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Healthcare in the Budget

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In honor of Healthcare Solutions Week, I wanted to share with you some information about North Carolina’s Health and Human Services budget.

The North Carolina Department of Health and Human Services (DHHS) is made up of thirty divisions and offices, which are categorized under four broad areas: health, human services, administration, and support.  In addition, the department oversees fourteen facilities including developmental centers, psychiatric hospitals, and alcohol and drug abuse treatment centers, among others. 

Last year the General Assembly enacted a $5.1 billion general fund budget for DHHS, but that isn’t the total cost of health services in North Carolina.  Some of the health programs are funded through other means, the main artery being the federal government.  If we take total expenditures for DHHS in fiscal year 2014-15, the amount is closer to $19 billion, with 17,403 full-time equivalent employees statewide.  Out of the large departmental budget, there are three divisions that account for most of the budget: (1) the Division of Medical Assistance, more commonly referred to as Medicaid, $13.8 billion, (2) the Division of Social Services, $1.7 billion, and (3) the Division of Mental Health, Developmental Disabilities and Substance Abuse Services, $1.4 billion.  Below is a breakdown of the eleven divisions within the department and their expenditures under the FY 2014-15 budget.

Dept. of Health and Human Services Expenditures Percent
Division of Central Management  152,152,679 0.80%
Division of Aging & Adult Services  115,311,763 0.61%
Division of Blind & Deaf/Hard of Hearing Services  32,639,127 0.17%
Division of Child Development and Early Education  667,998,042 3.52%
Division of Health Services Regulation  65,399,275 0.34%
Division of Medical Assistance (Medicaid)  13,769,876,232 72.56%
Division of Mental Health, Dev. Disabilities, Substance Abuse  1,364,706,219 7.19%
Division of NC Health Choice  174,711,677 0.92%
Division of Public Health  827,356,675 4.36%
Division of Social Services  1,668,936,436 8.79%
Division of Vocational Rehabilitation  138,503,086 0.73%
Total  $18,977,591,211 100%

Medicaid, a health insurance program for low-income individuals and families, is the largest expenditure within DHHS and was the focus of much of this past year’s state budget debate.  Making up 73 percent of total expenditures within the department, and having an $81.7 million shortfall last year despite conscious efforts to avoid another shortfall, set the stage for legislators to plan for reform.  The legislature passed a law requiring the department to consult with stakeholder groups, study and recommend options for a Medicaid reform plan intended to provide greater budget predictability.  Lacking reliable data for the 2014-15 fiscal year due to the implementation of a new computer system, unachieved budget reductions from the prior year, and more requirements from the Affordable Care Act, the legislature established a $186 million reserve fund for another potential Medicaid shortfall.   

The second largest expenditure within the agency is the Division of Social Services, which works in the areas of adult services, childcare, child support, energy assistance, financial assistance, food and nutrition services, health coverage, child welfare, and public assistance fraud.  These programs are authorized by and substantially paid for through the federal government.  North Carolina has been given the responsibility of creating these programs at the state level and overseeing the implementation and support of these programs in each county.  At the bottom of the umbrella are the local social service departments, each located in one of the state’s 100 counties, that deliver services to citizens. 

According to a report from the Fiscal Research Division, the major budget changes that occurred in the Division of Social Services were to childcare subsidies and child protective services.  Previously, childcare subsidies were given to families at 75 percent of State Median Income.  Now families are eligible at 200 percent of the Federal Poverty Level for children ages 0-5 and special needs children, and at 133 percent for children aged 6-12.  There was no change to eligibility for children in foster care and those receiving child protective or child welfare services.  These children will continue to receive assistance without any income level requirement.  Most families, while receiving childcare services, are required to pay a co-payment. The new law has set co-payments at 10 percent of the family’s income, regardless if it is on a part- or full-time basis.  Child Protective Services received $7.3 million to reduce investigative workers’ caseloads as well as $4.5 million for Child Welfare In-Home Services to help parents learn more effective parenting skills.

Overall, the Department of Health and Human Services makes up a large portion of our state’s budget, nearly a quarter of General Fund expenditures.  If we take a look at the state’s budget in 1980 and then compare to today’s budget allocations, Health and Human Services spending has increased over 260 percent, even when accounting for inflation.  During the Easley administration, Health and Human Services became the state government’s largest expenditure. Since 2005, the DHHS budget has been consistently higher than education appropriations, historically the largest expenditure in state government. 

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Sarah Curry is Director of Fiscal Policy Studies at the John Locke Foundation. Previously, she worked for the North Carolina State Senate as a research assistant for the chairs of the Senate Agricultural Committee and headed the research efforts for… ...

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