordable Care Act. Another 22,000 have come in through county offices where their applications are backlogged.
Jacobs pointed out that one issue with that backlog is that Medicaid can pay bills retroactively for people after they apply, incurring unknown amounts of liability.
Jacobs said that instead of a true forecast, she had “best- and worse-case scenarios.”
Based on a best-case scenario, $147 million in savings created in last year’s budget would only come to about $119 million. Barriers to achieving all the changes legislators tucked into last year’s budget include delays in getting federal approval for amendments to the state’s Medicaid plan and whether federal officials will allow North Carolina state officials to retroactively cut rates on providers once amendments are approved.
But she did say that if changes were successfully entered into the troubled NCTracks computer system for billing and claims tracking, the budget forecast could also improve.
Jacobs said the worst-case scenario could be that changes legislators put into last year’s budget would only yield $87 million of the $147 million in savings. If those barriers hold, they could produce a shortfall for the next year’s budget that could top $256 million.
“It’s an estimate; it’s the best information we have. I am not comfortable enough with the data or what’s happening at the local level with applications to come to this body and tell you that we have a forecast,” Jacobs said. “It’s the unknown that keeps me awake.”
DHHS got two new financial chiefs last summer. Departmental Chief Financial Officer Rod Davis and Medicaid Chief Financial Officer Rick Brennan both began within weeks of one another. Brennan told lawmakers this put the department at something of a disadvantage when it came to dealing with this year’s budget.
“By the time I got here, budget was already out,” Brennan said.
He said that with the input of the Fiscal Research Division and the state Office of Management and Budget, DHHS leaders “agreed to build this year’s budget strictly from last year’s expenditures,” in part because of problems with the NCTracks system.
And according to those comparisons, the Medicaid budget is on target. But that analysis lacks some detail.
Brennan detailed savings lawmakers had worked into last year’s budget and then proceeded to describe to them how tens of millions in savings would be unachievable.
Rep. Nelson Dollar (R-Cary) asked Brennan when he and his department realized these savings would be lost. Brennan responded that some analyses were done in August and others in January.
“It seems to me that if there were questions about them that went back to last summer, that those should have been addressed with not only the staff,” Dollar said. “And if there was no appropriate response back, that it should have been shared with this committee soon enough for this committee to be aware, as opposed to not really being fully aware until so late in the fiscal year that we can’t do anything about it.”
Brennan described asking Fiscal Research and OSBM for documents last summer to back up the savings projections that were made in the budget.
“We were asking for documentation and where we could find things,” Brennan said. “We had spent significant time going through files in the agency, trying to duplicate these items in the savings. We had not been able to do it.”
But Jacobs from the Division of Fiscal Research contradicted Brennan’s account. She described a meeting in August where her office and people from OSBM shared documents, spreadsheets and analysis with new leaders at DHHS.