Category Archives: Privatization

BREAKING: House and Senate appear close to a Medicaid deal!!

In our last post on Medicaid reform, we updated you on the recent bill passed by the North Carolina Senate relating to the long-standing thorn in the side of the General Assembly, especially regarding the states’ budget – the Medicaid program. The Senate’s version of Medicaid reform is quite different from what we have previously seen and is a hodge-podge of managed care and a new idea: “provider-led entities.”

In a strong sign that this proposal is a compromise between competing sides that could end up getting passed, both House and Senate leaders are speaking positively on the record to news media about the prospects for a deal. Given how public the issue is and how big it is (an expected $14.2 billion in North Carolina in the coming year), that means they expect to get a deal done soon. The fact that the issue is so tied up with the budget that is overdue to be passed is a further headwind to passing a bill.

Right now, the bill is in a conference committee of negotiators from the House and Senate to work out an agreement, given the differences between the two chambers.

One major issue that the committee needs to look at is whether there will be a whole new state agency: the “Department of Medicaid.” The Senate endorsed that idea last week.

Our prediction: The legislators will chart a cautious course and not erect a whole new agency at the same time they are overhauling the system.

With Wos having (coincidentally?) just stepped down as Secretary of the Department of Health and Human Services, perhaps the lack of a lightning rod for criticism of DHHS will let the air out of the proposal to remove Medicaid from DHHS’s hands.

Stay tuned.

By Robert Shaw

Robert

The Nine Habits of a Highly Effective Secretary for DHHS

With the recent passing of the torch from Aldona Wos to Rick Brajer (see blog), I’ve been thinking about…

What are the qualifications of a Secretary of DHHS?

What exactly are the qualities that would make a great Secretary of DHHS?  Remember, in Mary Poppins, when the children draft their requirements for a nanny?  Or, better yet, what are the “Seven Habits of a Highly Effective” Secretary for DHHS?  Or…in this case, the “Nine Habits”…

Here are my “Nine Habits of a Highly Effective Secretary of DHHS;” our Secretary of DHHS should have the following:

  1. A health care background
  2. A successful track record of his/her ability to manage large companies or agencies
  3. An understanding of the Medicaid system, and, maybe, even have first-hand knowledge of how the system affects recipients and providers
  4. A relationship with someone on Medicaid or a parent of someone on Medicaid
  5. A working knowledge of clinical coverage policies, reimbursement rates, and regulations surrounding Medicaid
  6. Both the capacity to listen and speak and do both eloquently and genuinely
  7. True empathy about the physical and mental health of Medicaid recipients and about providers, plus have the patience to handle all types of demographic differences
  8. An understanding that he/she is handling tax payers’ money, that redundancy in staff is excess administrative costs, and ability to trim the fat
  9. An ability to communicate with both the Senate and the House and to be frank with both

wosbrajer

Let us analyze the qualifications of Wos that we came to witness over the last few years, as well as, review the qualifications of soon-to-be Sec. Brajer with information to which we are privy.

Let’s see if both, either, or neither have these “Nine Habits of a Highly-Effective Secretary for DHHS.”

  1. Health care background:

Wos: Yes. And, yet, maybe not.  She is an M.D. Although I do not know whether she ever practiced medicine in North Carolina.  According to Wikipedia, (which is never wrong) Wos “prides herself on her work in the field of preventing HIV and AIDS.”  However, I was unable to find a single clinic in which Wos provided services.  While, generally, an “M.D.” automatically bestows a certain aura of understanding health care, I question whether this “M.D.” automatically has a working knowledge of billing for and receiving reimbursements under Medicaid in North Carolina.

Brajer: Hmmmm.  This one is more tricky. The two companies that Brajer owned, Pro-nerve LLC and LipoScience Inc., are health care related, in that Pro-nerve was an intraoperative neuromonitoring (IONM) company and LipoScience sold a diagnostic tool to health care providers.  Arguably, both companies are health care related, at least, in an ancillary way.  However, Brajer is not a health care professional, and, to my knowledge, has never rendered health care services. Furthermore, neither of Brajer’s companies was successful; quite the opposite is true, in fact. From my understanding, one company declared bankruptcy and the other was not far behind.  Which brings us to the next category…

Answer: Both…kinda.

2. A successful track record of his/her ability to manage large entities:

Wos: Prior to acting as the Secretary to DHHS, Wos served as the Ambassador to Estonia until 2006.  What she did besides political functions between 2006 and 2012, I do not know. Acting as an Ambassador does not entail managing large entities.  The most managerial skills that I can find in her background, prior to being appointed Secretary, are related to political fund-raising. Since I would not call her brief reign as Secretary of DHHS a success, I give Wos a “two thumbs down” on this criterion.

Brajer: He managed two companies.  We can bicker as to whether these companies should be considered large…neither employed 17,000 employees.  Regardless, the “successful” criterion appears to be lacking.

Answer: Neither…pickles.

3. An understanding of the Medicaid system:

Wos: “You’re asking me without having all the data available to answer a question,” she told lawmakers on October 8, 2013.  In her defense, she responded as such when asked whether the State was moving toward privatization for Medicaid.  No one could know the answer, except, maybe, McCrory.

On the other hand, the implementation of NCTracks was nothing short of a catastrophe of epic proportion. See blog. See blog.  Anyone with nominal knowledge of the Medicaid system would have, at least, paused to consider keeping HP Enterprises under contract during the switch to NCTracks or pushed back the go-live date.

Brajer: Unknown

Answer: Here’s to hoping that Brajer does.  I’m cheering for you! Go! Fight! Win!

4. A relationship with someone on Medicaid or a parent of someone on Medicaid:

Wos: Unknown.  If I were shaking a proverbial “8 Ball,” it would read, “Doubtful.”

Brajer: Unknown. Perhaps one of his former employees at Pro-nerve, LLC and LipoScience, Inc. is on Medicaid.

Answer: Gimme a ‘B’! B! Gimme a ‘R’! R! Gimme a ‘A’! A! Gimme a ‘J’! J! Gimme a ‘E’! E! Gimme a ‘R’! R! Whats that spell? Brajer!!

5.  A working knowledge of clinical coverage policies, reimbursement rates, and regulations surrounding Medicaid.

Wos: Unknown. Whatever Wos’ knowledge of regulations and clinical coverage policies is or lacked, she, initially, made up for any knowledge lacked with the key hire and quick resignation of Carol Steckel.  Unfortunately, Steckel’s experience was never replaced.

January 2013: “I am pleased to say that we are already taking steps to address some of these issues,” Wos said. “Now, the most important of this is that we have hired Ms. Carol Steckel, a nationally recognized — nationally recognized — expert in Medicaid to run our Medicaid program for the state. Carol is already moving ahead with systemic reviews of operations in this division. She is reviewing and establishing new policies and procedures.”

September 27, 2013: Steckel resigns. And blog.

Brajer: Unknown.

Answer: B! R! A! J! E! R! Let’s go, Brajer!

6. Both the capacities to listen and speak and do both eloquently.

Wos: Wos brandished an ability to speak publicly with ease.  Listening, on the other hand….eh?

Brajer: Unknown

Answer: I think you can, I think you can, I think you can…

7. Genuine concern about the physical and mental health of Medicaid recipients AND about providers PLUS have the patience to handle all types of demographic differences

Wos: She seems to think so. Her country club does not discriminate.

Brajer: Unknown

Answer: Go! Go! Go! Go! Go, Brajer!!

8. An understanding that he/she is handling tax payers money and that redundancy in staff is excess administrative costs and trim the meat

Wos: “My obligation as secretary is to find the best possible team in order to get the job done.”  Les Merritt served as CFO of DMA on a $300,000-plus contract.  Joe Hauck was paid over $228,000 for 6 months of advise to Wos.  Matt McKillip was paid $87,500 to serve as chief policy maker without any health care background.  Ricky Diaz pulled in $85,000 as communications director. Id.  Wos has handed out $1.7 million in pay hikes to 280 staffers, many with “no career or educational experience for the jobs they hold.” Id. The implementation of the MCOs also fell under Wos’ watchful eye.  The MCO system has created thousands upon thousands of high-paying jobs with our Medicaid dollars.  I believe that in the “trim the fat” category, Sec. Wos scores a goose egg.

Brajer: Unknown.

Answer: Please, Brajer! For the love of Pete!

9. Ability to communicate with both the Senate and the House and to be frank with both.

Wos: “Separation pay” v. “Severance pay?

In April 2013: “I think the word transparency can get pretty dangerous,” Wos said. “Because what does transparency mean? If transparency means that we’re in a planning process and you’re asking us, ‘Tell us all the things you’re planning,’ well, my goodness, allow us to work, and then we’ll give you everything that you want.”

Brajer: Unknown

Answer: Brajer, Brajer, He’s our man! If he can’t do it…[gulp].

____________________________________________

It concerns me that so many of future Sec. Brajer’s core abilities/habits to run and manage DHHS and the Medicaid program in a highly effective manner are unknown.  Nothing like placing all your money on red!  But we have HIGH hopes for Brajer!!!  Don’t let us down!!

The whole point of this blog is to pause and really contemplate what characteristics would comprise a great Secretary for DHHS. Obviously, the Governor has the full authority to appoint the Secretary, meaning that we taxpayers have little to no input as to whether we deem a person qualified, except in the indirect method of voting or not voting for the Governor.

Call this blog an exercise in examining what habits, if in existence, would make the most highly effective Secretary of DHHS and an opinion as to whether these habits exist in our former and future Secretaries.

We are cheering for Brajer!  But…

One fact about the future is that it is unknown.

Lordy, Lordy, Look Who’s Forty: A Review of Our 40-Year-Old Stalemate in Health Care Reform

40-birthday

Well, folks, it is official.  I am “over the hill.”  Yup.  My birthday is today, January 7, 1975, and I was born 40 years ago.

Instead of moping around, I have decided to embrace my 40s. For starters, let’s take a look at where we were 40 years ago. Obviously, personally, I was in utero. But what about the country? What about health care?

Not surprisingly, even 40 years ago, politicians were discussing the same issues with health care as we are now. Some things never change…or do they???

In my “40 years in review” blog, I want to discuss why we, as a nation, are still arguing about the same health care issues that we were arguing about 40 years ago.  And, perhaps, the reason why we have been in a 40-year-old stalemate in health care reform.

Today, we have a diverged nation when it comes to health care. Democrats want to expand public health insurance (i.e., Medicaid) and tend to favor a higher degree of government oversight of health care to ensure that health care is available to all people.  Republicans, on the other hand, believe that the financial burden of the Affordable Care Act (ACA) on the federal and state level is unsustainable, and people will receive less than adequate health care. Republicans tend to favor privatization of Medicaid, while liberals oppose such ideas.

Health care reform has been a hot topic for over 40 years…with some interesting differences…

Going back to 1975…

Gerald Ford, a Republican, was our nation’s president, and we were in a nationwide recession.

Under Ford, the American Medical Society (AMA) proposed a new plan for health care, an employer mandate proposal.

According to a 1975 Chicago Tribune journalist, the AMA’s new proposal pushed for a broader government role in health care.  See below.

“The new [ ] plan would cover both employees and the unemployed, along with poor people and those considered uninsurable because of medical or mental problems.  It would require employers to subsidize health care for employees and their families and pay at least 65 % of each premium.  It would also require the government to provide partially subsidized health insurance, financed from general revenues, for the poor and the unemployed. It calls for medical insurance benefits covering 365 days of hospital care during any one year, 100 days of nursing home care, and home health, mental, and dental service for children aged 2 and up.  All but the poorest beneficiaries would share premium costs and would pay 20 per cent for the services provided, but no individual would pay more than $1,500 a year and no family more than $2,000 a year for health care.”

Chicago Tribune, “The A.M.A.’s subsidy plan” April 19, 1975 (emphasis added) (no author was cited).

Interestingly, in that same newspaper from April 19, 1975, advertisements show towels for $1.89, pants for teenagers for $4.99, a swivel rocker for $88, and a BBQ grill for $12.88. My how times have changed!

Those prices also indicate how much buying power was involved with the AMA’s proposal, and what it meant to suggest that an individual might have to pay up to $1,500 a year, and a family up to $2,000 a year, for health care – a lot of money back then!

In 1976, Pres. Ford proposed adding catastrophic coverage to Medicare, offset by increased cost sharing.  These are examples of Pres. Ford (a Republican) creating more government involvement in health care and expanding health care to everyone.

After Pres. Ford, came Pres. Jimmy Carter from 1977-1981, a Democrat.

Pres. Carter campaigned on the notion of “universal health care for everyone;” however, once in office he decided instead to rein in costs, and not expand coverage.  In the prior decade (1960), the consumer price index had increased by 79.7%, while hospital costs had risen 237%.  President Carter proposed an across-the-board cap on hospital charges that would limit annual increases to 1.5 times any rise in the consumer price index.

Pres. Carter was also quoted from public speeches saying, “We must clean up the disgraceful Medicaid scandals.”

Pres. Carter’s stance on “universal” health care was: “that such a program would be financed through both the employer and the payroll taxes, as well as general revenue taxes. Patients would still be free to choose their own physician, but the federal government would set doctor’s fees and establish controls to monitor the cost and quality of health care.”

In May 1979, Senator Ted Kennedy, a Democrat, proposed a new universal national health insurance bill—offering a choice of competing federally-regulated private health insurance plans with no cost sharing financed by income-based premiums via an employer mandate and individual mandate, replacement of Medicaid by government payment of premiums to private insurers, and enhancement of Medicare by adding prescription drug coverage and eliminating premiums and cost sharing.

These are examples of Democrats, Pres. Carter, by not expanding health care coverage and reining in costs, and Sen. Kennedy, by proposing privatization of Medicaid, acting in a more conservative nature, or, as a conservative nature would be perceived today.

So when did the parties flip-flop? Why did the parties flip-flop? And the most important question…if we have been struggling with the exact same issues on health care for over 40 years, why has our health care system not been fixed?  There has certainly been enough time, ideas, and proposed bills.

While I do not profess to know the answer, my personal opinion is the severe and debilitating polarizations of the two main political parties have rendered this country into a 40-year-old stalemate when it comes to health care reform and are the reason why the solution has not been adopted and put into practice.

Maybe back in 1979, when Senator Kennedy proposed replacing Medicaid with private insurance, Republicans refused to agree, simply because a Democrat proposed the legislation.

Today when Republican candidates campaign on privatizing Medicaid and the Democrats vehemently oppose such action, maybe the opposition is not to the idea, but to the party making the proposal.

Just a thought…

And here’s to the next 40!!!

The Future of Medicaid, a POPPED Balloon, and Proposals

There are more people on Medicaid than Medicare.

Think about that.  There are more people in America who qualify for Medicaid than Medicare.  Yet, as a nation, we spend more on Medicare than Medicaid.  (I assume because the older population requires more expensive services).  58 million people relied on Medicaid in 2012 as their insurance.

And Medicaid is growing.  There is no question that Medicaid is growing.  When I say Medicaid is growing, I mean the population dependent on Medicaid is growing, the demand for services covered is growing, and the amount of money required to satisfy the demand is growing.  This means that every year we will spend more and more on Medicaid.  Logically, at some point, at its current growth pattern, there will come a point at which we can no longer afford to sustain the Medicaid budget.

If you think of the Medicaid budget as a super, large balloon, imagine trying to inflate the balloon more and more.  At some point, the balloon cannot withstand the amount of air being put into it and it…POPS.

Will Medicaid eventually POP if we keep cramming more people into it, demanding more services, and demanding more money to pay for the increased services?

First, let’s look at the amount of money spent on Medicaid last year.

The Center for Medicare and Medicaid Services (CMS) just released the 2013 Actuarial Report on the Financial Outlook on Medicaid and its report considers the effect of Obamacare.

The CMS report found that total Medicaid outlays in 2012 were $431.9 billion.

The feds put in $250.5 billion or 58%.  States paid $181.4 billion or 42%.  In 2011, the federal government’s percentage of the whole Medicaid expenditure was 64%.

The CMS report also made future projections.

“We estimate that the [Affordable Care] Act will increase the number of Medicaid enrollees by about 18 million in 2022 and that Medicaid costs will grow significantly as a result of these changes starting in 2014.”

The 10 year projection, according to the report, is an increase in expenditures at an annual rate of 7.1%.  By 2022, the expenditures on Medicaid will be $853.6 billion.

Just for some perspective…a billion is a thousand million.

If you sat down to count from one to one billion, you would be counting for 95 years (go ahead…try it!).

If I gave you $1000 per day (not counting interest), how long would it take you to receive one billion dollars?  Answer: 2,737.85 years (2,737 years, 10 months, 7 days).  Now multiply 2,737.85 years by 853.6.

That’s a lot of years!!

In the next ten years, average enrollment is projected to reach 80.9 million in 2022.  It is estimated that, currently, 316 million people live in America.

So the question becomes, how can we reform, change, alter (whatever verb you want to use) Medicaid so that we can ensure that the future of Medicaid is not a POPPED balloon?  While I do not have the answer to this, I do have some ideas.

According to the CMS report, per enrollee spending for health goods and services was estimated to be $6,641 in 2012.  I find this number interesting because, theoretically, each enrollee could use $6,641 to purchase private insurance.

Remember my blog: “A Modest Proposal?” For that blog, I used the number $7777.78 per enrollee to purchase private insurance, which would require an increase in Medicaid spending assuming we give $7,777.78 to each enrollee.  But think of this…the amount would be a known amount.  Not a variable.

My health care, along with health care for my husband, costs $9,000/year.  My cost includes two people.  If I wanted individual insurance it would only have cost $228/month or $2,736/year.

What are other options to decrease the future Medicaid budgets and to avoid the big POP:

  • Decrease Medicaid reimbursements (really? Let’s make LESS providers accept Medicaid);
  • Decrease covered services (I would hope this idea is obviously stupid);
  • Decrease the number of recipients (I believe the ACA shot this one out of the water);
  • Create a hard cap on Medicaid spending and refuse to allow services over the cap regardless of the medical necessity (Again, I would hope this idea is obviously stupid);
  • Decrease administrative costs (this is apparently an impossible feat);
  • Create more difficult standards for medical necessity (I believe the ADA would have something to say about that); or
  • Print more money (Hmmmm…can we say inflation?).

Please, if anyone else has a good idea, let me, or, better yet, your General Assembly, know.

Because without question the future of Medicaid is larger and more expensive than today.  We want to avoid that…

POP!!

McCrory Administration Accused of Suppressing Insight into Medicaid

Whew…more bad press for the McCrory administration, Secretary Aldona Wos, Carol Steckel and the Department of Health and Human Services (DHHS). 

Ms. Rose Hoban, a journalist for North Carolina Health News, a website that I, personally, visit often, accuses the McCrory administration of suppressing information about Medicaid that, in her opinion, indicates that Medicaid was not as broken as the January 2013 Performance Audit conducted by Beth Wood, our State Auditor demonstrated.  According to Ms. Hoban, the McCrory administration suppressed the Medicaid information in order to push forward the McCrory administration’s intent to privatize Medicaid.

That is quite an accusation with immeasurable consequences if correct?  Right?

Did the McCrory administration suppress Medicaid information with the intent to push for privatization? I have no idea. 

Ms. Hoban suggests that Ms. Steckel’s revisions to the former administration’s responses to the Beth Wood audit on DHHS indicates the McCrory administration’s intentional suppression for a political reason.  I am not so sure that Steckel’s revisions to the former administration’s responses proves prima facie (on its face and without any other evidence) that the McCrory administration was “suppressing insight into Medicaid,” in order to privatize Medicaid… But, who knows???? 

According to Ms. Hoban’s article, another related article will be published in the future, so maybe she has more evidence to support the accusation. We shall see….

Here is Ms. Hoban’s article:

McCrory Administration Officials Suppressed Insight Into Medicaid

For months, members of the McCrory administration have maintained that the state’s Medicaid program is “broken.” But in the first of a two-part investigation, North Carolina Health News shows McCrory officials sat on information that would have depicted the state’s much-lauded Medicaid program in a better light.

By Rose Hoban

Soon after taking control in Raleigh in early 2013, people hired by Gov. Pat McCrory to run the Department of Health and Human Services made strategic edits to the departmental response to State Auditor Beth Wood’s audit of the North Carolina Medicaid program.

Documents obtained by North Carolina Health News through a public records request show that in January, incoming Sec. Aldona Wos and Medicaid head Carol Steckel eliminated detailed explanations of alleged high administrative costs, management problems and budget overruns in past years.

The resulting document accepts the criticism in Wood’s assessment wholesale and paints the health care program that covers 1.6 million North Carolinians as “broken.”

The criticisms contained in the audit have yielded talking points used by Wos, Steckel and McCrory for the past eight months as justification for turning down a federal expansion of the program under the Affordable Care Act and proposing to privatize the program.

State Auditor Beth Wood describes the results of her audit of the state Medicaid program, while Governor Pat McCrory listens.

State Auditor Beth Wood describes the results of her audit of the state Medicaid program, while Gov. Pat McCrory listens.

The original response to the audit created in December 2012 by outgoing officials from Gov. Bev Perdue’s administration was revised in successive editions of the document throughout January, with a decisive, near-final edit by Steckel.

In a document that displays “track changes” that include Steckel’s electronic signature, whole paragraphs were deleted, with evidence that, for example, North Carolina’s administrative costs are lower than most states rather than 30 percent higher, as maintained by McCrory administration officials.

Incoming administration officials also deleted whole sections explaining that budget overruns were in large part a function of under-budgeting by the General Assembly.

And in her first week in her new office, Steckel struck through paragraphs explaining that Community Care of North Carolina had been studied by two national groups that found cost savings. Instead, she inserted language casting doubt on the efficacy of CCNC and suggesting further study of the statewide program that’s been lauded nationally and that is being replicated in several states.

‘Administrative costs are 30 percent higher’

During a press conference to present the audit in January, Wood said her analysts had determined that North Carolina was spending significantly more on administrative costs than states with Medicaid programs of comparable size (see table, below).

“The administrative spending for the state’s medicaid program is 38 percent higher than the average of nine states with similarly sized Medicaid programs,” Wood maintained. “While those states on average have administrative costs of 4.5 percent, the state of North Carolina spent over 6 percent of its total budget on administrative cost. In real dollars that means that the state is spending $180 million more than the average of our peer states.”

For her analysis, Wood used information from the Centers for Medicare and Medicaid Services.

In a February appearance before the Joint Legislative Oversight Committee on Health and Human Services, Steckel cast some doubt on those numbers, telling the committee that in many states administrative costs are hidden inside the contracts with managed care companies that run Medicaid programs.

Administrative cost comparison calculated by State Auditor's staff

Administrative cost comparison calculated by state auditor staff (screenshot from final audit)

“Actually, the administrative cost functions are in the managed care entities. And if you look at what is termed the ‘medical-loss ratio,’ which is what the managed care companies are allowed to use for administration, if you look at that for Arizona, their administrative costs would actually be 13.74 percent,” Steckel told the committee, explaining that the managed care company, rather than the state, was spending the administrative dollars.

Steckel may have gotten the Arizona figure from an analysis prepared by outgoing DHHS officials in December 2012. In the original departmental response to the state auditor’s report, which called Wood’s comparison “incomplete and misleading,” DHHS officials used actuarial data from national firm Milliman and from an Academy of Health report to calculate actual administrative overhead in the states Wood used in her comparison, including overhead from state expenditures and from managed care companies.

That table shows Arizona’s administrative expenditures at 13.74 percent.

When figures from all the states are tallied up and compared, North Carolina is among the lowest for administrative expenditures (see table and document, below).

Wos wrote in the final departmental response that DHHS agreed with Wood’s findings and recommendations on controlling administrative expenses.

During the press conference to announce the audit, Wos said, “Cost overruns will not be tolerated and will not be acceptable. There’s a budget for a reason, and we must adhere to this budget.”

Administrative cost comparison compiled by DHHS

Administrative cost comparison compiled by DHHS using data from July 2012 study by Milliman & Academy of Health report. Source: Issue Sheet 3, “Admin Costs w Responses,” dated Dec 18, 2012 (screenshot from document shown below).

Since release of the audit, Wos and McCrory have used Medicaid’s supposedly high administrative costs as talking points for problems in Medicaid; most recently, McCrory cited that figure in a September interview with Tom Campbell on NC SPIN.

“We had a more than $500-million overrun based on Gov Perdue’s projections on Medicaid, and our costs are 30 percent higher than other states in Medicaid administration,” McCrory told Campbell, “just basic operational issues.”

“The state overspent its Medicaid budget by $1.4 billion under the previous administration, and this administration thought that was indefensible,” wrote DHHS spokesman Ricky Diaz in response to a request for comment on this story.

Budget issues

Another talking point used by Wos and McCrory is the Medicaid budget overruns that have plagued the program over the past three fiscal years. Both have been quoted numerous times stating that Medicaid has been over budget by a total of $1.4 billion during that time period.

In the audit, Wood tallies the state budget overrun for the three years at $375 million, which includes federal matching funds to reach the $1.4 billion total. And Wood states that administrative overruns were the result of an “apparent lack of oversight.”

Initially, DHHS officials strongly disagreed with this assessment, writing that any exceeded budget amounts were due to “other factors such as consumption and price, not lack of oversight.… Since Medicaid is an entitlement program, the Division has little control over consumption.”

But this defense was edited out by Steckel, as evidenced in the tracked-changes version of the audit response dated Jan. 22, 2013. Steckel noted that telling Wood Medicaid is an entitlement would be “speaking out of school to the auditor.”

Steckel also deleted most of the language that provided any defense or explanation of departmental actions. In her edits, Steckel added that the department would be implementing a system where “we track contract requirements and expenditures on a weekly basis,” something DHHS officials had been doing since the previous summer, as noted in earlier versions of the document prepared by outgoing Perdue officials.

Perdue’s team had also included explanations of how the Office of State Budget and Management had been consulted on – and approved of  –  any overruns, explaining: “The Department cannot unilaterally expend funds beyond budgeted amounts.”

Later in the document, former officials argued that the department had repeatedly provided legislators, OSBM and the legislative Fiscal Research Division “with information regarding the inability to achieve savings included in the budget for [fiscal year] 2012-2013 as early as April, 2011.”

That was around the time former DHHS Sec. Lanier Cansler began sending letters to legislative leaders and to OSBM warning that budget targets were too low, essentially forcing DHHS to overspend its budget. Cansler sent letters in May and June, and again on Oct 27, 2011, when he wrote that “aggressive budget cuts mandated by the General Assembly’s budget are unreasonable and unattainable.”

In a letter to Speaker of the House Thom Tillis and Senate President Pro Tempore Phil Berger dated June 2, 2011, then-governor Perdue wrote that she believed the amounts budgeted for Medicaid were too low.

Perdue pointed out that since 2008, the state had grown by 400,000 people and the state was still struggling to emerge from the economic downturn that meant many workers lost insurance, with some of those workers and many of their children swelling Medicaid’s rolls.

“[Y]our budget relies on over $750 million in reductions to Medicaid over the course of the biennium,” Perdue wrote. “When the loss of Medicaid matching funds are accounted for, your cut is actually $2 billion in real money taken out of the North Carolina economy….

“It is anticipated that over $200 million of these reductions will not be achievable due to technical mistakes and overestimating of savings.”

But any references to departmental attempts to warn others outside DHHS of issues were edited out by Steckel. She also removed references to the fact that federal rules prohibit states from changing their Medicaid programs unilaterally; any rule changes require federal approval, which can take months, and those delays mean a state ends up spending at a higher rate than desired in the meantime.

Later, in sections of the audit that fault the Division of Medical Assistance for poor forecasting of expenditures, Steckel edited out the following: “The Department disagrees that actions were not taken to reduce expenditures to stay within budget. Despite the actions taken by the Department, estimates were exceeded largely due to factors outside the Department’s control. Medicaid is an entitlement program and changes require approval outside of the Division and the Department.”

Again, these explanations of budgeting procedure and warnings by DHHS to other branches of government were edited out by Steckel, adding to an overall impression of a rogue department that was spending out of control.

“North Carolina Medicaid is not broken,” argued John Oberlander, professor of social medicine at the UNC School of Medicine. “This is a contrived crisis.”

“They had a solution and they were looking for a problem. And they were looking to portray Medicaid in as negative a light as possible in order to justify what they wanted to do, which is privatize.”

But DHHS spokesman Diaz said administration officials “stand by our final responses to the audit.”

“We continue to update and improve the Department’s forecasting practices as we reform our state’s broken Medicaid system,” he said.

Part 2 (tomorrow) – Casting doubt on a national model

Steckel track changes edit, Jan 22, 2013