Sen. Berger’s Greetings from Raleigh


Last week, the House and the Senate began negotiations to reach a resolution between the differences in the two budgets.

Late Wednesday afternoon, budgetary targets for our respective subcommittees were assigned. A timeline has been set to pass the budget before July 1st. The Joint Senate and House Conference Committee on Health and Human Services began work Wednesday night reviewing our budgetary differences. The Senate has to agree to an additional $400 million in reductions above and beyond the budget we passed in early April. Since Wednesday afternoon, we have met for over 17 hours reviewing and negotiating our differences in Health and Human Services budgetary items which constitute approximately 26 percent of the state budget. Tentative agreements of over $150 million in cuts have been made to date but an additional 250 million dollars in cuts must be resolved. Click here for more discussion on the meetings.

Medicaid Optional Programs Face Deep Cuts

Under the federal stimulus package, North Carolina will receive approximately three federal dollars for every state dollar we spend on Medicaid services. During the midpoint of the second year of our state budget, this match will revert back to two federal dollars for every state dollar spent. In order to receive this match, there are mandatory services that North Carolina must agree to provide. Primary physician care and nursing home care are two of the services required to be covered. There are over 20 optional Medicaid programs.

The two optional programs that have been under consideration for deep cuts are (1) community support services for the mentally ill and (2) developmentally disabled and personal care services for the elderly. Both of these optional programs provide services to important constituencies, but they have also been subject to significant amounts of waste in taxpayer’s money.

Community Support for the Mentally Ill

In late 2006, the Department of Health and Human Services under the Easley administration revealed that there was uncontrolled growth in the Community Support Program. Scrutiny of that program revealed that the State of North Carolina was paying $61.00 an hour for non-professionals to take mental health patients on recreational and shopping outings. The News and Observer estimated that over $400 million state and federal dollars had been wasted in the program. Details of the story can be found here.

The legislature responded by enacting stringent controls on the providers of these services. Over the past two years, we have witnessed a significant decline in the cost of these programs. The House budget made additional cuts in the Community Support budget in an attempt to end the program. Our Senate subcommittee is in agreement with the House to end this program, but we were not in agreement with the House as to how much money should be available for the creation of a new streamlined program to deliver services to the mentally ill at the local level. We believe the cut proposed by the House was too deep and would impair our ability to meet the needs of the mentally ill at the local level.

Personal Care Services to the Elderly

While the Community Support Program was growing out of control in 2006, a 2006 independent audit of the Personal Care Services Program revealed that up to 45 percent of the recipients were not eligible for participation. The Easley administration did not reveal the results of this audit to the General Assembly. Not having access to the report, the General Assembly’s budget funded many of these recipients to remain in the program. Furthermore, the Easley administration did not reveal the results of subsequent audits showing the same disturbing pattern. These undisclosed audits were taking place at a time when the Easley administration was under fire for waste, fraud and abuse in the Community Support Program. Consistent with her promise of transparency, Governor Perdue’s administration released the results of the audits to the General Assembly for review at the beginning of this year’s budgetary process. The Perdue Administration has proposed stringent rule changes in the program that were adopted by the House in their budget and will likely be adopted in some form by the Senate. The new director of the Division of Medical Services, Craygan Gray, wrote me the following:

Our program changes are designed to get the care people need in their homes not necessarily the care they want. At the risk of using an anecdote to support the point, our medical director recently visited a PCS recipient where the elderly but able lady expressed how grateful she was for the house cleaning services because it freed up her family on the weekend.

We understand the importance of good stewardship of the Medicaid dollars and look forward to your continued support to reach that objective.

After almost 5 hours of discussion and negotiations, the House and Senate Subcommittees reached a tentative agreement that the Community Support Program would be cut by $65 million and the Personal Care Services Program would be cut $40 million for fiscal year 2009-2010 for a total combined cut of $109 million state dollars. The Community Support Program would be cut by $97.5 million and the Personal Care services program would be cut $60 million for fiscal year 2010-2011 for a total combined cut of $164.5 million state dollars.

After these cuts there will be, for both years as calculated by our fiscal staff, $411.2 million in combined federal and state dollars allocated to the delivery of Personal Care Services and $724.7 million in combined federal and state dollars available for the creation of a new delivery system of community support.

Draconian Cuts in Health and Human Services Remain To Be Considered

The House budget includes a tax package of $780 million dollars. Governor Perdue met with legislative leaders demanding that class sizes not be increased and that no teacher or teacher assistant positions be cut. Here is a link to the story.

It will cost an additional $400 million dollars to meet the demands of the Governor which could push our tax package to $1.1 billion dollars. She may ultimately propose increasing taxes by $1.5 billion dollars. While she has not publicly focused on the Health and Human Services budget, the amount she may propose is likely based upon a realization that there are draconian budget cuts remaining in the Health and Human Services budget. Here are some of the untenable cuts that remain in the House proposed budget that receive federal matching dollars:

1. Health Choice Cut by 17 million dollars

  • Approximately 129,000 children are currently covered under our child health insurance program. This insurance is provided to cover children of working families who earn too much to qualify for Medicaid but not enough income to purchase private health insurance. The House Budget would result in approximately 30,000 children being removed from the program.
  • 2. CAP Slots for Developmentally Disabled Children cut by 14 million state dollars

    3. Hospice Care cut by 5 million state dollars

    4. Local Management Entities Fund Balance cut by 50 million state dollars

    5. Elimination of Level 3 and 4 Group Homes saving 31 million state dollars

    6. Case Management Services cut by 53 million state dollars

    7. Provider Rate Reductions cut by 82 million state dollars

    8. Adult Care Home cut by 2 million state dollars

    9. Nursing Home Provider Rate cut by additional 9.1 million dollars

    10. Non-embryonic Stem Cell transplants cut by 6.4 million state dollars.

    The cuts total approximately $250 million dollars and will result in the state of North Carolina losing an additional $750 million in matching federal dollars if maintained. The bottom line is that the stimulus portion of the state budget is in the Health and Human Services budget where we receive a 3 to 1 match in federal dollars. The $264 million dollars the Governor proposes to spend on eliminating the cuts that would lead to increased class sizes and loss of teacher positions would, if spent on Medicaid programs, result in a match that would bring over a billion dollars into the North Carolina economy. Because the Education and Heath and Human Services budgets represent over 72 percent of the state budget, they are unfortunately in competition with one another for limited state dollars. A tax increase of 1.5 billion dollars, like the one that the Governor may propose, would alleviate this dilemma.

    Our House counterparts report that if the tax package reaches 1 billion dollars, there will not be enough votes in the House to adopt a budget. We obviously have more work ahead before fashioning a responsible and balanced budget.

    As always I welcome your comments on this newsletter or anything else that concerns you. My office is here to help in whatever manner we can. It is an honor to serve as your Senator and I will do everything in my power to live up to that honor.

    Sincerely,

    Signature

    Doug Berger