NC Medicaid cuts lead to blame game

Republican lawmakers passed a $19.7 billion budget – over Gov. Beverly Perdue's veto – that called for cutting $356 million from the Department of Health and Human Services. Agency officials told a legislative oversight committee Thursday that they can't make all of the required cuts.

Lawmakers overestimated some cuts that have to be approved by the federal government, officials said. That process takes months, but budget writers calculated the savings as if they had started immediately.

Other requested cuts would break Medicaid program rules, which could cost the state millions in federal revenue.

The shortfall means state leaders will have to find a way to close the gap between revenue and expenditures for Medicaid, the government-run health care plan for poor children, older adults and the disabled.

Medicaid is an entitlement program, so the state must pay for services paid through the program for nearly 1.5 million recipients. The budget for the division overseeing Medicaid is almost $3 billion.

The General Assembly already has given Health and Human Services Secretary Lanier Cansler authority to reduce or eliminate optional Medicaid services if the cost savings mandated in the budget aren't being reached. Optional services include podiatry and dental care, as well as hearing aids and organ transplants.

House Speaker Thom Tillis said Thursday that lawmakers weren't aware of the problem at DHHS.

"A lot of those cuts were made in consultation with the secretary and the Department of Health and Human Services," Tillis said. "Obviously, if we'd been consulted by them and they said they weren't possible to begin with, (the cuts) wouldn't have been in there."

Cansler quickly sent oversight committee members a letter noting that budget writers were fully aware of the difficulty in making cuts to some of the agency's programs.

"The true nature of these cuts was pointed out to you in letters from Gov. Perdue dated May 27 and June 2, 2011," Cansler wrote.

Medicaid probably will fail to achieve $27 million of savings this year because less than half of the proposed changes to the state program have yet to be approved by the U.S. Centers for Medicare & Medicaid Services, DHHS officials said. GOP lawmakers have said previously state regulators should press the Obama administration to approve more quickly state changes to the Medicaid plan to accelerate savings.

Community Care of North Carolina, a highly successful managed care program for Medicaid patients, was directed to find $90 million but now anticipates a minimum of $51 million due to timing issues related to enrolling more older adults and people with disabilities, officials said.

A report from Deputy DHHS Secretary Michael Watson also said the legislature didn't set aside $41 million to help pay for a previously disclosed $300 million accounting error in 2008 that resulted in overpayments. The state also must repay $42 million after a federal audit found personal care services were either billed improperly or had inadequate documentation from providers, the department said.

The state could have other options for erasing the shortfall – tax collections are running $150 million above forecasts through the first three months of the fiscal year, and there's almost $300 million in the state's rainy-day reserve fund. But the surplus could quickly dry up if unemployment remains above 10 percent, and reserves may be needed to pay for agricultural damages related to Hurricane Irene.