Raleigh, N.C. — Inefficient management and lax oversight of contracts led to North Carolina spending much more to administer its Medicaid program than similar-size states, officials said Thursday.

State Auditor Beth Wood said North Carolina's administrative costs are 38 percent higher than the average of nine states because of "structural flaws" in how the Department of Health and Human Services operates the Medicaid program. The higher costs translate into an extra $180 million in North Carolina.

Although the Division of Medical Assistance is primarily responsible for processing Medicaid claims, two-thirds of the administrative costs were racked up by 10 other DHHS divisions, Wood said. Also, half of DMA's administrative costs were tied to contracts that weren't properly monitored.

Other problems found included a lack of budget forecasting – Medicaid spending was $1.4 billion over budget from 2009 to 2012 – and outright flouting of state law. Wood cited one instance where DMA withheld $131 million in drug rebate funds that were supposed to be transferred to the federal government and another where nursing homes received $13 million in inflationary adjustments.

DHHS Secretary Aldona Wos vowed changes in department operations under her watch.

"Cost overruns will not be tolerated and will not be accepted," she said. "There is a budget for a reason."

Wos said Carol Steckel, who was recently hired to run the Medicaid program, is already reviewing operations and establishing new policies and procedures.

Gov. Pat McCrory said his administration is working to fix what he called "a broken system," especially since DHHS is trying to implement new computer systems by this summer.

"Every dollar that is mismanaged at DHHS for Medicaid is $1 less that is available for medical services, education or things like road and bridge repair," McCrory said. "She cannot make good decisions and neither can I if we have bad information, and right now, there's a lot of bad information."

While McCrory said he hasn't made a decision about expanding Medicaid to accommodate people under the federal Affordable Care Act, Senate President Pro Tem Phil Berger said the mismanagement uncovered by the audit proves the state isn't ready to do that.

Legislation in the Senate would block any Medicaid expansion under the federal law and prohibit the state from establishing its own health insurance exchange, which would provide an online marketplace for people to shop for health coverage if they don't have an employer-sponsored plan.

House Speaker Thom Tillis said audit results are disappointing, if not surprising.

"The audit is further proof of inefficiencies and mismanagement at many levels of the Medicaid system that cannot be tolerated. It is apparent that improvements must be made to ensure that individuals dependent on Medicaid are adequately served by the system," Tillis said in a statement.