JLF Triangle Blog

Absolute Debacle

From the audit of the state’s Medicaid program, released today by Auditor Beth Wood. Below is the summary. It can be summed up in two words: absolute debacle.


This performance audit was requested by the General Assembly. The audit found that administrative spending for the state’s Medicaid program is significantly higher than the average of nine states with similarly sized programs. While those states on average have administrative costs of about 4.5% of the total program cost, North Carolina spends 6.3% on administrative functions. The audit also found that Medicaid uses flawed or incomplete budget forecasting methods. The Division of Medical Assistance, which oversees the Medicaid program, failed to produce budget projections for two spending categories that together had a budget shortfall of $190 million. DMA was potentially non-compliant with directives from the General Assembly. In one case, the Division withheld 131 million dollars in reimbursements owed to the federal government to cover its expenses at the end of the fiscal year, even though the General Assembly had specifically passed a law prohibiting this kind of withholding. In another case, the Division refused to eliminate automatic increases to nursing homes as the General Assembly had required in its budget. That decision cost the state almost $13 million in unplanned spending. The audit also raises questions about whether the nonprofit agency Community Care of North Carolina (CCNC) is providing the level of savings to Medicaid it has promised. In the most recent fiscal year, the company fell $39 million short of its projected $90 million in savings. That shortfall was not made up for with savings from other areas, even though the General Assembly had specifically directed DMA to find savings elsewhere if CCNC missed its target. The audit found structural flaws with the Medicaid program. While DMA is considered the primary agency administering the program, about two-thirds of Medicaid money is spent by agencies other than DMA, giving it very little ability to ultimately control costs. In addition, people in the state’s Office of State Budget and Management and in the General Assembly report that they have a difficult time receiving useful information from DMA that allows them to see when there is a budget problem and attempt to resolve it before the end of the fiscal year.

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