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Back You are here: Home News Local and State News State Governor McCrory: Medicaid Audit Shows Need for Reforms

Governor McCrory: Medicaid Audit Shows Need for Reforms

RALEIGH, N.C. : January 31, 2013 - On January 31, Governor Pat McCrory welcomed a recent independent audit of the state’s Medicaid program by State Auditor Beth Wood and highlighted the need to address cost control and accountability issues in the program through proactive reforms.
“This audit should be a concern for every North Carolinian,” said Governor McCrory. “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.”
1.5 million North Carolinians are enrolled in the state’s Medicaid program, and more than 88 million Medicaid claims are processed by the Department of Health and Human Services every year. On average, North Carolina’s Medicaid program costs North Carolina approximately $36 million a day.
The independent audit of the state’s Medicaid program by State Auditor Beth Wood highlighted administrative inefficiency, lack of oversight of contracts, lax cost-control and cost-management measures and disjointed accounting practices that have led to inaccurate financial projections.
“This information is critical to us in the work we have ahead to reform the Medicaid system in North Carolina,” said Department of Health and Human Services Secretary Aldona Wos, M.D. “I am pleased to say that we already are taking proactive steps to address some of these issues – the most important of which is hiring Carol Steckel, a nationally recognized expert in Medicaid, to run our Medicaid program.”
Carol Steckel comes to North Carolina from Louisiana, where she coordinated the state’s response to the federal Patient Protection and Affordable Care Act of 2010 (PPACA) legislation.
She led initiatives to improve the state’s public health care services while reducing costs, and to revamp its information technology capabilities, taking extensive advantage of the private and academic sectors while reducing public employment. Previously, she led Alabama Medicaid from 1988-1992 and from 2003-2010.
In 2011 she provided instrumental support to the Republican Governors Association in developing a report titled “A New Medicaid: A Flexible, Innovative and Accountable Future.”
The audit report states, "When compared to states with similar size medical assistance payment (MAP) spending, the state fiscal year (SFY) aggregate administrative costs (ADM) of the North Carolina Medicaid program as a percentage of MAP is significantly greater.  In SFY 2011, North Carolina Medicaid incurred administrative expenses of approximately $648.8 million which when compared to MAP spending of $10.3 billion produced an ADM/MAP percentage of  6.3 percent. This percentage was significantly greater than the ratio for states with comparable spending.  Other state’s ratio ranged from 1.73 percent in Arizona to 5.44 percent in New Jersey. "
The report states, "One possible reason for the high amount of North Carolina's administrative spending relative to other states is due to the high level of Medicaid administrative expenses being incurred by other divisions within the Department of Health and Human Services (DHHS).  For example, of the $781 million in Medicaid administrative costs claimed during SFY 2012, only $256.7 million or about 33 percent of the total were for costs incurred by DMA.  Of the $524.3 million in costs incurred by the other DHHS Divisions, the three (3) divisions that spent the largest amounts were the Division of Social Services at $238.3 million, the Division of Mental Health at $96.7 million, and the Division of Central Administration at $164.8 million."
The report states, "While important administrative functions such as eligibility determinations, administrative case management and Medicaid Management Information System (MMIS) design, development, and implementation occur at these other DHHS Divisions, these functions are not under the administrative control of DMA.  As a result, DMA is not afforded the opportunity to control these costs."
The report states, "Another contributing factor to the high amount of North Carolina’s administrative spending is insufficient monitoring of administrative services that are contracted out by DMA.
To view the full audit report, visit http://p1.governor.nc.gov/sites/default/files/2013.01.31-Independent-Medicaid-Audit.pdf