RALEIGH -- State Auditor Ralph Campbell faced another day of tough questions and strong criticism Wednesday as he defended a critical state audit of North Carolina's Medicaid program. While some observers came away with the sense that Campbell had been painfully bruised by a legislative hearing in Raleigh, during which the three-term Democrat was grilled by key state senators from his own party, I take a contrary view.
Gov. Mike Easley and his administration may be winning some tactical victories in their war of words with Campbell, which began last week when his audit was released. But their strategy makes no sense, and they are in danger of losing the campaign -- by which I mean the figurative, military one, though the literal, political one is now implicated.
Campbell's audit deals with a number of complex issues, but it can be boiled down to these main points: 1) since the mid-1990s North Carolina inappropriately allowed a consortium of hospitals essentially to run a Medicaid reimbursement program for said hospitals; 2) the reimbursements in question were based on outdated or faulty information about hospital inpatient and outpatient costs, in some cases employed knowingly by state officials; 3) some hospitals may have obtained a second round of reimbursements to which they were not entitled under federal regulations; and 4) much of the problems with reimbursements were related to the fact that the state had failed to conduct final cost accounting with these hospitals since 1996, accounting which should have been completed on something like an annual basis.
Overall, the state audit estimated, North Carolina (meaning the hospitals or the state or some combination) may owe the federal government more than $400 million in overpayments. The hospitals, in turn, would technically have received another couple hundred million tax dollars or so from state government without proper documentation or justification.
Carmen Hooker Odom, Easley's secretary of health and human services, has answers for most of Campbell's findings. Some are actually quite straightforward and persuasive -- the hospital arrangement and Medicaid management problems predated the start of her tenure in 2001 -- while others are subject to interpretation. Unfortunately, Odom also resorted to what I think is unnecessarily caustic rhetoric about Campbell himself, arguing that as state auditor during the period he should have uncovered these problems long ago and therefore bore much of the blame for them.
Naturally, with auditors questioning the expenditure of some $660 million in state and federal tax dollars, Odom and other Easley officials had a strong incentive, and likely a heart-felt desire, to set the record straight. But their tenor and tone were far from constructive. The Wednesday hearing was characterized by the political equivalent of abusive language from state senators friendly to the administration and to Odom's husband, former Sen. Fountain Odom of Mecklenburg. They argued that Campbell's work was "irresponsible," that it brought little new to the table, and that HHS was already taking care of the problems. The implicit message was that the state auditor didn't know what was going on and his staff didn't know what they were doing.
If they thought Campbell was a wet noodle (or chicken, free feel to insert your favorite soup reference here) they were wrong. He fired back with a letter sent by HHS to his auditors in 2003, in preparation for the ensuing audit, that did not appear to disclose the corrective actions Odom had already begun in the Medicaid program. "If the department knew of the problems and had begun to take corrective action, then they were required ... to disclose that information to our auditors," he said. "They did not."
I know some facts are in dispute. I also know that reputations and egos are in play here. But the Easley administration and its legislative allies have chosen a strategy that is guaranteed to keep public and press attention riveted on a story that can only be viewed as at best a distraction and at worst damaging for a governor facing a competitive re-election campaign this year. Republican rivals are already latching onto the issue, as should have been entirely predictable, and the political exposure is wider because of the administration's response to the audit than it would otherwise have been.
While nursing deep and perhaps even justifiable grievances, Odom and other Easley officials should have simply thanked the auditor for his work, listed the steps they were taking to correct the problem, and moved on. Their job is to run state departments effectively and, in some cases, to get their boss re-elected. Their strategy serves neither purpose.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.