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Jul. 25th, 2013: - johnlocke.org Manage Subscriptions

A Brief Glimpse Into the HHS Budget and Its Devouring Medicaid Monster
By Katherine Restrepo

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Almost one full month past the original deadline, the budget has been voted out of the legislature and will be given the stamp of approval by Governor Pat McCrory. 

The General Fund appropriates $20.6 billion for fiscal year 2013-2014 and $20.9 billion for fiscal year 2014-2015, a fiscally conservative 2.5% increase from last year.  Within the Department of Health and Human Services (DHHS), over $10 billion has been authorized this biennium, and 70% of this grand sum serves the Medicaid Monster on a grandiose platter.

Medicaid On The Grill

Within each of the past four fiscal years, Medicaid has exceeded its appropriated budget by an average of 11 percent.  Combined state and federal expenditures that fund North Carolina's entitlement program have grown 90 percent over the past decade.

Republican Senator Ralph Hise, the Senate Budget Health Subcommittee Chairman, comments that, "Medicaid is driving everything in this state budget.  These funds coming out are controlling what we do in education, what we do in transportation and highways." 

Meanwhile, this week's News & Observer writes,

Senate leader Phil Berger, an Eden Republican, said legislators support public education and respect teachers.  Raises weren't possible, Berger said, because the legislature had to commit an additional $1.5 billion over two years to pay for Medicaid.

Furthermore, my colleague and Director of Education Studies Dr. Terry Stoops, observed on Capitol Tonight that education cannot be discussed without first addressing uncontrollable Medicaid spending that makes for unpredictable budgets.  Medicaid not only chews away at other important funds -- like education and transportation -- but also consumes other categories within its own section of the budget.  Over $30 million in funds, most including historical transfers, are shifting to HHS's Division of Medical Assistance (DMA) to begin offsetting the straining $330 million Medicaid shortfall.  Terry receives full credit for initially referring to Medicaid as a "monster."

Medicaid Menu

A few important line items included in the budget's $1.5 billion Medicaid spending increase:

  • Line item 66: Medicaid Rebase -- $1 billion to continue the program

  • Line items 67 and 68: $58 million appropriated for Medicaid provider cost settlements and Medicaid contracts.  This is due to the projected increase in Medicaid enrollees along with the requirement that Medicaid providers be reimbursed at least 100% Medicare rates under the federal health law.

  • Line item 69: "Woodwork" and Affordable Care Act -- Although NC did not opt for Medicaid eligibility expansion, another $164 million is appropriated to move an estimated 142,000 people who are already eligible for Medicaid onto it's rolls over the next two years.  Failure to comply with this measure and its appropriated funding would result in penalties and outreach efforts to reduce the uninsured under the federal health law.  

  • Line item 70: Transfer of Health Choice Children -- $68 million for the transfer of approximately 51,000 children who live under 133% of the FPL from Health Choice to Medicaid.  Again, Obamacare requires the implementation of this provision.

    While not an entitlement program, NC Health Choice is a government program established under the Social Security Act.  Children between ages the ages of 6 and 18 who live in households earning an annual income 101-200% of the Federal Poverty Level (FPL) are eligible recipients for medical assistance.  Overall, the program supports children of families who bring in too much income to receive Medicaid benefits but not enough to be able to afford private health insurance.  

Insatiable Appetite

These 51,000 child recipients who will move onto North Carolina's Medicaid program will receive benefits not otherwise covered through NC Health Choice such as long-term care services, non-ER medical transportation, and limited dental services.  Children on Medicaid also receive benefits funded by the taxpayer's dime until 21 years of age.

North Carolina has rejected further expansion, which would have brought a little less than 500,000 additional residents onto Medicaid, for many financially sound reasons.  Despite this responsible maneuver, the federal health law still imposes expansionary mandates in an attempt to reduce the number of uninsured statewide.  Blurring the lines of the welfare state contributes to the committed $1.5 billion Medicaid spending spree.  To put in perspective how broadly medical assistance programs now operate, 6 out of every 10 people on Medicaid once paid for private health insurance.  

Incessantly expanding the welfare state will only make private coverage even more expensive and less affordable to those trying to wean themselves off medical assistance programs.  Actually, that seems to be the Obama administration's main objective. 

Hopefully North Carolina's proposed competitive managed care Medicaid reform will benefit patients, providers, and taxpayers while effectively reigning in health care costs via the budget's other items -- limited physician visits, shared savings plans on selective services, and prior authorization of prescription drugs.

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Monday, Jul. 29th, 2013 at 12:00 p.m.
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