Audit reveals flaws in state Medicaid system

Feb. 01, 2013 @ 09:00 AM

An independent audit showed accountability issues and poor cost control within the state's Medicaid program.

The audit, issued Thursday by State Auditor Beth Wood, said that the Department of Health and Human Services (DHHS) did not incorporate multiyear budget projections, the Division of Medical Assistance (DMA) does not manage Medicaid costs under agency control, the DMA did not comply with a legislative mandate to eliminate "inflationary" increases for nursing facilities and, the reports issued by the state do not provide timely or easily understood data.

One of the highlights of the audit was that the DMA did not track its contract expenditures against its yearly budget which led to overages in the DMA budget over the last four years. Over those years, the DMA has exceeded its budget by an average of $28 million in contracted administrative services.

The audit said that those contractor payments constitute 47 percent of the DMA budget for expenditures in 2012.

"It is always important for a state government to exercise sound management practices with regard to the contracted services, but it becomes even more critical when almost half of the administrative expense is made up of contract payments," the audit said.

DHHS Secretary Aldona Wos said, in a statement, that the department is already taking "proactive steps to address some of these issues."

"This information is critical to us in the work we have ahead to reform the Medicaid system in North Carolina," Wos said.

In addition, the audit said that the DMA failed to project costs for expenses that have had impact on total Medicaid expenses. One fund, in particular, had a shortfall of $96.5 million in 2012.

The DMA also carried state debt into the 2013 fiscal year by holding $131.8 million of federal funds for drug rebates and medical assistance accounts receivable, which the audit reported was a violation of state law.

North Carolina Gov. Pat McCrory said, in a statement, that the audit should be a concern for taxpayers in the state.

"Every dollar that is mismanaged at the Department of Health and Human Services for Medicaid is one dollar less that is available for medical services, education or road and bridge repair," McCrory said.

According to the Governor's office, 1.5 million residents are enrolled in the state's Medicaid program with more than 88 million Medicaid claims processed by DHHS each year. The Medicaid program costs the state approximately $36 million each day.

In her official response to the audit, Wos said that DHHS agreed with the findings of the audit — which was commissioned at the request of the General Assembly — and would review and implement new processes as a result.

House Speaker Thom Tillis said that he was concerned, but not surprised by the audit and said that improvements to the system "must be made."

"We cannot allow bureaucratic incompetency to negatively affect North Carolina's taxpayers," Tillis said in a statement.