First Posted: 3/27/2014
RALEIGH — North Carolina’s Medicaid shortfall this fiscal year isn’t expected to be as large as it has been in recent years, state budget officials told legislators Wednesday. But number crunchers said uncertainty remains about the gap in one of state government’s largest programs.
The Department of Health and Human Services, state budget office and the legislature’s fiscal staff offered their projections Wednesday to the department’s oversight committee of Medicaid budget gaps that range from $69 million to $140 million in state funds.
The estimates compared with the actual $484 million state Medicaid deficit that legislators and Gov. Pat McCrory had to close for the year ending June 30, 2013 — a shortage the governor said left to state employees and teachers failing to get raises this year. The potential for across-the-board raises and other new spending likely improves without a large Medicaid budget gap that siphons away cash.
“Overall the state’s Medicaid budget is in a much better place than it’s been over the last two or three years,” said Rep. Nelson Dollar, R-Wake, senior chairman of the House Appropriations Committee. “We have made tremendous progress on resolving many of the long standing Medicaid management issues, but we still have a ways to go.”
The state has struggled for years with shortfalls associated with Medicaid, the federal-state health coverage program for 1.8 million residents — mostly poor children, older adults and the disabled. The state set aside $3.5 billion for Medicaid this year, so the high end of the ranges presented represent between a 3 to 4 percent shortfall.
DHHS and the Office of State Budget and Management projected a shortfall from $120 million to $140 million. The General Assembly’s Fiscal Research Division offered a range of $69 million to $131 million but said it didn’t have enough data yet to assemble a true forecast for legislators as they reconvene in mid-May to adjust the second year of the current two-year budget approved last summer.
The gap likely would require legislators to provide a cash influx before the end of June to Medicaid or create a reserve in the next year’s budget to cover claims that carry over.
Through February, state Medicaid spending was largely on track with what was budgeted, speakers said.
“Things are tracking fine as of now,” said Rod Davis, the DHHS chief financial officer. “We’re just concerned about things we don’t know about.”
Analysts addressing the panel said there were still significant shortcomings with data needed to make better predictions. The state Medicaid division said it’s going to fall one-third short of meeting Medicaid cost savings required by the budget. There are also hundreds of millions of dollars in unpaid claims that could shift the totals.
“The numbers could drastically change,” Fiscal Research Division analyst Susan Jacobs said. “We don’t know what the real backlog is. We are estimating that. That has huge implications if we do not have that number right.”
There’s a backlog of $200 million in backlogged claims by health care providers seeking payments for treating Medicaid patients, of which the state would be responsible for $72 million, Davis said. Some doctors and hospitals continue to have trouble getting paid through a new Medicaid billing computer system that came online last July.
Governments also have yet to process an estimated 59,000 Medicaid applications from people who sought insurance through the new federal online insurance exchange, as well as 22,000 other new enrollees, the state budget office said.
While the state budget set aside money for the enrollees, it’s unclear whether there will be enough money to pay for them all. The federal government pays roughly two-thirds of claims expenses.
Committee members later criticized the Division of Medical Assistance, which oversees Medicaid, for failing to tell them sooner the division would only be able to realize $100 million of the $147 million in savings demanded within this year’s state budget. Many changes required the approval of federal regulators, but division officials had told lawmakers last year what each change could reap in savings.
One change predicted to generate $17.2 million in savings by freezing automatic rate increases for hospital outpatient services actually will produce nothing because the change already had occurred the year before.
Rep. Marilyn Avila, R-Wake, called it a “sophomoric kind of error.” Division CFO Rick Brennan, who arrived at his job last May, said he couldn’t vouch for the original cost savings estimates but similar calculations were done differently now.