Raleigh, N.C. — Unexpected, budget-busting Medicaid shortfalls have become something of a rite of spring for lawmakers, and this year's came to light Tuesday.
In a very technical-sounding news release issued late Tuesday afternoon, Budget Director Art Pope and Department of Health and Human Services Secretary Aldona Wos said they were abandoning a plan to levy Medicaid assessments on local mental health agencies. An "assessment" is money a health care provider hands back to the state for participating in the Medicaid program for the poor and uninsured. However, levying that kind of assessment on local management entities – LME/MCOs in the acronym-laced vernacular of the mental health community – is against federal rules, according to the Centers for Medicare and Medicaid Services, or CMS.
Or as Pope and Wos put it in a joint statement: "Due to guidance from CMS and the Office of Inspector General’s report on Pennsylvania’s gross receipts assessment on Medicaid Managed Care Organizations, OSBM and DHHS have decided not to pursue an assessment on LME/MCOs. We are considering additional options at this time and working with the Legislature to achieve savings through other methods."
The result: $60 million the governor and Senate thought they were going to save is now going to have to come from tax dollars.
That aggravates lawmakers such as Sen. Ralph Hise, R-Mitchell, one of the budget writers responsible for Health and Human Services.
"It's a huge frustration," Hise said, noting that the assessment was something the governor had used as a tool in two years worth of budgets. "Now we're being told it doesn't meet the guidelines of CMS, and we're discovering the work's not been done on the governor's end. When you propose it to a legislature ... you would assume that someone had done some due diligence and (had) some conversations with CMS about whether that was allowable or not."
During budget meetings earlier this year, DHHS officials guaranteed lawmakers that they had the Medicaid budget under control and that there would be no late-spring surprises from unexpected cost overruns. While this isn't a billing error or computer glitch like those that have plagued the department in the past, it is a nasty fiscal shock that comes in the middle of the budget process.
"Without that provision, the Senate budget is $60 million out of place," Hise said.
The Senate has already completed work on its proposed budget. House budget writers are beginning to put together their proposal. The two documents will have to be reconciled before going to McCrory for his signature.
The new Medicaid hole, Hise said, will complicate budget negotiations between the House and Senate.
"This is the basic definition of what is non-sustainable, irresponsible and just shows no fiscal responsibility," Hise said, wondering out loud how something like this happens.
Pope and Wos offered the following background:
- On May 14, the Governor’s Recommended Budget Adjustments included implementing a 3.5 percent assessment on the LME/MCOs, which would have saved the state about $60 million. This provision was also included in the Senate’s budget.
- On May 28, the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) issued a report on Pennsylvania’s assessment on Medicaid Managed Care Organizations, finding that the assessment is not allowable for Medicaid funding purposes.
- In the report, the OIG also recommended that CMS clarify its policy concerning permissible provider assessments.
- Since the budget is now in the North Carolina House, OSBM and DHHS will work with members of the House to remove this provision and achieve the savings through other methods.