RALEIGH – North Carolina’s budget woes are about to roar right back into the headlines, as Gov. Mike Easley either moves to close a yawning budget deficit for the fiscal year ending in June or calls the N.C. General Assembly back into special session to do so.

Whoever ends up doing the heavy lifting is going to have to grapple with Medicaid, the health care program for the elderly, disabled, and poor that is jointly funded by state and federal governments. North Carolina’s Medicaid program is the most expensive in the South. It consumed the lion’s share of new spending in the FY 2001-02 “budget” the legislature enacted last year (I use the b-word loosely, given its immediate and unconstitutional lurch into imbalance). And Medicaid is a major contributor to the new deficit that Easley and/or lawmakers will have to fix in the coming weeks.

It’s not as though North Carolina’s Medicaid-spending addiction has gone completely unnoticed. Health and Human Services Secretary Carmen Hooker Buell, Medical Assistance Director Nina Yeager, and their staff at HHS have made a valiant effort to make some headway. Last year’s budget bore their fingerprints, with some $44 million in projected Medicaid savings in FY 2001-02 and nearly $100 million in FY 2002-03. Changes included a 5 percent reduction in doctor fees, more aggressive management of prescription drug costs, and limits on personal care services. The department is also experimenting with more intensive managed-care applications, though much of the Medicaid caseload may prove unsuitable.

Still, the Easley administration and General Assembly haven’t gone nearly far enough, in part due to skillful lobbying by medical providers. Remember last year’s ridiculous backtrack on eliminating taxpayer-funded circumcisions? The procedure has few if any medical benefits but uninformed media commentators and others tried to make it an issue of equality and dignity. Actually, it was an issue of deploying taxpayer dollars to a high-priority use, but common sense rarely prevails in such situations.

I calculated last year that if North Carolina seeks to gets its Medicaid costs in line with our neighbors by 2006, we needed to save $87 million in FY 2001-02 and nearly $200 million in FY 2002-03. So our leaders are about halfway there. We need to continue to reduce reimbursements to a level more comparable to those in other states, eliminate some services that Washington doesn’t require of us, and seek whatever additional flexibility we can secure from the Bush administration to get control of this costly and wasteful entitlement program.

Perhaps most importantly, we need to enact more comprehensive health care reforms, including deregulation of health plans and personal tax credits for private coverage, so that fewer North Carolinians will end up on the medical-welfare rolls. According to Allen Gambill, who heads up financial operations for Medicaid, North Carolina saw enrollment exceed projections during 2001 by 70,000 people – including 30,000 just since September.

Unless we reform Medicaid now, our tax burden will grow, as will the ranks of those ensnared in government dependency.