Senate leaders: 'Medicaid is driving' state budget

Senate budget writers say their plan, rolled out Sunday night, doesn't make many big spending changes - with one very large exception.

The single largest increase by far in the Senate budget plan is an additional $584 million dollars plowed into Medicaid in the upcoming year. Next year, the increase will be $796 million.

Senate leaders say that has to change.

"That’s the message coming out of this budget," Sen. Ralph Hise, R-Mitchell, told the Senate Budget Health subcommittee at Monday's meeting on Senate Bill 402. 

“Medicaid is driving everything in this state budget. These funds coming out are controlling what we do in education, what we do in transportation and highways," he said.

Republican leaders are hoping Governor Pat McCrory's bid to privatize Medicaid will lead to better cost control down the road. But that will take time: reforms on that scale have to be approved by the federal program through state waivers and plan amendments.

In the meantime, Hise says budget writers are doing what they can to control costs in the entitlement program.   

One proposal in the Senate plan would move many pregnant women off Medicaid and into the private insurance market. 

In the not-so-distant past, North Carolina had one of the nation's worst infant mortality rates. State leaders decided to offer Medicaid coverage to more pregnant women - up to 185% percent of federal poverty level - in hopes of reducing that rate. 

While the strategy seems to have worked, Hise says the advent of federal health insurance exchanges under the Affordable Care Act could save the state $20 million in the next year alone.

Pregnant women between 185% and 133% of federal poverty level (the federal cut-off for eligibility) would have to buy private insurance through the exchange. The state would pay their premiums during their pregnancies. Afterward, the women would have the option of continuing the coverage on their own. 

Because plan premiums in the exchanges are controlled for income, Hise says, they probably wouldn't be much more than $25 a month. But the women would almost certainly have to pay co-pays, deductibles, and other out-of-pocket expenses they wouldn't have to pay under Medicaid. 

Hise admitted the benefits under an exchange plan probably wouldn't be as rich as under Medicaid. "I don’t deny the fact that there are savings in doing this." But he said it offers women an advantage in setting them up with insurance they can afford to continue after childbirth, rather than dropping them, as the Medicaid program did.

Advocates for low-income women say that isn't much of an advantage, since those women could buy a policy on the exchange for themselves after their Medicaid coverage lapsed, anyway.

"On Medicaid, a pregnant women is not denied service because she doesn’t have the co-pay amount," Adam Linker with the NC Health Access Coalition told the committee. "The co-payments are higher in private insurance. Could she be turned away?"

Another proposal would shut down all three of the state's in-patient treatment centers for drug and alcohol addiction.

"These centers, residential treatment centers, have shown no evidence that they provide better outcomes than community-based treatments," Hise told the committee. "However, the cost for operating these centers is $158,000 per bed per year."

Senator Gladys Robinson, D-Guilford, asked whether counties or private entities would be able to cover the demand for in-patient treatment. Hise said there are no guarantees, but added that the state would put part of the savings into community-based treatment instead.     

"We have a need to provide these services," Hise said. "We just don’t believe the centers that are providing them do so in a cost effective manner."

The Senate budget would also move a large chunk of funding away from pre-K programs and into child-care subsidies, to be administered by county Departments of Social Services. The change would largely cut out the NC Partnership for Children, the non-profit that administers Smart Start.

The money that would have funded 2,500 seats in NC Pre-K will fund 2,600 seats in subsidized child care programs, which benefit more children, Hise said. “It is our belief that there is a stronger focus in the community looking at birth through 5 than just focusing on 4 year olds.”

The proposal also requires Governor Pat McCrory's administration to submit its Medicaid reform plans to the General Assembly for approval before taking the final steps to secure a waiver from the federal program. But Hise sounded optimistic about the prospect. 

"We can’t continue to be coming in here, year after year, biennium after biennium, with an unpredictable system," he said. "We have got to be able to control our Medicaid costs, and we have got to be able to forecast at the beginning of the year what those costs are going to be. And quite frankly, we can do neither until we reform the system."