shows a red cross with the word Medicaid printed on it, in front of a pile of dollar bills. For Medicaid transformation

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By Rose Hoban

As Gov. Pat McCrory introduced North Carolina’s Medicaid reform plan Wednesday, he praised this year’s “$300 million surplus in the Medicaid budget made possible by Republican-led reforms that have gotten the chronically troubled program back on track.”

When the budget numbers came in this spring, they showed the program was at least $313 million below it’s target budget.

And Republican leaders in the legislature have crowed over that number, most of which was returned to the state’s general fund this year.

However, it’s not clear that this year’s Medicaid surplus was a result of better management or legislative reforms, so much as better budgeting and some positive changes made possible by outside forces.

One of the biggest drivers for growth in the Medicaid program is enrollment. Last year, DHHS leaders projected that Medicaid enrollment would grow by 8.3 percent. That enrollment projection represented a higher growth rate than the level seen in most of the previous seven years. Even during the 2009 fiscal downturn, when many more people became eligible as people lost work, Medicaid grew by only 6.2 percent.

Blue lines show the predicted enrollment growth for Medicaid last year. The green lines show that actual growth was much lower. Graph courtesy NC DHHS
[In 2014, enrollment growth for Medicaid alone was high at 9.2 percent, but that was in large part because kids in the state’s Health Choice program were moved into Medicaid as Health Choice was phased out. The total growth for the two programs overall was 6.6 percent.]

In a program as large as Medicaid, a small change makes a big difference. Last year’s actual growth in enrollment was only 3.3 percent. That seemingly small difference added up to more than $107 million in savings.

When asked about those over-estimates, Medicaid head Dave Richard said the forecast was a “reasonable projection.”

“We knew that we were conservative in that,” said Richard, citing uncertainty caused by an influx of Medicaid applicants into the system as a result of the Affordable Care Act, which added about 66,900 people in 2014, but only about half that amount in 2015.

“We didn’t know what it would be like,” he said.

All data courtesy NC DHHS.

The other big source of savings in last year’s Medicaid budget came from federal dollars paid into the program. More than $87 million of surplus arose from a more generous federal rate for matching the state dollars North Carolina puts into the program. In 2014, the federal government paid $1.93 for every dollar paid in by North Carolina. Last year that matching payment went up to $1.96 for every North Carolina dollar.

That change amounted to at least $100 million. And this year, that rate will tick up again, to more than $2.02 paid by the feds for every North Carolina dollar spent.

As DHHS officials told legislators in May, “over 60 percent of the reduction is due to lower than anticipated enrollment and a more favorable match.”

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