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:
- A health care background
- A successful track record of his/her ability to manage large companies or agencies
- An understanding of the Medicaid system, and, maybe, even have first-hand knowledge of how the system affects recipients and providers
- A relationship with someone on Medicaid or a parent of someone on Medicaid
- A working knowledge of clinical coverage policies, reimbursement rates, and regulations surrounding Medicaid
- Both the capacity to listen and speak and do both eloquently and genuinely
- 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
- An understanding that he/she is handling tax payers’ money, that redundancy in staff is excess administrative costs, and ability to trim the fat
- An ability to communicate with both the Senate and the House and to be frank with both
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.”
- 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…
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.
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.
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.”
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?
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.
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.
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.
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.”
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.
Aldona Wos resigned today after two years and seven months as Secretary of NC DHHS. Wos’ last day will be Aug. 14.
McCrory named Rick Brajer, a former medical technology executive, as the new Secretary of DHHS.
Soon-to-be Sec. Brajer, 54, was the chief executive of ProNerve and LipoScience. LipoScience was sold to LabCorp in 2014, and ProNerve was sold to Specialty Care in April.
Brajer is not a doctor, as Wos was. Instead, Brajer touts an MBA from Stanford.
I do not have any information as to why Wos resigned now, especially in light of the recent resignation of the Secretary of Transportation, but will keep you apprised.
More to come….
With Carol Steckel’s abrupt resignation September 27, 2013, only 8 months after accepting the job as NC Medicaid Director, we North Carolinians were left without a Medicaid Director. I posted a week or so ago that I can only imagine how difficult it would be to fill the position, considering the absolute mess the Department of Health and Human Services (DHHS) has created recently…the calamity of NCTracks…the negative PR…the high salaries of administration…Who would want to inherit this mess???
While I cannot imagine the person who would actually apply to be our Medicaid Director in the midst of such storms, I do have some advice for whomever attempts to carry the burden of being NC’s Medicaid Director.
I don’t know why Ms. Steckel left. I’ve heard numerous hypotheses. I’ve heard that she didn’t get along with Sect. Wos. I’ve heard that she left because the NC Medicaid system cannot be fixed. I’ve heard the bad media press upset her. I’ve heard she couldn’t handle the scrutiny of the public.
Regardless, anyone who is thinking of applying to be our Medicaid Director needs to understand that this is a public servant job. This is not a private sector job. Why is that important? Because as an officer in the public arena, you are accountable to the taxpayers. You cannot hide behind rhetoric or stop speaking to media. As a public servant, you have duty to be transparent to taxpayers. You will be scrutinized by the public…and this is allowed.
Recently, Secretary Wos responded with this comment when asked about transparency… “I think the word transparency can get pretty dangerous. … 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.”
While I understand Sect. Wos’ assertion that if all we do is talk then nothing gets done, in the public sector, transparency is, not only desired by taxpayers, but public servants owe a duty to be transparent. Public servants are not spending their own money. It’s my money and your money. We deserve to know how our money is being spent and we deserve to have an opinion as to whether our money is being spent in an economically intelligent fashion.
For example, my blog about the managed care organizations paying the health insurance for its employees and the employees’ families was to point out that our tax dollars are paying for these employees’ families’ health insurance…tax dollars that are meant to provide health insurance to our most needy population.
Similarly, all the media hype about the high salaries of the two 24-year-old staffers, who were given salaries making $85,000 or more, the media are angered because, again, those salaries are paid by us.
Because the money that the Department of Health and Human Services (DHHS) spends is our money, not private funds, transparency is essential.
A few weeks ago, when I flew to New Mexico, I had to go through airport security. I had to take off my shoes (yuck! and walk on the airport floor), place my purse and laptop on the conveyor belt and step into the “All-Seeing Machine.” You know, the machine that you have to place your feet a little apart and raise your hands above your head, while the machine whirls around your body. I always feel slightly mortified every time I have to go through that machine. I even suck in my breathe a little so my belly doesn’t poke out. It is just a strange feeling to have a stranger look that closely at you and scrutinize your body. You never know what the person looking at your image is thinking. Being scrutinized is not fun.
Similarly, as NC Medicaid Director, and a public servant, you will be scrutinized. Every word. Every action…and non-action.
Remember Mary Poppins? Remember the sweet, little song the two children sang about the criteria for their new nanny?
If you want this choice position
Have a cheery disposition
Rosy cheeks, no warts!
Play games, all sort
You must be kind, you must be witty
Very sweet and fairly pretty
Take us on outings, give us treats
Sing songs, bring sweets
Never be cross or cruel
Never give us castor oil or gruel
Love us as a son and daughter
And never smell of barley water…
Well it applies to the Medicaid Director position too. Here is the “Perfect NC Medicaid Director Song:”If you want this choice position Have an open disposition Know Medicaid laws and rules Don’t treat media as fools You must be strong, you must be smart Very tenacious, open heart Take on naysayers, show guts Move our Agency out of ruts Be transparent, don’t circumvent Never say to media, “No comment.” Love our citizens; our state And always, always update…
I found the job posting for our Medicaid Director on the National Association of Medicaid Directors’ (NAMD) website.
Here it is:
DIRECTOR OF MEDICAL ASSISTANCE
The North Carolina Department of Health and Human Services (DHHS), in collaboration with our partners, protects the health and safety of all North Carolinians and provides essential human services.
Within DHHS, the Division of Medical Assistance (DMA) provides access to high quality, medically necessary health care for eligible North Carolina residents through cost-effective purchasing of health care services and products. The Department of Health and Human Services and DMA are devoted to quality customer service.
The Director of Medicaid directs the administration of the state’s Medicaid and NC Health Choice Programs. The Medicaid program serves more that 1.7 million North Carolinians and provides services to children, the elderly, the blind, the disabled and those eligible to receive federally funded assisted income maintenance payments. The North Carolina Health Choice (NCHC) Health Insurance Program for Children is a comprehensive health coverage program for low-income children. The goal of NCHC is to reduce the number of uninsured children in the State. The program focus is on families who make too much income to qualify for Medicaid but not enough to afford private or employer-sponsored health insurance.
DMA has approximately 400 employees and a budget impact of 14 billion dollars which includes 3.8 billion in state appropriations. DMA partners with over 78,000 physician providers throughout the state to provide essential services to recipients. The Director is responsible for multi-million dollar contracts and performs an array of fiscal agent and administrative services which include cost reimbursement and integrated payment management reporting to local management entities (area mental health programs). The position manages the state waiver program and demonstration projects. The Director is the primary interface with the Federal Centers for Medicare and Medicaid Services (CMS) and for the Committee Management Office. (CMO)
KNOWLEDGE, SKILLS AND ABILITIES:
Prior leadership and policy role in large complex organization administering the Medicaid Program or within a Medicaid Reimbursement or Health Insurance Agency
Demonstrated knowledge of the federal and state funding process for Medicaid and Medicare
Proven ability to build consensus among diverse stake holders which includes constituents, providers, advocacy groups, the media, the public and the legislature
Demonstrated ability to provide leadership during a time of change or reorganization
MINIMUM EDUCATION AND EXPERIENCE REQUIREMENTS:
A Masters Degree in Business, Public Health, Health Administration, Social or Clinical Science or a related field and six years of broad management experience in Health Administration or in Healthcare financial management of which at least three years must be at the Director or Assistant Director level of a statewide or federal division in Health Administration or Financial Management.
To be considered for this opportunity please submit a detailed resume to email@example.com
To learn more about the North Carolina Department of Health and Human Services, please visit our web site at: www.ncdhhs.gov
All applications will remain confidential.
Equal Opportunity Employer
Nowhere in the advertisement for the NC Medicaid Director does it say what the Medicaid Director ACTUALLY has to do in real life.
Undergo scrutiny. Talk to the public. Maintain transparency. Be a public figure in a time of crisis.
It’s our money. So talk to us.
NC State Auditor, Beth Wood, Calls Out Inaccuracies Stated at the NC Oversight Committee Regarding NCTracks
After the October 8, 2013, Oversight Committee meeting regarding NCTracks, our State Auditor, Beth Wood, had some clarifying remarks. By clarifying, I mean, Wood points out the (we don’t want to use such a harsh words as “lies”) inadvertent mistruths that came to light at the October 8, 2013, Oversight Committee meeting. (Click the blue phrase to see a portion of the video of the actual meeting).
One inadvertent mistruth was as follows:
During the Oversight Committee, Senator Parmon asked Secretary Wos whether any professional opinion had been given to the Department of Health and Human Service (DHHS) warning DHHS that NCTracks was not ready to go live July 1, 2013.
Secretary Wos answered: “No, Senator.”
Was the State Auditor’s May 2013 Performance Audit explicitly stating that NCTracks was not ready to go live not enough???? Or maybe Secretary Wos did not consider the Performance Audit a “professional opinion.” She may have a point. Perhaps the Performance Audit should be considered “professional fact.”
It is important to remember that this $484 million contract (which price tag has been surpassed) is funded by our tax dollars.
Here is Beth Wood’s response to the Oversight Committee:
October 10, 2013Honorable Justin Burr
NC House of Representatives 300 N. Salisbury Street, Room 307A Raleigh, NC 27603-5925
Dear Representative Burr,
The Office of the State Auditor has several concerns about incomplete information provided to the Joint Legislative Oversight Committee on Health and Human Services during its committee meeting on October 8, 2013. We would like to clarify some of the information provided to the committee by officials from the Department of Health and Human Services.
1. When Senator Parmon asked Secretary Wos whether the Department of Health and Human Services had received any professional opinions indicating that that the NC Tracks system may not be ready to go-live on July 1, the Secretary responded “No, Senator.” This answer ignores the work of our audit issued on May 22, 2013, titled: “NCTracks (MMIS Replacement) – Implementation.” The State Auditor met and presented Secretary Wos with the findings and recommendations as early as March 27, 2013, to allow her department to begin addressing problems uncovered in the audit.
The audit findings from our report included that:
- Independent assessments regarding system readiness and testing were flawed and put system readiness at risk
- Access control and security environment were at risk on go-live
- No formal criteria framework existed to determine if NCTracks was ready for go-live
“The Department should re-evaluate its current “Go” decision for July 1, 2013, once final Go/No-go criteria is established and documented,” our audit recommended. “This assessment should incorporate the final user acceptance testing and production simulation testing results.”
2. In his presentation, Mr. Cooper referenced NCTracks testing procedures done by DHHS and its vendor, CSC, prior to the July 1 go-live date and indicated that the system had met their benchmarks. Our audit, however, found several shortcomings in the testing of the system.
Our findings indicated that:
- Out of 834 “critical” priority test cases affecting various Medicaid and provider business processes, 123 critical tests had failed and 285 critical test cases were not performed. The department itself defined which business processes were critical, and according to the department, “critical” test cases were absolutely required to be tested.
- Our audit stated, “If user acceptance testing is accepted without addressing these issues, a high risk exists that critical NCTracks functions could have major errors on go-live and possibly lead to a delayed CMS certification of the system.”
- Oversight over the production simulation testing process was inadequate. Our work found that the department allowed CSC to develop the acceptance criteria for its own work, one week prior to the end of the testing phase, and that the department lacked clear test benchmarks.
3. Mr. Cooper stated during this presentation that, “On February 28th we [DHHS] reached a point-of-no-return when the state had to cancel the HP contract.” This contradicts what Department leaders told state auditors during our NCTracks pre-implementation audit. During our audit, DHHS senior leadership repeatedly indicated that the termination of the contract with HP, the vendor for the Medicaid system that was replaced by NCTracks, should not be considered final acceptance of the project.
“According to the Department, the letter to HP does not constitute formal acceptance of the NCTracks system,” our audit states. “The Department has indicated that if the NCTracks system is not ready for go-live on July 1, 2013, HP will be willing to continue its services as long as needed. However, there is no guarantee that this continuation of services would occur or at what cost to the State as this is not in writing.”
The fact that Mr. Cooper and the Department now characterize the contract termination as a “point-of-no-return” indicates that the Department’s decision to go-live did not take into account the actual readiness of the system or the critical risks that were raised between February 28 and June 30.
Our full audit report on NCTracks can be viewed at http://www.ncauditor.net/EPSWeb/Reports/InfoSystems/ISA-2013-4410.pdf.
Our staff is available to answer any questions or concerns you may have about our work. If you wish to discuss this information with me, you can contact me at 919-807-7628.
Thank you for your work on behalf of the people of North Carolina.
Sincerely,Beth A. Wood, CPA North Carolina State Auditor
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 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 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 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.
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