News: CJ Exclusives

State health officials say budget stalemate may put DHHS in the red

Money is tight at N.C. Department of Health and Human Services.

The department has been battling financial woes after the budget stalemate threw Medicaid transformation into chaos and sent the department scrambling to make the existing budget work for the upcoming fiscal year. 

The longer the delays, the worse the consequences. The five managed care companies that won contracts to handle Medicaid are each losing $3 million to $5 million every month the delays continue. They are trying to protect the jobs of roughly 1,200 employees they hired for Medicaid transformation, but legislators worry about the consequences if the General Assembly fails to pass a transformation plan in April’s short session.

Gov. Roy Cooper vetoed the General Assembly’s 2019-21 budget bill — which included money for Medicaid transformation — in late June. In August, he vetoed a separate measure funding Medicaid transformation. Lawmakers have failed to override the vetoes.

“The longer the suspension lasts, the more work we will have to do to get ourselves back in the position we were in the middle of November,” said Jay Ludlam, assistant secretary for N.C. Medicaid, on Tuesday, Feb. 11, at the Joint Legislative Oversight Committee on Medicaid and N.C. Health Choice. “The readiness of the health plans will begin to degrade as potentially staff leave and they make system or policy changes internally.”

The department has already let 163 contractors go, as it operates to “just keep the lights on,” reported the News & Observer. And losing employees isn’t the department’s only concern. Further delays could dissolve part of the infrastructure that drives managed care. 

“The data will get stale. Data is a perishable item,” Ludlam said. “The longer the data sits in its current state, the more likely it is to become outdated. And outdated data needs to be refreshed … retested.”

If delays continue, the federal government could get involved. The department could have to reapply for permissions from the Centers for Medicare and Medicaid Services. 

“This reminds me of the UNC [basketball] game against Duke,” Rep. Donny Lambeth, R-Forsyth, said. “We’re playing well as a team, we have all the momentum, and then it starts slipping away. … and then we’re in the locker room wondering what happened. .. We need to get back out there and get going again. … Otherwise, two years, and we’re still talking about it.” 

That’s not all. The department is also operating on a razor thin margin for its Medicaid budget. But the department believes it can stay within its budget, despite this year’s “special challenges,” says Adam Levinson, NCDHHS chief financial officer.

“We feel relatively confident that we will be within budget,” Levinson said. “But we certainly can’t be 100% certain. … With our forecasts showing that we will be just barely within budget, if the actual expenditures exceed the forecasts, we could very easily be over budget.”

If spending is just 1% higher than forecast, the department could face a $40 million deficit. The department hasn’t run annual deficits in the past six years, but the legislature scrambled to patch hundreds of millions of dollars in budget holes just a decade ago.  

The department is facing a slew of complications as it tries to stay within the current budget. DHHS raised reimbursements for providers and managed care organizations, just as the federal government scaled back how much it was paying Medicaid and Health Choice. And the department will battle medical inflation as health care costs rise.

“Although we have suspended our managed care launch, we haven’t suspended our work around managed care,” said Dave Richard, N.C. Medicaid deputy secretary. “We are, have been, and continue to be committed to the goals and opportunities we believe … managed care provides.”