Peppering her remarks with fiscal horror stories, state Health and Human Services Secretary Aldona Wos told lawmakers Wednesday she is reforming a harried department in organizational meltdown.
Wos said DHHS, the state’s second-largest bureaucracy with an $18 billion budget, is entangled in legal woes, lacks supervisory accountability, rushes multimillion-dollar payments through chaotic processes, and routinely fails to complete timely financial and operational reports vital to legislative oversight and department effectiveness.
“We actually have begun to simply issue our first warning letters that are entered into the employee personnel files,” Wos told members of the Joint Legislative Oversight Appropriations Subcommittee on Health and Human Services.
“We are not going to change the system overnight,” she said. “But we will change.”
“I don’t need to tell you that Medicaid needs improvement. I think you all have heard loud and clear from several auditors and other entities,” Carol Steckel, state Medicaid director, told committee members. She is implementing internal reforms.
“We will not have another auditor report like I had two weeks ago, I can promise you that,” Steckel said.
Medicaid is the main driver in the DHHS budget. A recent state audit with 20 recommendations cited $1.4 billion in Medicaid overspending and widespread mismanagement. Medicaid has exceeded budgets for several years. It is $21 million in the red now, said Steve Owen, chief business operations officer of the state Division of Medical Assistance.
Despite that background, Steckel said any reforms would build on rather than replace Community Care of North Carolina, the nonprofit entity responsible for administering the majority of Medicaid services.
Steckel said questions are due today [Thursday] from those interested in providing “bold proposals” for “market-based” Medicaid reforms under a request for information DHHS put out on Feb. 4. Suggested proposals are due March 15, after which the best ideas will be distilled and recommended reforms will be advanced.
The department is not interested in “just buying products and fee-for-service systems,” but showing improved outcomes, Steckel said. “Were going to build systems that quantify and measure the success of the program.”
The CCNC program is a fee-for-service model. Medicaid recipients are assigned to a primary care doctor, who bills for every office visit, test, and procedure. The goal is to reduce more expensive emergency room visits and hospital stays.
Critics say that leads to medical overutilization because payments are based on quantity, not quality. Ultimately, they say, that leads to budget overruns that are passed on to taxpayers. They say a capitated, managed care model is better suited to rein in costs and produce better outcomes through integrated care.
“Community Care of North Carolina is something that many states are trying to build now, so it would be irresponsible to take a system that is seen as state of the art and a very good baseline system and not build on it,” Steckel said.
Legislative and gubernatorial committees in Alabama, where Steckel previously was Medicaid director, have investigated Medicaid reform.
“Both committees said we need to look at the North Carolina model and go forward with that. There are states all across the country that are looking at that,” Steckel said.
However, there also is a body of former and current state Medicaid directors and health systems experts who say CCNC has not worked here as well as its hired consultants claim. Some states that tried a similar system abandoned them after negative experiences.
“I don’t think there’s anyone, including the representatives from Community Care of North Carolina, that will tell you they’re doing everything they can do,” Steckel said.
So even though DHHS will review any free-market reform recommendations that come from the public, providers, and medical stakeholders, “Community Care of North Carolina is going to be a critical component of this and I would not be responsible by saying we are going to undo that and do something different,” Steckel said.
“We are in a period of enormous change right now in our health care,” Wos said. There are many areas needing attention among the 250-plus services DHHS offers, but the immediate top two priorities will be upgrading information technology systems and Medicaid reform, she said.
Joe Cooper, who started last Friday as DHHS chief information officer, was introduced to the committee. All IT projects are being aligned under him to provide a cohesive approach and allow for better use of resources. Cooper said he’s already consolidated three departments, but is focusing on completing NC FAST and MMIS information systems.
To illustrate the disarray she found in DHHS when she took over last month, Wos recited a list of anecdotes involving frenzied staff members rushing in and out of her office, dropping off an array of documents.
“The papers had no names, no contact information, and [staffers were] asking me for signatures for something that needed to be done urgently,” Wos said.
One distressed employee pleaded for her to sign quickly a contract that required her signature. When asked what the document was, the official “was unable to provide the information to me, but she said she thought it was a couple of million dollars contract,” Wos said.
In her first week, members of her budget team presented a variety of money woes, Wos said. One was a demand for more than $4 million because of an error in communication. Another was for a $5 million program reduction required by law but not enacted for two years. A third involved nearly $40 million in unpaid bills.
Just last week legislative reports that were due in November, December, and January “showed up on my desk,” Wos said. “Not only were these reports months late, they were simply incomprehensible.”
As a result, she issued a directive to staff “that all signatures required by me must be on my desk at least a week before, that they must come with a simple, one-page cover sheet that includes the person who is responsible for this, perhaps a grant name,” the name of the supervisor involved, whether state or federal money is involved, and containing a summary and bullet points.
Staffers now are made accountable for completing specific tasks rather than assigning them to a “point of contact,” Wos said, and an expectation has been established that deadlines will be adhered to.
She said her staff is “extremely thin” and more retirements are pending. She asked that lawmakers reduce requests for reports in exchange for receiving them more completely and on schedule. The department receives 150 legislative requests a year.
“That is equivalent to a report every Monday, Wednesday, and almost every Friday,” Wos said.
Dan E. Way (@danway_carolina) is an associate editor of Carolina Journal.