Legislators, DHHS plan ahead of Medicaid cutoff deadline

North Carolina stands to lose $414 million in federal funding due to conflicts between how state and federal rules say personal care service dollars should be spent. Al Delia, acting secretary of the Department of Health and Human Services, says the state is ready not only to meet the end-of-the-month deadline but is closing in on a solution that would fix this long-running problem for good.

Lawmakers and representatives of the adult care industry are less sanguine.

"It's a serious issue, and it's kind of late in the game for the legislature to be getting some information on it," said Sen. Pete Brunstetter, a Winston-Salem Republican and lead budget writer in the Senate.

Lou Wilson, a lobbyist for the North Carolina Association of Long Term Care Facilities, says the state has been struggling to meet the concerns raised by federal regulators since 2006. Her group has been saying publicly that 30,000 people could be "put out on the street" if there is not a meeting of the minds between Washington and Raleigh.

"Nobody has told us how they're going to work it out," Wilson said. "We wonder what's going to happen to all these people."

While the potential problem is a big one, Delia said before the meeting that the discussion of the issue had become overly heated.

"The notion that the state doesn't have a plan to deal with this is, on its face, inaccurate," he said.

Medicaid is a program jointly funded by the federal government and the state. It takes care of those too poor and too sick to care for themselves.

To understand this current problem, it's helpful to go back to 2006 when the state asked federal Medicaid officials for permission to change how hospice services were handled.

At that time, federal regulators raised concerns about differences in how the state provided personal care services for those able to stay in their own homes versus those who were in an institutional setting like adult care homes and assisted living facilities. Federal regulations call for those services to be the same regardless of where the patient receives help.

That sparked a years-long discussion in which state and federal regulators traded potential fixes but did not close in on a solution.

Then in 2009 and 2010, state regulators found millions of dollars worth of abuse in the personal care services program. Companies were billing for care that was either unneeded or never performed. That prompted the General Assembly to change the criteria patients had to meet before they could be eligible for those services.

In addition to fighting fraud in the program, those changes exacerbated differences between how personal care services were delivered in home settings and in assisted living homes. And those changes gave federal regulators with the Centers for Medicare & Medicaid Services (CMS) more leverage to demand that North Carolina make rules for providing personal care services in at-home and institutional settings equal.

In 2011, the U.S. Department of Justice raised a different set of questions. Federal case law says the state should provide the "least restrictive" setting for patients receiving federally-funded care. But the differences in how North Carolina has funded personal care services favored more restrictive institutional settings, the Justice Department alleged. Unless the state changed, the federal government would sue the state to make changes.

Some time later, CMS regulators threatened to cut off funding to all those who received personal care services.

"We, as a state, find ourselves between a CMS rock and a Department of Justice hard place," Delia said.

However, many of the problems raised by the Justice Department and CMS can be met by the same set of solutions, he said.

Delia and other Health and Human Service administrators planned to tell lawmakers Wednesday that the federal government has agreed to give the state until the end of the year to put a new plan in place for handling personal care services.

That plan will include changing eligibility rules for anyone receiving personal care no matter the setting. The state will ease the rules for those looking for help staying in their own homes but increase the number of problems someone would have to have in order to be eligible for placement in a long-term care home.

Health and Human Service officials say that overall, more people will end up getting served. However, some 4,000 people who now receive services in long-term care facilities will have to find alternative arrangements.