Audit shows North Carolina wastes millions on Medicaid

January 31, 2013 3:10:36 PM PST
Governor Pat McCrory and State Auditor Beth Wood held a rare joint news conference Thursday to discuss the findings of a scathing audit commissioned by the General Assembly about North Carolina's Medicaid program.

Legislators directed Wood's office in last year's budget bill to conduct a performance audit of the Division of Medical Assistance and the Medicaid system it runs. Medicaid provides health coverage for more than 1.5 million North Carolina residents - most of them poor children, older adults and the disabled - and spends $12 billion in state and federal funds annually.

Wood said she found hundreds of millions of dollars in Medicaid cost overruns because of administrative inefficiency, lack of oversight of contracts, lax cost-control and cost-management measures and disjointed accounting practices that have led to inaccurate financial projections.

Click here to download Wood's audit (.pdf).

The audit shows the state is spending nearly 40 percent more than the national average just to administer Medicaid, and that's costing taxpayers an extra $180 million a year.

Last year, the state's Medicaid program was $1.4 billion over budget. It was the same in 2011, and even more in 2010.

"The people of North Carolina have sent us here to fix broken system and that's what we're going to do.  These issues should be of concern to everyone.  This is taxpayer money," said McCrory.

The McCrory administration pledged to get to work on Wood's recommendations.

"This information is critical to us in the work we have ahead to reform the Medicaid system in North Carolina," said Department of Health and Human Services Secretary Aldona Wos.

McCrory said until the problem is fixed, he won't consider expanding the Medicaid system - as many states are doing under the Affordable Care Act.

That could leave about 650,000 low-income residents who could be eligible for Medicaid under the Obamacare health insurance reform plan without coverage.

Some Republicans in the North Carolina General Assembly say they're opposed to Medicaid expansion because Washington could back out on its promise to pay all expansion costs for three years and 90 percent thereafter.

Democrats favoring Medicaid expansion say losing the federal money means more trouble for hospitals struggling with unpaid bills left by poor people's treatment.

Republicans are also advocating leaving it to the federal government to build the state's online marketplace for private health insurance that's also part of Obamacare.

In November, former Gov. Beverly Perdue set North Carolina on course for an exchange run jointly by the state and federal governments. The former Democratic governor said she consulted with incoming Republican Gov. Pat McCrory before acting.  

McCrory has since said he was revisiting the issue. Asked Wednesday whether the governor thought the Legislature is now trying to make that decision in his place, McCrory spokeswoman Crystal Feldman said he continues to analyze all options.  

About 715,000 North Carolinians are expected to buy coverage through an exchange in 2014, growing to more than 900,000 people by 2016, according to the North Carolina Institute of Medicine.  

About 300,000 of those projected to buy coverage through the exchange are among the 1.55 million residents under 65 currently uninsured, according to Milliman Inc., a consulting firm hired by the state Insurance Department to forecast how the exchange would be used. About 51,000 people are expected to be covered by small businesses purchasing insurance for employees and their dependents, the Milliman study said.  

A lobbying group for small businesses, the National Federation of Independent Business, wants North Carolina officials to manage the exchange rather than leave it to federal authorities, NFIB state director Gregg Thompson said.  

"I think that the state needs to be in control of its destiny on health insurance," said Thompson, a former Republican legislator from Mitchell County. "Anytime that the feds are involved, it's just one additional layer of bureaucracy and if the state has an opportunity to be in control of the health care program proposed in Obamacare then the state should be in control."  

North Carolina this month was awarded $74 million by the U.S. Department of Health and Human Services to keep working on the state's exchange. The state previously got $13.4 million to pay for planning, salaries and information systems.  

Proposed legislation in the General Assembly directs the state Insurance Department to return unspent taxpayer funds to Washington since it won't be needed for prepping an exchange.

Associated Press reporter Emery P. Dalesio contributed to this report.

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