Medicaid shortfall larger than expected

Officials with the Department of Health and Human Resources had earlier this year estimated that the state's Medicaid program would be $113 million over budget. Thursday, they announced the department would be short an additional $135 million. Combined with a "rebase," or an estimate of how much actual costs are growing year to year, the program will cost at least $434 million more in fiscal year that begins July 1 versus the current fiscal year.

"We have been taking a close look at previous Medicaid forecasting practices in order to create a more transparent and accurate process going forward," DHHS Sec. Dr. Aldona Wos said. The department recently hired Ernst & Young to conduct an in-depth evaluation of Medicaid forecasting methodologies in the Division of Medical Assistance. The agency has also hired former State Auditor Les Merritt to help with oversight of the department. 

This new shortfall is a result of a problem with the model the state uses to predict how much money the federal government will send to North Carolina for Medicaid expenses, according to the agency. The state and federal governments share costs for the program. 

Of immediate concern, the over-estimate of how much money might be forthcoming from the federal government will force lawmakers to plug a hole in the current year's budget before July 1.

"If the shortfall is as big as DHHS has modeled, we'll have to do something," said Sen. Pete Brunstetter, R-Forsyth. Lawmakers have already begun planning to plug that hole by filing a "placeholder" bill that could be used if action is needed.  

The good news, said Brunstetter, the senior budget chairman in the Senate, is that lawmakers were already expecting a larger shortfall than previously forecast. That means today's announcement won't derail plans to roll out the state budget this month. 

"These numbers are a little bit higher than what we anticipated, but not dramatically so," Brunstetter said.