Senator Donald G. Davis 5th District

Office:      300 N.SalisburyStreet

523 Legislative Office Building Raleigh, North Carolina 27603-5925

Phone:      (919)715-8363

Fax:            (919)754-3159

Email:         [email protected]

Counties: Pitt andGreene

October 4, 2019

Dr. Mandy K. Cohen, Secretary

North Carolina Department of Health and Human Services

2001 Mail Service Center

Raleigh, North Carolina 27699-2000

Dear Secretary Cohen:

Many conversations have been taking place in eastern North Carolina about health care and specifically, Medicaid. Most recently, State Auditor Beth Wood appeared on 103.7 WTIB-FM, Talk of the Town, a radio talk show, for an interview with Henry Hinton, the host. During this interview, State Auditor Beth Wood raised several concerns about Medicaid. I am explicitly seeking your response to State Auditor Wood’s statements below and requesting any information you wish to share with me and my constituents.

During the interview, State Auditor Wood referenced errors in the North Carolina Medicaid Program from a report entitled, North Carolina Medicaid Program Recipient Eligibility Determination: Department of Health and Human Services County Departments of Social Services (January 2017). Later, she stated, “…you just can’t keep putting a bunch of people into a system that is already broken.” She also said, “… I’ve had Republicans tell me that we believe that there is enough waste in the Medicaid program that we can take care of expanding it and not spend any more money… I think it wouldn’t cost us any more to cover another 500,000 people.” Near the end of the interview, State Auditor Wood stated:

…cabinet secretaries that are just blatantly breaking state policies, state rules, and think nothing of it. … they are breaking rules and spending money they shouldn’t be, I mean it’s in law, or in rules, you should not do this, and they’re doing it anyway.

With the budget stalemate, I find it is essential to engage in these conversations and share the most relevant information with my constituents. While I would like to see us close the Medicaid coverage gap, I also believe we have a fiduciary responsibility to ensure there is accountability in state government. Moreover, legislators must rely on the best information available to help guide public policy for our state.

I much appreciate you taking the time to review and respond to this inquiry. Enclosed is a copy of the transcript from this September 18 Talk of the Town interview. I look forward to hearing back from you soon. If you have any questions, please do not hesitate to contact me directly at (919) 715-8363.

Very respectfully,

Donald G. Davis Senator

Enclosure: Transcript

cc:State Auditor Beth Wood


 Talk of the Town

103.7 WTIB-FM September 18, 2019 Radio Host Henry Hinton

Interview: North Carolina State Auditor Beth Wood

HENRY HINTON: Beth Wood, ECU alum, she’s a true Pirate, the State Auditor, good morning, Madame Auditor, how are you?

BETH WOOD: Good morning, Henry, thank you so much for having me on.

HENRY HINTON: Absolutely, it’s good to have you. We got to get you down to an ECU football game now. You gotta come down and get up in that new tower and see what’s going on. We need you back down hear wearing purple.

BETH WOOD: Absolutely! Real soon.

HENRY HINTON: Alright good. You and I had a chance to kinda brief this a little bit yesterday. But, uh, you know. All we’re hearing from Roy Cooper is he’s not going to agree to this budget unless there is Medicaid expansion. Of course, the discussion about Medicaid expansion may be as soon as today in the state House but meanwhile, you have been delving into Medicaid in North Carolina and found some huge mistakes by the, uh, Department of Health and Human Services. And, I don’t know if you’ve talked about it publicly before today, but I wanted you to come on this morning and kinda tell us what you have found on that.

BETH WOOD: Absolutely, so the General Assembly is trying to move Medicaid into what we call managed care. It’s almost like the HMOs that we had, um, years ago. And so, um, we thought, since we are already into this, somewhat, we got seven MCOs—Managed Care Organizations–operating in North Carolina right now then they spent about $3 billion through that organization every year. We thought let’s go take a look and see how well they’re functioning before we move another $7 billion into this process. So, very complicated, um, how all this works but here what we’ve found. So, the managed care organizations that we are using right now, they find health services for the mentally disabled, the developmental disability, and people with substance abuse. We are spending $3 billion a year through these managed care organizations, and what we found is that the data going into how the rates are calculated, um, is not accurate, not reliable, um, and the seven managed care organizations that we have today have


accumulated over $439 million over a two-year period. Now, what is important to remember about that $439 million, once it gets paid to a managed care organization, it loses its characteristic of being Medicaid money. So, they can do anything they want to with those savings–they can buy airplanes, they can give million-dollar salaries. While, at the very same time, they got people on waitlist trying to get mental health services, trying to get developmental disability services.

HENRY HINTON: So, um, is this, is this just a failure of management at the Department of Health and Human Services? I mean. It sounds like what you are saying is a math error. That is creating this huge deficit.

BETH WOOD: Well not, not, not a math error, what it is, is that the managed care organization sends all the data for calculating the rate they’re paid, and it should be verified and confirmed by the Department Health and Human Services.

HENRY HINTON: I was going to say. So, so. It’s like saying. It’s like letting the fox guard the hen house. Right?


HENRY HINTON: They’re coming up with their own calculations on how to be reimbursed and they’re getting it. Now, um. So, so, you’ve got all these people who need Medicaid that aren’t getting it but, I mean, this $439 million that’s been paid. Um, I mean. Is, is, is that, is that overpayment in your view, or some percentage of it overpayment? What do you think?

BETH WOOD: It’s one of two things. Either the managed care organizations were overpaid, the rates were too high, and we’ve found evidence of that. It could be that when you give, um, this responsibility to the managed care organization, every dollar they don’t spend goes to their bottom line so they may be cutting back on the level of service. So, they may cutting back, they may be denying service that they should be giving. So again, oversight, oversight by the Department of Health and Human Services on two levels. Is the data going for the calculation of the rate accurate, complete, and reliable and the services being offered, is it being offered at the level it should be for everybody that should be getting it? And, and I’m just going to say this Henry, this is not just under this Administration. This has been going on for years, I found it under a Republican governor, I found it under a Democratic governor, and ain’t nobody fixed it yet.


HENRY HINTON: Wow. Uh, it’s, it’s just a complicated system to begin with. Uh, but it just seems like the Department.

BETH WOOD: Henry, I would tell you this. It’s not that complicated. We just got. We just have lack of accountability in state government for how mine and your tax dollars are being spent.

HENRY HINTON: Wow. Boy, that’s really disheartening to hear from, um, somebody, who actually has access to it and can go look at it. I mean. We all think that all the time but, uh, when we hear that somebody like you Beth say, you’ve, you’ve diving into these issues and tax money is being wasted like that. But, I mean. What’s, what’s that, and again, I know you are a Democrat, I don’t know you, but knowing you the way I know you. You don’t pull any punches with anybody, uh. You got the Governor right now screaming we gotta expand Medicaid. I mean. Is this the message here, no you can’t, you gotta get your house in order before you start asking for more people to go on the Medicaid rolls?

BETH WOOD: Well, and that’s exactly where I am. I am a middle of the road, you’re exactly right, right is right, and wrong is wrong, but you just can’t keep putting a bunch of people into a system that is already broken. And, and so we really do need to clean this up. And I’ve had Republicans tell me that we believe that there is enough waste in the Medicaid program that we can take care of expanding it and not spend any more money. We’ve got to clean up what we already have.

HENRY HINTON: Yeah. I, you know, that’s interesting. So, you think if they ran it better and they had their act together more, then we wouldn’t need to expand it to cover another 500,000 people?

BETH WOOD: I think it wouldn’t cost us any more to cover another 500,000 people.

HENRY HINTON: Yeah, right, right, um.

BETH WOOD: I don’t think, I don’t think the cost would go up at all.

HENRY HINTON: Is this report public right now?

BETH WOOD: It is, it’s on my website and its under, um. When you go onto my website, um. www.ncauditor.netthere is an icon that says audit/reviewsand you go to performance–the performance audit section, and this report is there.

HENRY HINTON: Is this the first time you’ve discussed this publicly?

BETH WOOD: No, I have talked about this, um, for several months now.


HENRY HINTON: And has the governor responded or anybody at the Department of Health and Human services responded to this yet?

BETH WOOD: They absolutely have and say that they are working on these issues before we start to spend another $6 billion this same way.


BETH WOOD: Cause right now, right now, we’re only spending $3 billion of 14 that going out the door on Medicaid. $43 billion state budget, 14 in Medicaid, 3 has been spent this way, and we have this kind of overspending if you will or excess saving, but were getting ready to take another $6 or $7 billion dollars and run it through the same process. That’s why we did this audit to see if were doing the initial $3 billion correctly or not.

HENRY HINTON: Beth Wood, the state auditor for the state of North Carolina. I can tell ya I have the utmost respect for Auditor Wood, ah, when I was on the Board of Governors I got to work with her and saw her in action and the way she looks after the tax payers money in the state and here’s another example of you finding some waste that needs to be fixed and here they are trying to expand it and waste more unfortunately. So, that’s the, um, the scariest thing about this. Now, um, um, I know you’re working on some other things that we can talk about later, but anything else pertinent right now, um, madam Auditor, that you wanna tell us about. That’s, by the way, that’s a big one and on behalf of the taxpayers of the state, thank you so much for working on that.

BETH WOOD: We have, um, some other, we got probably three more audits coming out of the next 90 days and what you’re gonna see here are agency heads both elected and cabinet secretaries that are just blatantly breaking state policies, state rules, and think nothing of it.

They’re setting, they are breaking rules and spending money they shouldn’t be, I mean it’s in law, or in rules you should not do this and they’re doing it anyway.

HENRY HINTON: And these are elected officials at the highest level?



BETH WOOD: Elected, elected officials, plus secretaries of agencies. But again.

HENRY HINTON: You mean, you mean in the Governor’s council of state, the Governor’s cabinet?

BETH WOOD: I’m telling you it’s all of ‘em. The R’s and the D’s. [chuckle]


HENRY HINTON: Good Lord! Uh, well.

BETH WOOD: So, so again they’re breaking rules, they’re breaking policy that blatantly they’re making a cognizant decision but watch, where about, over the next 90 days for audits that come out that will reveal this. And again, if they do it, nobody, there’s no teeth in the law, there’s no disciplinary for those that are doing it, and what kind of example are we setting for our staff when we at the head of the agency are not following the rules.

HENRY HINTON: God bless you Beth Wood for what you do, I mean it’s unbelievable, I mean look, if you’re going after the council of state, [chuckle] Roy Cooper’s cabinet, then, uh, you know, it shows that you’re willing to take on anybody to, to protect the taxpayers money. So, hey listen, from the bottom of my heart, I appreciate all that you do.

BETH WOOD: Thank you so much, Henry, it’s a pleasure being on your show.

HENRY HINTON: Alright good to have you and um, let me know when you want to come. I’ll get you at the new Towne Bank Tower. You need be, you need to get up there and visit with some of your Pirate buddies.

BETH WOOD: That sounds great. I’ll let you know.

HENRY HINTON: Ok, great.

BETH WOOD: Bye now.

HENRY HINTON: Uh, State Auditor Beth Wood. Hey, I’m proud she’s a Pirate. She’s getting it done. And with regard to Medicaid expansion I wrote this quote down, “We can’t keep putting people into a system that is already broken.” Are you listening Governor Cooper? Are you listening Don Davis? If you’re not going to vote for this veto override in the name of Medicaid expansion there is what the State Auditor just had to say about it.