Higher Medicaid Adminstrative Costs = Less Medicaid Money for Providers to Service Recipients

In dealing with administrative costs, it is only logical that the more people involved (the more salaries, the more paid-benefits) the higher the administrative costs.  Therefore, it is only logical that when North Carolina pushed the management of behavioral health in Medicaid to 11 (now 10) Managed Care Organizations (MCOs) that the administrative costs would go up, not down. More people involved in administration = more money needed to pay those people.

But my question is: How much of the Medicaid budget given to each MCO actually goes to reimburse providers rendering services?

The MCO system started in 2005 when Piedmont Behavioral Health (PBH) became the first behavioral health MCO.  Essentially, the Department of Health and Human Services (DHHS), Division of Medical Assistance (DMA) “farmed-out” the administrative duties of managing Medicaid for behavioral health Medicaid recipients, but only in a limited area (a test MCO, so to speak).  Then, beginning in 2011, and at different intervals, the PBH managed care model was expanded throughout North Carolina.  Now we have 10 MCOs (taking into account the termination of Western Highlands, beginning this summer).

Each MCO gets a lump sum of money each fiscal year to pay for its own administrative costs and to pay providers for rendering services. So I was curious…how much of this lump sum goes to providers for the benefit of Medicaid recipients?  Obviously, since the inception of most MCOs is so recent and the sensitivity of money/Medicaid, I found retrieving the information difficult.  Apparently, no one at the MCOs is eager to hand out financial statements to an attorney…especially one with a blog.  DMA was equally as eager.

The January 2013 Performance Audit conducted by the State Auditor revealed that almost 1/2 of the Medicaid administrative expenditures in the 2012 fiscal  year went to private contractors…such as the MCOs, PCG, and CCME.  The audit states:

“Private contractor payments represent about $120 million (46.7%) of DMA’s $257 million in administration expenditures for SFY 2012. It is always important for a state government to exercise sound management practices with regard to the contracted services, but it becomes even more critical when almost half of the administrative expense is made up of contract payments. Although contract payments represent a high percentage of its administrative budget, DMA was not able to provide a listing of contracts and the related expenditures in each SFY under review for this audit. DMA’s inability to provide this information is indicative of its inadequate oversight of contractual expenditures. The initial list DMA provided only included amounts expended to date per contract. However, we were able to eventually obtain contracted service expenditures for FY12 and compile this information.”

So how much does each MCO get each fiscal year? And how much goes to the behavioral health care providers actually providing services to Medicaid recipients?

Well, I received the information regarding salaries for CenterPoint, the MCO that manages Medicaid for Davie, Forsyth, Rockingham and Stokes counties. (Mind you, this is not even the biggest MCO, in terms of staff).

In 2012, CenterPoint had approximately 105 employees (This data are substantiated by me, so if there are small errors, please forgive me.  The information is based on a chart “Employee Salary Benefits” and was not substantiated by CenterPoint).

In 2013, CenterPoint’s employees grew to over 180, which is obviously rapid growth.  With more employees and more salaries to pay, administrative costs for CenterPoint increases and the amount of money actually used to reimburse providers for services rendered decreases.  Think about a pie.  If you give three pieces of pie to one person, then there is less pie to give to other people.

For fiscal year 2012-2013, CenterPoint oversees a Medicaid budget of $105.7 million coming mostly from Medicaid reimbursement fees and taxpayer money.  Yet, CenterPoint required one-time loans from all four counties it serves at a combined $1.26 million to help pay for its $3.7 million in MCO transition costs.

Yet, according to my information, CenterPoint pays hefty salaries to its top-executives.  In addition to these hefty salaries, CenterPoint pays for all employees’ health insurance, as well as the health insurance for all employees’ families!!

I don’t know about you, but, personally I pay A LOT to insure my husband and myself.  If my firm paid for my health insurance AND my husband’s insurance, my total salary/benefit package would be increased by approximately $7,824.00.  In other words, I would have $7,824.00 more dollars in my pocket each year because I would not have to pay for these premiums.  Multiply that amount by 180 employees and we are talking about close to $1.5 million IN JUST HEALTH INSURANCE BENEFITS.

Am I the only one who sees the absurdity in this?

I don’t have the figures, but I am willing to wager that few employers pay for 100% of employees’ health insurance.  I’m also willing to wager that an even lower percentage pays 100% of health care premiums for the families of employees.

As to the hefty salaries, in 2013, of the 180 employees, 12 employees receive over $70,000 base salary.  That’s a little over 7% of the employees who receive over $70,000 base salary.  FYI: The highest base salary is $240,000.

However, when you take into account the paid benefits (i.e., health benefits, life insurance, retirement, dental insurance), 51 employees make over $70,000.  That’s almost 30% of CenterPoint employees are paid over $70,000, including paid benefits. Almost 1 out of 3 in a company!

BTW: That same employee who makes $240,000 base salary per year also receives $16,176.00/year in retirement. That’s more than some people make all year!  That same employee receives over $11,000.00 in health care benefits.  Remember, my number was $7,824.00, if my firm paid my health insurance? That employee is getting over $11,000.00 in health care benefits.

CenterPoint manages a Medicaid budget of $105.7 million.  Medicaid budgets are comprised of federal and state tax dollars.  Therefore, any entity with a Medicaid budget has an accountability to NC taxpayers.

With 51 employees making over $70,000/year, $4,384,654.20 of the budget is already gone…just for 51 employees’ salaries.  I actually added up all 51 employees’ salaries to get the number $4,384,654.20.  Which means the average salary for the 51 employees that receive over $70,000/year is $85,973.62…not bad for a public servant…

I don’t think other public servants, such as teachers get 100% of their health insurance paid, plus family.

Remember, this $4,384,654.62 only accounts for 51 employees’ salaries and benefits.  There are still 129 other employees.

Imagine this:

Roughly estimate the total of administrative costs for CenterPoint to be $5 million.  Now multiply this number by 10 (the number of MCOs) = $50 million.  Also, imagine that, since the January 2013 DMA audit that showed the high administrative costs of DMA, this additional $50 million is added to the already high administrative costs of DMA.  In other words, in order to offset the administrative costs of the MCOs, DMA did not slim down its own administrative costs.

With more and more Medicaid dollars going to administrative costs and people’s salaries, less and less Medicaid dollars are going to the Medicaid recipients. More cost = less Medicaid services.

About kemanuel

Medicare and Medicaid Regulatory Compliance Litigator

Posted on June 10, 2013, in Accountability, Behavioral health, Beth Wood, Budget, CenterPoint, Division of Medical Assistance, Health Care Providers and Services, MCO, Medicaid, Medicaid Audits, Medicaid Costs, Medicaid Recipients, Mental Health, Mental Health Problems, Mental Illness, NC DHHS, North Carolina and tagged , , , , , , , , , , , , . Bookmark the permalink. 13 Comments.

  1. Thanks for spelling this out. Without your advocacy, too much would continue to go unstated or, if stated in local communities, may start making sense to leadership at various levels.

  2. Thanks, Laurie!!

  3. Knicole:
    I’m sure you’ve heard about the PCG “credentialing reviews” that are being conducted for fully-licensed therapists who have applied for Medicaid provider numbers. Historically, if you achieved full licensure with your board and remained in good standing, AND you were willing to complete the lengthy/confusing Medicaid provider application AND you were willing to pay the application fee, you could be “blessed” with a Medicaid provider number and direct bill medicaid as a therapist (yes, “blessed” is in tongue-in-cheek quotes). Now, we have apparently gone a step further — even after you do those aforementioned steps (and even take an exam for some), you then might get a visit from PCG staff to interview you and the agency you’re attached to. Recentlyy, we went through this process (which to me seems beyond extraneous), and we were visited by TWO PCG staff who took turns asking a few questions from a questionnaire. This step was shorter for us since PCG had already gone through the lengthier steps with our Corporate office and fully-licensed therapists there. The PCG folks were both quite nice, mind you, but I was struck that the “process” was not terribly lengthy but that it still involved two PCG staff and an actual site visit. I’m not quite sure why two people (who I’m sure are paid full-time and likely have a great benefits package) needed to conduct this review? I don’t even fault PCG for this as they’re just doing the jobs that they were hired to do — and, the way they described it, CSC does the credentialing and then refers some applicants to PCG to do the reviews….Not sure who is being paid by whom, but my sense is that we’re talking about EVEN MORE money being diverted away from actual direct care to actual recipients. And, please don’t get me started on the slew of denials we’re fighting at the MCO level for services that are clearly medically necessary…..THANKS for all your advocacy!

  4. Don,

    That’s my point exactly. It seems with all these third-party companies sticking their fingers into the Medicaid pot, the actual recipients are receiving less.

    As for the denials on the MCO level, un-bel-i-ev-able!!! Sadly, the denials are not all from one MCO. These seem to be across the board, and usually the more expensive services, which have ore recipients unable to appeal for themselves.

  5. Janet Presson


    Excellent article! I wish all of our legislators could see this! I’d love to see a comparison of salaries/benefits packages across all of the MCOs. NC taxpayers have no idea where their money is being wasted and they certainly should!

  6. Here’s the link to PBH’s audit conducted by the state auditor. Interesting reading. Thanks Knicole for all you do!


  7. Thanks, James!!

  8. My apologies to all blog readers. Someone pointed out that the President of the United States actually makes $400,000, since 2001. I had written that $240,000 was above the President’s salary. I was wrong. Thank you for any corrections.

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