DHHS is under criminal investigation by the federal government for allegedly overpaying employees without a bid process, and, simply, mismanaging and overspending our Medicaid tax dollars. See blog.
When I first started writing this blog, I opined that the federal investigation should be broadened. While I still believe so, the results of broadening the scope of a federal investigation could be catastrophic for our Medicaid providers and recipients. So I am metaphorically torn between wanting to shine light on tax payer waste and wanting to shield NC Medicaid providers and recipients from the consequences of penalties and sanctions on NC DHHS. Because, think about it, who would be harmed if NC lost federal funding for Medicaid?
[BTW, of note: These subpoenas were received July 28, 2015. Aldona Wos announced her resignation on August 5, 2015, after receipt of subpoenas. The Subpoenas demand an appearance on August 18, 2015, which, obviously, has already passed, yet we have no intel as to the occurrences on August 18, 2015. If anyone has information, let me know.]
Does this criminal investigation go far enough? Should the feds investigate more Medicaid mismanagement over and above the salaries of DHHS employees? What are the potential consequences if NC is sanctioned for violating Medicaid regulations? How could a sanction affect providers and recipients?
DHHS’ employees are not the only highly compensated parties when it comes to our Medicaid dollars! It is without question that the contracts with vendors with whom DHHS contracts contain astronomically high figures. For example, DHHS hired Computer Sciences Corporation (CSC) to implement the NCTracks software for $265 million. Furthermore, there is no mention of the lack of supervision of the managed care organizations (MCOs) and the compensation for executives of MCOs being equal to that of the President of the United States in the Subpoenas.
The subpoenas are limited in scope as to documents related to hiring and the employment terms surrounding DHHS employees. As I just said, there is no mention of violations of bid processes for vendors or contractors, except as to Alvarez & Marsal, and nothing as to the MCOs.
Specifically, the subpoena is requesting documents germane to the following:
- Les Merritt, a former state auditor who stepped down from the North Carolina State Ethics Commission after WRAL News raised questions about potential conflicts of interest created by his service contract with DHHS;
- Thomas Adams, a former chief of staff who received more than $37,000 as “severance” after he served just one month on the job;
- Angie Sligh, the former director of the state’s upgraded Medicaid payment system who faced allegations of nepotism and the waste of $1.6 million in payments to under-qualified workers for wages, unjustified overtime and holiday pay in a 2015 state audit;
- Joe Hauck, an employee of Wos’ husband who landed a lucrative contract that put him among the highest-paid workers at DHHS;
- Alvarez & Marsal, a consulting firm overseeing agency budget forecasting under a no-bid contract that has nearly tripled in value, to at least $8 million;
Most likely, the penalties imposed would be more civil in nature and encompass suspensions, recoupments, and/or reductions to the federal matching. Possibly a complete termination of all federal matching funds, at the worst.
42 CFR Part 430, Subpart C – of the Code of Federal Regulations (CFR) covers “Grants; Reviews and Audits; Withholding for Failure To Comply; Deferral and Disallowance of Claims; Reduction of Federal Medicaid Payments”
The Center for Medicare and Medicaid Services (CMS) is charged with the oversight of all 50 states’ management of Medicaid, which makes CMS very busy and with solid job security.
CMS may withhold federal funding, although reasonable notice and opportunity for a hearing is required (unlike the reimbursement suspensions from providers upon “credible” (or not) allegations of fraud).
If the Administrator of a hearing finds North Carolina non compliant with federal regulations, CMS may withhold, in whole or in part, our reimbursements until we remedy such deficiency. Similar to health care providers’ appeals, if the State of North Carolina is dissatisfied with the result of the hearing, NC may file for Judicial Review. Theoretically, NC could go all the way to the U.S. Supreme Court.
Other penalties could include reductions of (1) the Federal Medical Assistance Percentage; (2) the amount of State expenditures subject to FFP; (3) the rates of FFP; and/or (4) the amount otherwise payable to the state.
As a reminder, the penalties listed above are civil penalties, and NC is under criminal investigation; however, I could not fathom that the criminal penalties would differ far from the civil allowable penalties. What are the feds going to do? Throw Wos in jail? Highly unlikely.
The subpoena was addressed to:
NC DHHS, attention the Custodian of Records. In NC, public records requests go to Kevin V. Howell, Legal Communications Coordinator, DHHS.
But is the federal government’s criminal investigation of DHHS too narrow in scope?
If we are investigating DHHS employees’ salaries and bid processes, should we not also look into the salaries of DHHS’ agents, such as the salaries for employees of MCOs? And the contracts’ price tags for DHHS vendors?
Turning to the MCOs, who are the managers of a fire hose of Medicaid funds with little to no supervision, I liken the MCOs’ current stance on the tax dollars provided to the MCOs as the Lion, who hunted with the Fox and the Jackal from Aesop’s Fables.
The Lion went once a-hunting along with the Fox, the Jackal, and the Wolf. They hunted and they hunted till at last they surprised a Stag, and soon took its life. Then came the question how the spoil should be divided. “Quarter me this Stag,” roared the Lion; so the other animals skinned it and cut it into four parts. Then the Lion took his stand in front of the carcass and pronounced judgment: The first quarter is for me in my capacity as King of Beasts; the second is mine as arbiter; another share comes to me for my part in the chase; and as for the fourth quarter, well, as for that, I should like to see which of you will dare to lay a paw upon it.”
“Humph,” grumbled the Fox as he walked away with his tail between his legs; but he spoke in a low growl:
Moral of Aesop’s Fable: “You may share the labours of the great, but you will not share the spoil.”
At least as to DHHS employees’ salaries, the federal government is investigating any potential mismanagement of Medicaid funds due to exorbitant salaries, which were compensated with tax dollars.
Maybe this investigation is only the beginning of more forced accountability as to mismanaging tax dollars with Medicaid administrative costs.
One can hope…(but you do not always want what you wish for…because the consequences to our state could be dire if the investigation were broadened and non compliance found).
Let us quickly contemplate the possible consequences of any of the above-mentioned penalties, whether civil or criminal in nature, on Medicaid recipients.
To the extent that you believe that the reimbursement rates are already too low, that medically necessary services are not being authorized, that limitations to the amount services are being unduly enforced…Imagine that NC lost our federal funding completely. We would lose approximately 60% of our Medicaid budget.
All our “voluntary” Medicaid-covered services would, most likely, be terminated. Personal care services (PCS) is an optional Medicaid-covered service.
With only 40% of our Medicaid budget, I could not imagine that we would have much money left to pay providers for services rendered to Medicaid recipients after paying our hefty administrative costs, including overhead,payroll, vendor contracts, MCO disbursements, etc. We may even be forced to breach our contracts with our vendors for lack of funds, which would cause us to incur additional expenses.
All Medicaid providers could not be paid. Without payments to providers, Medicaid recipients would not receive medically necessary services.
Basically, it would be the next episode of “Fear the Walking Dead.”
Hopefully, because the ramifications of such penalties would be so drastic, the federal government will not impose such sanctions lightly. Sanctions of such magnitude would be a last resort if we simply refused to remedy whatever deficiencies are found.
Otherwise, it could be the zombie apocalypse, but the Lion’s would be forced to share.
Exactly how much has the federal government contributed to NC Medicaid? Throughout the years, I’ve heard 75%, 2/3, and as low as 60%. So I wanted to find out exactly how much the federal government gives North Carolina. I also wanted to compare the percentage to other states. And what will change if NC expands Medicaid? What changes?
Turns out that the Centers for Medicare and Medicaid (“CMS”) offers the historical stats I wanted.
In 2009 (the data for 2010 is not available yet, although it seems that by 2013 the data should be available), North Carolina’s population was 9,380,884. 1,974,287 of those residents were Medicaid enrolled.
In 2009, total Medicaid pay-outs were $10,888,466,523.00 (Yes, folks, that is ten BILLION).
The federal government paid $7,818,867.023.00 or 71.81%. The State paid $3,069,599,500.00 or 28.29%. The federal government’s 2009 contribution to NC’s Medicaid was higher than the national average, which was 66.30% in 2009. However, that was not always the case. In 2008, the federal government contributed 64.22% to NC’s Medicaid expenditures. Although it is important to note that in 2008, the national average declined to 57.03%. So NC was still above average.
But why the huge discrepancy? Why in 2008 does the federal government, on average, pay for a little over half the states’ Medicaid costs, and, in 2009, pay, on average, 2/3 of the states’ Medicaid costs?
The federal government pays states for a specified percentage of program expenditures, called the Federal Medical Assistance Percentage (FMAP).
FMAP varies by state based on criteria such as per capita income. The regular average state FMAP is 57%, but ranges from 50% (the minimum) for wealthier states up to 75% in states with lower per capita incomes (the maximum regular FMAP is 82 %).
This all sounds, to me, like a lot of statistical jargon. So I went to NC’s historical FMAPs. According to statehealthfacts.org, NC’s FMAP in 2009 was 74.51%. But, according to CMS, the actual federal Medicaid payment was 71.81%. So why the difference? Maybe one of the websites incorrectly calculated the FMAP. If so, it seems (just by gut) that CMS would have the actual Medicaid costs; thus providing more accurate data. The State Health Facts website also projected NC’s FMAP up through 2013, so again, it appears that the State Health Facts’ data were more projections. Just in case you were wondering, the State Health Facts website projected NC’s FMAP for 2013 as 65.51%.
Why will it go down? Apparently, all the factors that contribute to NC’s FMAP.
Well, we also have to consider Obamacare or the Affordable Care Act (ACA). If NC expands Medicaid, from 2014-2016, the federal government will cover 100% of our Medicaid costs (not ALL Medicaid costs) but 100% of costs to cover newly-covered Medicaid recipients. For example, if the projections are correct and 700,000 more North Carolinians will be covered if NC accepts the ACA, than the federal government will pay for 100% of the newly-eligible 700,000 Medicaid recipients, or, in other words, the federal government will pay 100% of approximately 35% of NC Medicaid costs. The rest of the NC Medicaid costs in 2014, or 65% of overall Medicaid costs, will be paid by the federal government at the normal FMAP amount (somewhere between 60-66%)
Let’s throw out some more projections: Remember, in 2009, the State paid $3,069,599,500.00 or 28.29%. But the FMAP was high at 71.81%. The State Health Facts website projected NC’s FMAP as 65.51% in 2013. So let’s use 65.51% for 2014 when it is projected that 700,000 more North Carolinians will be Medicaid recipients. In 2009, 1,974,287 people in North Carolina were Medicaid recipients. For the sake of simplicity, let’s say that by 2014 the number rounds up to 2,000,000 and the projected 700,000 additional Medicaid recipients occurred, as predicted, for a grand total of 2,700,000 North Carolina residents depending on Medicaid.
If we paid $10,888,466,523.00 for 1,974,287 people (both federal money and state money), I think it is a safe approximation that we would pay approximately $11,000,000,000.00 (this number is merely for this example) for 2,000,000 people (the increase in money is for an estimated additional 25,713 Medicaid recipients and the decrease in our projected FMAP). The additional 700,000 Medicaid recipients would cost approximately another $3,850,000,000.00 (assuming about 35% increase is correct with 700,000 more Medicaid recipients).
Thus the projected grand total of Medicaid costs to NC in 2014 (if NC expands Medicaid) will be approximately $14,738,466,523.00. The federal government, based on these estimations, will pay approximately $3,850,000,000 (100% of newly-eligible persons’ Medicaid costs) + $7,150,000,000 (65% of regular Medicaid costs based on the FMAP) for a total of 11,000,000,000.00. Leaving the $3,738,466,523.00 for North Carolina to pay.
Seems pretty sweet, right? I mean, our Medicaid costs do not increase terribly and the federal government pays for way more Medicaid costs in NC. However, this sweet deal does not last. Starting sometime after 2016 (the federal government states that the decrease will be “phased in”), the federal government’s portion for the newly-eligible Medicaid recipients decreases from 100% to 90%.
For NC, just the 10% increase in 2017 means approximately $1,100,000,000.00, increasing NC’s costs for Medicaid payments to up around $4.8 billion. In NC Medicaid history, NC has never paid over 4 billion. But NC will pay way over $4.8 billion in only four years under the ACA.
This is not a blog against Medicaid expansion. I am merely pointing out the financial undertakings and consequences if NC expands. If NC expands, NC must be ready to pay for the Medicaid program. Read the rest of this entry