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To Decrease Medicaid Spending (Without Decreasing Medicaid Recipients’ Services), Drastic Administrative Cuts Are Needed

It is indisputable that reigning in Medicaid costs is one of this administration’s top priorities.

And, I agree, reigning in Medicaid costs should be a top priority.  In fiscal year 2011, it is estimated that Medicaid comprised 23.6 percent of total state expenditures (average of all states).  My only concern is reigning in the appropriate Medicaid costs without interfering with Medicaid recipients’ medically necessary services.  A Medicaid budget cut (or reigning in Medicaid spending) should not be painfully felt by the Medicaid recipients by increased denials of services or by their providers being terminated from the Medicaid program without cause.  Instead a Medicaid cut should be felt by the administration. 

The Medicaid budget exists in order to provide medically necessary services to the most needy, not to create jobs at the Department of Health and Human Services (DHHS).

“About $36 million a day we spend on Medicaid, and the numbers grow by the second. It is a non-sustainable system,” Wos said to members of the Medical Care Commission this past Friday.  For the article, please click here.  The Medical Care Commission is a governor-appointed medical advisory group made-up of 16 North Carolinians and charged with the responsibility of recommending Medicaid cost control and budget predictability. (Actually, it is interesting that when you look at the NC DHSR website (click on Medical Care Commission) that the website states that the commission is composed of 17 individuals.  But when you count the individuals, only 16 are listed.  I assume that Gov. McCrory or Sec. Wos is the 17th member, but I am not 100% sure).

While I agree with Sec. Wos that continuing to spend $36 million a day and, perhaps, more in the future, is a non-sustainable system, I also believe that we could decrease Medicaid spending without decreasing services to recipients. 

The Medical Care Commission’s chairperson, Ms. Lucy Hancock Bode “served as the Deputy Secretary of the North Carolina Department of Human Resources from 1982 to 1984. She has been an Independent Trustee of Tamarack Funds Trust and various Portfolios in the fund complex of Tamarack Funds since January 2004. She served as a Director of BioSignia, Inc.”  See BusinessWeek.

The Vice-Chairperson, Joseph D. Crocker, “is Director of the Poor and Needy Division at Kate B. Reynolds Charitable Trust in Winston-Salem, North Carolina, where he has served in such capacity since May 2010. Mr. Crocker served as Assistant Secretary for Community Development at the North Carolina Department of Commerce in Raleigh, North Carolina, from 2009 to 2010.  See Forbes.

Well, goodness, the appointees can be found in BusinessWeek and Forbes!! Who else is on the Medical Care Commission? The grandson of the founder of the Biltmore Estates, 6 MD’s, the ex-CEO of FirstHealth of the Carolinas, the Vice President and Director of the Health Care Program for The Duke Endowment, the President and CEO of Coastal Horizons.  My guess is that not one of the appointees to the Medical Care Commission has ever depended on Medicaid for insurance nor been personally acquainted with those dependent on Medicaid. How will these elite (which I am defining as making a salary well-over poverty level for years and years) help “adopt, recommend or rescind rules for regulation of most health care facilities,” and help “[b]e able to provide the proper care to the proper people at the proper time and at the proper price?”  How does the person making $13.8 million truly understand the troubles and turmoil of someone making $9.00/hour?

I recently read an article about McDonald’s and its low wages it pays to its employees.  The article pointed out that most McDonald’s employees received minimum wage, the median hourly wage is $9.00/hour.  McDonald’s also recommends that its employees file for food stamps and welfare.  Then I read that the CEO of McDonald’s is paid $13.8 million/year.  That’s over $1 million/month!!! That is stupid money!! What in the world does Donald Thompson do with that much money?  When Mr. Thompson encourages his employees to file for food stamps and welfare programs, how can he, making $13.8 million/year, have an inkling as to the daily troubles of an employee making $9.00/hour…how difficult it can be to maneuver government beaurocracy…to even get authorization to receive the food stamps…only to discover that the legislature suspended the distribution of food stamps this week…

(A quick aside, for those of you thinking right now, “What about you, Knicole? You are a partner at a big law firm? How can you protest to know anything about the $9.00/hour employee? Without getting too personal, I have not always been employed at a law firm.)

Had I been in McCrory’s position of appointing the folks onto the Medical Care Commission, I would have wanted at least one appointee to have either been personally dependent on Medicaid, been a case manager exclusively for Medicaid recipients, or, in some way, dealt with Medicaid recipients on a close, personal level.  In other words, I would have wanted at least one appointee to understand the real-life difficulties actually suffered by Medicaid recipients.  If I were a CEO of a company for 20 years, how would I know that medically necessary services are being denied to Medicaid recipients?  How would I know that when a mother calls to make a dental appointment for her child that it can take months to be seen by a dentist if you are on Medicaid? How can the social elite understand the frustrations of Medicaid recipients? They have never been turned down by a doctor because of the insurance they have.

I called a few of the offices of the 6 MDs appointed on the Medical Care Commission and learned that those offices I called accept Medicaid, which relieved me.  But I would be interested in knowing what percentage Medicaid clients each office accepts.  And how closely the MDs work with Medicaid recipients (do the MDs appeal denials for their clients’ services and appear and testify on their behalf in court?)

A funny thing happens when you’ve made a lot of money over a number of years…you forget how important $20 can be to a single mom with rent to pay and a kid with a tooth ache.  I would also assume the same thing happens when you are Governor or Secretary…you forget how debilitating a service denial is and how scary the prospect of an appeal can be.

Going back to reigning in Medicaid costs:

Is there a way to decrease spending on Medicaid without compromising medical services.  Is there even a way to decrease Medicaid spending while providing better medical services to Medicaid recipients…? Could it be possible?? I believe so.

How many times have you heard the administration state that the Medicaid system is broken and the money spent on Medicaid is non-sustainable? And what about the Performance Audit conducted by the Office of the State Auditor?  The January 2013 Performance Audit revealed that almost 1/2 of the Medicaid administrative expenditures in the 2012 fiscal  year went to private contractors…such as the managed care organizations (MCOs), Public Consulting Group (PCG), and the Carolinas Center for Medical Excellence (CCME).  Another huge expenditure is the administrative costs for the Department of Health and Human Services (DHHS)…think about it…DHHS employs approximately 70,000 people at an average salary of $42,000.  Add up the costs associated with private contractors and the administrative costs of DHHS, and the sad truth is that not even a quarter of the Medicaid budget goes to paying Medicaid recipients’ actual services.

Remember my blog: “How Dare They! That Money Could Have Been Used on a Medicaid Recipient!”

Remember the January 2013 Performance Audit of DHHS

Another contributing factor to the high amount of North Carolina’s administrative spending is insufficient monitoring of administrative services that are contracted out by DMA. 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 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.”

Inadequate oversight of contractors…Hmmmm…

In order to decrease Medicaid spending, how about a little thing I like to call: ACCOUNTABILITY!?

As in, if DHHS contracts with an entity that spends too much Medicaid money on “extras,” then DHHS must instruct the entity to cease the “extra” spending.  This is our tax money, remember!! For example, everyone knows that attorneys are not cheap, right? At hearings, the MCOs usually have in-house counsel  or retain the county attorney.  But two MCOs, Cardinal and MeckLINK (yes, MeckLINK, despite MeckLINK’s solvency issues) have hired an expensive and prestigious law firm.  There is no question that the law firm has experienced, excellent attorneys.  But who is paying for the expensive attorneys’ fees? Medicaid dollars? You? Me? I thought about these questions when, at a recent hearing three attorneys appeared on behalf of the MCO.  Let’s see…$450/hour + $350/hour + $275/hour = $1075/hour?  And who is paying?  (Obviously, I made these numbers up, but I dare say they are close estimates).

By the same token, DHHS needs to monitor its own expenses.  I can only imagine how difficult it is to monitor 70,000 employees.  At any given time, thousands may be on Facebook, cell phones, or surfing the web.  I am not suggesting that Sec. Wos turn DHHS into a sweat shop, by any means.  No, I am merely suggesting that a way to decrease money spent on Medicaid is to conduct a self-audit and determine that if 3 people are doing the job that 1 person could do, only employ the one person.  Just like, DHHS would be accountable if PCG used Medicaid dollars to pay for in-office massages for employees.  Medicaid dollars should be spent on Medicaid recipients.  DHHS should be accountable for superfluous spending.

With all these newly- contracted entities working for DHHS (and getting paid by DHHS), where is the savings in Medicaid spending?? To my knowledge, there has not been a huge slash in jobs at DHHS…the salaries and administrative costs at DHHS have not decreased drastically…no, instead, we’ve hired MORE companies and we are paying MORE salaries!! How will hiring more contractors decrease Medicaid costs if we are not decreasing our administration overseeing Medicaid?  We all know that no one wants to be the administration who cut government jobs, but if you truly want to decrease administrative costs, you have to decrease the cost of the administration, especially if you are hiring companies to do what the administration used to do.

Going to McDonald’s low wages and ridiculously, high-paid CEO, obviously, McDonald’s is a private company and is entitled to pay its CEO $13.8 million/year and its employees an hourly median wage of $9.00/hour.  McDonald’s only has to answer to its shareholders.

DHHS, on the other hand, is not a private company.  DHHS is funded by tax dollars and is accountable to every taxpaying citizen of North Carolina.

Want to decrease Medicaid spending while providing the medically necessary services to our most needy?  Cut the administrative costs…eliminate unnecessary staff (no matter how unpopular the idea is)…actively monitor the expenses of all contracted entities…provide the medically necessary services to Medicaid recipients (thereby decreasing the need for the more expensive ER visits and incarcerations)…

Cease all unnecessary administrative costs!  Be accountable!  Self-audit! Closely monitor all contracted entities’ expenditures!!

And, remember, hiring a third-party company costs money…real money…tax payer’s money!  If the hiring of the company is not offset by a reduction in spending elsewhere, the result is increased overall spending.  It isn’t hard, people…this is Logic 101.  So when DHHS hired PCG or CCME or HMS, the administration should have decreased Medicaid spending elsewhere just to break even (as in, just to continue our high Medicaid spending).  To decrease spending along with hiring third-party contractors, we have to severely and drastically decrease Medicaid spending.  In order to avoid reducing Medicaid recipients’ services, a decrease in Medicaid spending calls for the drastic action of slashing administrative costs.

It isn’t fun, but it is necessary.

NC Taxpayers Demand Accountability as to Behavioral Health Care Medicaid Funds (And That Medicaid Recipients Reap the Benefit of Such Funds).

I ask you, why do employees of an MCO receive better health care plans with Medicaid dollars than a Medicaid recipient with Medicaid dollars?

The State of North Carolina is accountable to me, and every taxpaying citizen, for taxes spent. 

Similarly, executives of a corporation owe a duty to shareholders to account for stock crashing.  Remember Enron? What a disaster!

Enron has been dubbed the biggest audit failure.  Enron shareholders filed a $40 billion law suit after the company’s stock price, which achieved a high of US$38.44 per share in mid-2000, plummeted to less than $1 by the end of November 2001.  And why did the shareholders sue?  Because they lost money?  Well, yes, but it is much more.  The reason the shareholders lost money is because the executives of Enron owed a duty to the shareholders, basically, to be accountable to report correct data on financials.

Apparently, Enron’s financial statements were complex and confusing to shareholders.  It has been said that from 1997 until its demise, “the primary motivations for Enron’s accounting and financial transactions seem to have been to keep reported income and reported cash flow up, asset values inflated, and liabilities off the books.” Bodurtha, James N., Jr. (Spring 2003). “Unfair Values” – Enron’s Shell Game. Washington, D.C.: McDonough School of Business. p. 2. CiteSeerX: 10.1.1.126.7560.  Arthur Anderson was the audit and accounting firm, which also went belly up due to Enron.  But Enron’s financials were false and, ultimately, led to numerous convictions.

Now, I am certainly NOT comparing the State of North Carolina to Enron.  I am merely providing an example of a possible result when accountability is ignored.  When the fiduciary duty owed is not fulfilled.

Not completely unlike corporate financials, North Carolina creates a budget every fiscal year (yeah, I get it, not completely similar either). 

When the Medicaid budget is created each year, which is more than $18 billion, I, as a taxpayer, expect those Medicaid dollars allocated to the Medicaid budget to be spent for the benefit of Medicaid recipients.  Medicaid money should be spent on Medicaid providers, who service Medicaid recipients.  I expect that administration costs be kept at a minimum.  I expect that Medicaid providers receive timely, prompt payments, and I expect that Medicaid recipients receive good, quality, and continuing health care.

I do not expect the State to cover the health care for everyone.  Not even most people.  I understand that funds are not limitless in government and that there must be limitations on spending, otherwise our great State will become another Detroit. 

However, I do expect that the funds that ARE allocated to Medicaid to BE allocated for the benefit of the Medicaid recipients. Period.

In the past year, we have implemented the Managed Care Organizations (MCOs) to manage Medicaid behavioral health care.  In theory, the MCOs were implemented to cut down the administrative costs for DHHS.  Basically…outsourcing.  In theory, it sounds good.

DHHS’ administration costs are out-of-control.  After the January 2013 Performance Audit on DHHS, State Auditor Beth Wood said North Carolina’s administrative costs are 38 percent higher than the average of nine states because of “structural flaws” in how DHHS operates the Medicaid program.

So, in response to these high administrative costs (among other things), we took the administration of behavioral health from DHHS and delegated that administration to the MCOs.  With the number of employees in Health and Human Services over 17,000 employees and the average MCO employing only a couple hundred, it seems, on its face, to be a good idea.  Surely these MCOs can and will run more efficiently that the government! Right?

(The other assumption in outsourcing is that DHHS administrative costs would actually decrease due to the MCOs, but I have seen no indication of this). I have seen no indication of the “structural flaws” in how DHHS operates the Medicaid program being fixed.

According to the website indeed.com, the average salary for a person working at NC DHHS is $47,000.  In addition to the average salary, you also need to contemplate that employees of NC DHHS qualify for basic health benefits at no cost.  However, if a DHHS employee wants to have his or her spouse covered or an insurance plan above the “basic plan,” there is a nominal cost. (The standard plan (above a basic plan) for an employee is still low, only $22.76/mo).

Health insurance premiums are a HUGE expense.  So when calculating salaries, if an employee receives free health care, in essence, the salary is higher…due to not having to pay premiums every month.  Health care premiums add up.  For example, I pay $750.00 monthly for health insurance for me and my husband. That’s $9000/year! Yikes!! (No, for real, yikes!!)  If Williams Mullen paid my health insurance premium, in essence, my salary would increase by $9000/year.

Including health care and trying to underestimate instead of overestimate, I calculate the average salary, including health care premiums, at NC DHHS at about $52,000-ish.

Since the MCOs went “live,” the Medicaid tax dollars that would have been held by NC DHHS, are now divvied up and bestowed upon each MCO.  Today, we have 11 MCOs, but soon Smokey Mountain Center will take over Western Highlands, bringing us to 10 MCOs.  Plus, according to a recent article published, “Frustrations With MeckLINK Grow as Denials for Care Increases,” MeckLINK is financially unstable.  We may soon be down to 9.  But, as for now, 11 MCOs receive the federal and state tax dollars for Medicaid behavioral health.

Key point? Tax dollars.

CenterPoint Human Services (CenterPoint), one of the MCOs, staffs approximately 200 employees (about 19 part-time). Out of the 200-ish employees, 41 employees receive salaries over $75,000 (including health care).  Almost 1/4 of CenterPoint’s employees have salaries OVER $75,000. 

145 employees receive salaries over the NC DHHS average salary: $52,000. 

Let’s talk about the price of health care.  Remember, these are OUR tax dollars.

Employee A has a base salary of $45,500.  But A received $16,965 in medical contribution.  Remember, my insurance for me and my husband costs $9,000/year.  For $16,965, how big of a family are we taxpayers covering?

Employee B has a base salary of $43,500. (Now, let me preface this example with…I hope…I pray…that this one example is a typo on CenterPoint’s financials, because, if not, this is outrageous!).  According to CenterPoint’s financials, Employee B gets $84,658 in medical contributions. Including FICA contribution, dental, short and long-term disability, 401K, etc., Employee B receives $136,716 in total compensation.  Admittedly, I have no way to confirm whether this is a typo….and, I must admit, I really hope it is. Regardless, according to CenterPoint’s financials Employee B receives $84,658 in medical contributions for a total of $136,716 total compensation, but with a base pay of only $43,500.

But here it is in black and white (and yellow) (toward the bottom):

Health Insurance

Three other employees, C, D, and E, have base salaries of $49,750, $49,000, and $47,100, respectively, and medical contributions of $12,007 each.  And here I thought MY health insurance was expensive…

The number $12,007 is popular.  12 employees in total receive $12,007 in medical contributions for a total of $144,084 (for 12 employees).

Another employee gets $16,965 in medical contribution with a base salary of $47,100.

Now let’s talk about the Medicaid recipients’ behavioral health care services.

Since the MCOs went live, it is indisputable that less behavioral health services are being authorized by the MCOs.  (Why the government has not addressed this tragedy, I do not know).  Another question is how many less behavioral health care servies?  I have my suspicions that if we were shown the number of behavioral health care services authorized last year compared to this year, the line would look like \. 

Remember the chart from yesterday?

MeckLINK_June_Slide

And this chart only shows one county. One MCO.

NC DHHS is handing over millions (just the behavioral health portion of the Medicaid funds) of Medicaid dollars to the MCOs.  But the money is not going to service Medicaid recipients.  The Medicaid dollars are paying salaries at every MCO, as well as the employees’ families’ health insurance plans.  What Medicaid funds go to the recipients for medically necessary services?  Seems to decrease every day.

I ask you, why do employees of an MCO receive better health care plans with Medicaid dollars than a Medicaid recipient with Medicaid dollars?

Aren’t Medicaid funds supposed to be for Medicaid recipients?

Maybe instead of all this administrative waste, we should just buy private health insurance for all Medicaid recipients. It would probably be cheaper.  And the medically necessary services would

                                                                                                  NOT

                                                                                                            LOOK

                                                                                                                     LIKE

                                                                                                                            THIS.

Going back to the State of North Carolina’s accountability to me and all taxpayers as to Medicaid tax dollars spent, I have not seen any investigation as where the behavioral health care Medicaid money is being spent.

The same article from above stated something that made me extremely concerned.  In “Frustrations With MeckLINK Grow as Denials for Care Increases,” the article cites that “[o]nce MCOs took over, North Carolina stopped tracking what care patients are receiving. A health official said the database goes blank. That means the state does not know how many North Carolinians received services, what those services were, or what was denied. It can compare MCOs financials, but not their care.” (emphasis added).

Are you kidding me? The State of North Carolina, which is accountable to me and all taxpayers, cannot determine whether the Medicaid dollars being handed over to the MCOs are being used appropriately????

Yet 145 employees at CenterPoint receive salaries over the NC DHHS average salary: $52,000!  145 out of 200-ish, to be exact.  Some employees are receiving health insurance contributions of over $10,000/year…and NC cannot determine how many Medicaid recipients received medically necessary behavioral health care??

As a taxpayer, I am appalled. And I want accountability!!

Where is the fiduciary duty to taxpayers?