Gov. Pat McCrory presented his budget to reporters Wednesday. The document will be presented formally to the legislature Thursday morning.
By Rose Hoban
On the same day lawmakers at the General Assembly started their work for the short legislative session, Gov. Pat McCrory presented his budget adjustments for the 2014-15 fiscal year.
In a plan that McCrory said covers the Medicaid shortfall while also giving raises to teachers and state employees, the governor proposed a total budget outlay of $20.9 billion for the coming year; $5.01 billion of that covers funding for the Department of Health and Human Services.
But though the plan covers the entire cost of the state’s Medicaid outlay, has a $168 million surplus and adds $50 million to a reserve fund, it teases more revenue out of hospitals, asks mental health managed care organizations to send money back to the state and moves money to create more slots for 4-year-olds to enter the Pre-K program.
McCrory and budget director Art Pope told reporters that this year’s Medicaid overrun has been reduced to only about $70 million dollars, down from a $140 million deficit that was projected in April.
“There’s a possibility that the $70 million shortfall numbers that we are using may be wrong,” said Pope, who explained that his office only has figures through the month of April. “There are a range of estimates, different ways to estimate it, but the governor does not have the luxury of putting a range into the state budget.
“We are using a number we think is most appropriate based on the information available.”
The plan allows the Department of Health and Human Services to keep its cash on hand at the end of the year, even as other departments revert their unspent funds to the state’s General Fund. Whatever cash remains within DHHS will be held to pay for unpaid claims from the 2013-14 fiscal year that roll into the next fiscal year that begins July 1.
Several of the state’s larger hospital systems have reported that they are still owed millions of dollars by the state’s Medicaid program, which has struggled to pay claims since the department rolled out the new NCTracks computerized claims-management system last summer.
Hospitals, mental health providers pay more
In last year’s budget, hospitals were told they would pay more back to the state in the form of an assessment on their Medicaid receipts.
The state compels hospitals to give the General Fund back a cut of what they earn in exchange for providing Medicaid and receiving state and federal dollars to provide for the care. This assessment, which was created in the 2011 legislative session, has been a fixed amount from each hospital.
Last year, that calculation changed from a fixed amount to 25.9 percent of hospital Medicaid revenue. This year, the state wants an additional 2.95 percent, which will take an additional $15 million out of hospitals’ coffers.
N. C. Hospital Association lobbyist Hugh Tilson said hospitals are already paying “more than the state’s share of the cost of caring for hospitalized Medicaid patients.”
“Our community hospitals cannot continue to offset state underpayments for Medicaid and fulfill our role as the health care safety net and our mission to care for any North Carolinian, all day, every day,” Tilson wrote in an email statement.
Also this year, an assessment of close to $60 million will be levied on the state’s mental health managed care organizations. The organizations are given funding by the state to run certain services, while they collect Medicaid and insurance fees to cover the cost of care for people who need mental health services.
This past week, the N.C. Council of Community Programs, a coalition of the state’s mental health providers, touted the fact that they’d stayed within their state-allocated budget for the provisioning of services.
“Budget predictability is one of the most important benefits of public managed care for our state, and it’s good to know that these services aren’t causing budget concerns,” wrote Executive Director Mary Hooper in a release.
Each of the state’s nine local management entity/managed care organizations’ budget is set and capped at the start of the fiscal year using historical claims data and other factors. Each LME-MCO must then manage the budget, and are “at-risk” if there are cost overruns.
“Funding for managed care is capped and predictable,” Hooper argued last week.
A representative from the Council of Community Programs was unavailable before publication to respond to the governor’s proposal.
Small cuts, small additions
Out of a total Department of Health and Human Services budget of more than $5 billion, the governor’s budget writers removed 3.75 percent, or about $122 million. Many cuts were small or moved money from one place to another. But in many programs, small changes make a big difference.
Some smaller changes embedded in the governor’s plan:
- Takes $7.1 million from the federal Temporary Assistance for Needy Families block grant to pay for increased Pre-K slots, and saves that amount in state dollars. TANF usually provides welfare funds for low-income families.
- Adds $2.7 million in recurring funds to create 30 positions in the state’s Division of Social Services to monitor county child-welfare agencies around the state. This increases Child Protective Services by more than 200 percent.
- Provides $1 million for start-up costs for planned Medicaid reform.
- Fully funds the state’s AIDS Drug Assistance Program, even with a one-time cut of $3.78 million.
- Requires people receiving anti-psychotic medications to get prior authorization before getting the drugs, saving the state $6 million.
Lisa Hazirjian, who leads the N.C. AIDS Action Network, said that in the past year officials from DHHS have been finding ADAP recipients who might be eligible for Medicare because they have a disability. And once those folks get signed up for Medicare, they’re eligible for another program, the State Pharmaceutical Assistance Program.
“It’s less expensive to serve people in the SPAP,” Hazirjian explained. She said instead of paying the full cost of AIDS drugs under ADAP, Medicare pays part of the cost and SPAP picks up the rest.
In addition, the state can apply for rebates from pharmaceutical companies for people who are enrolled in the SPAP.
“And the drug rebates have been considerable,” Hazirjian said.
But she also said that many anticipate that pharmaceutical companies will start phasing out their rebate programs starting in 2015. Hazirjian said it’s clear to her that the governor’s budget team understood that they could only make a one-time cut to ADAP funding without harming recipients.
“We’re encouraged by the understanding of the issues that we see in the budget language and by the strong commitment of the principles we’ve been articulating since last year’s budget fight,” Hazirjian said.
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