A significant unanswered question had to be addressed in North Carolina’s Health and Human Services (HHS) budget for 2010-11: Will the U.S. Congress approve an extension of enhanced federal Medicaid funds to the states or not?
If Congress approves the funds, North Carolina would receive an anticipated $561 million to cover the state’s swelling Medicaid caseload and rising Medicare Part D expenses. If not, the state would have to find the money to cover these expenses.
The final state budget agreement developed a compromise of sorts to address this pressing question. The budget is based on the assumption that the Congress will extend $561 million in federal Medicaid funds, but state budget writers included a contingency plan to go into effect if the federal funds were not approved by Jan. 1, 2011.
The state’s contingency plan would be financed through a combination of sources. These include monies taken from the state’s Disaster Relief Fund, the Rainy Day fund, extra lottery receipts and unused General Fund monies. Reductions in Medicaid provider reimbursement rates, a reduction in the annual contribution to the state teacher and employee pension plan and a one percent across-the-board “management flexibility reduction” for state agencies are also expected to generate the majority of financing for the contingency plan.
Curiously, the contingency plan only raises $519 million and falls short of the $561 million the state would need to cover Medicaid and Medicare Part D expenses should the extra federal funds not be approved. The discrepancy suggests that state budget writers are anticipating about $42 million in additional federal Medicaid funds in some form even if the enhanced funding is not approved.
Not to be overlooked in the 2010-11 HHS budget is $520 million in federal funds already slated to backfill state spending for the second year of the two-year budget bill passed last summer. Nearly all of those federal funds ($503 million) are designated for the state’s Medicaid program. Because the $520 million is counted as a cut, it needs to be added back to the state budget numbers to reflect actual spending on state programs this year. Combine that $520 million with the $561 million in additional “cuts” to the budget with this year’s adjustments that are going to be filled either with the federal extension or the contingency plan, and the HHS budget includes $1.08 billion in extra spending not accounted for in the state budget bill.
Thus, actual spending on state HHS programs in this year’s budget totals $5.03 billion. The new levels are up 4 percent over last year’s total spending and mark a 12 percent increase over actual spending just two years ago.
Significant expansions and reductions include:
- $430.5 million expansion to accommodate unanticipated growth in Medicaid caseload. The Medicaid budget baseline was already increased for 2010-11 in last year’s budget by $273 million. The changes bring the total upward baseline adjustment for this year to more than $700 million.
- $40 million for community services to aid in mental health, developmental disabilities and substance abuse. The services are administered through Local Management Entities (LME).
- $14.2 million to serve those enrolled but currently on the waiting list for the state’s AIDS Drug Assistance Program. The program, funded jointly by the state and federal governments, is designed to assist eligible enrollees in the purchase of medications that treat HIV and AIDS.
- $6.5 million to increase enrollment in the Health Choice program by 2 percent. Health Choice is a government-subsidized health insurance program created for children whose families earn too much to qualify for Medicaid.
- $51 million from the elimination of certain in-home Personal Care Services for adults and focusing on those adults "at greatest risk of needing institutional care." Other eligible recipients will be transitioned to a new program designed for adults with “the most intense needs.” Personal Care Services provides aide to adults to help them meet everyday needs such as bathing, dressing and eating. The reductions mirror Gov. Perdue’s and the Senate’s recommendation.
- $481.6 million: Itemized as a reduction in Medicaid state spending under the presumption that the federal government will replace state spending through a 6-month extension of an enhanced federal matching fund program enacted in the American Recovery and Reinvestment Act (ARRA). The budget bill contains a contingency plan (described above) in case Congress does not approve the additional funding.
- $79.4 million: Also itemized as a cut in the state budget, in this case in reference to Medicare part D. This funding item shares the same fate as the above mentioned Medicaid “cuts.”
- $45 million in anticipated savings from expanding “care management programs” of the Community Care Network of North Carolina (CCNC). The state contracts with CCNC to manage the utilization of Medicaid services.
- $41 million in anticipated savings from “rate and utilization management” measures in mental health care.
- $10 million in savings by adding select mental health drugs to the state’s Preferred Drug List.
- $40 million in savings from enhanced techniques of detecting Medicaid fraud and abuse.
- $5 million reduction to the state’s Smart Start program, dropping state expenditures to $188 million.