North Carolina Budget Cuts Targeting Health Care Programs and Initiatives

On May 28, 2009 the North Carolina House Appropriations Subcommittee for Health and Human Services distributed its proposed list of budget cuts for the fiscal years 2009-2010 and 2010-2011.[1] The extensive health care cuts include, among other things, the phase-out of the “community support” services program paid through Medicaid. This community support program is one of about 150 health care programs or initiatives that would face cuts based on the draft budget proposal.

According to a 2007 state government review of the community support program hundreds of million of dollars were spent on overpriced or unnecessary care. This program, which is paid for by Medicaid, with the federal government providing matching funds, would be rebuilt by state regulators at the direction of the lawmakers. The phase-out of the community support program would save $59.8 million in fiscal year 2009-2010 and $116 million in fiscal year 2010 -2011.

The community support programs evaluates the needs of individuals as they transition to or from intensive treatment. This evaluation leads to assistance in areas such as social skills training or in correctly taking medication. Although a certain amount of funds will remain for the provision of transitional services for poor children and others with mental health conditions, it is expected that a larger number of individuals will no longer have access to such resources.

The House Appropriations Subcommittee for Health & Human Services proposed a list of 158 items associated with suggested budget cuts. Of particular interest are the following items:

1. $7.2 million reduction in each of the two fiscal years of state funding for local management entities’ administrative funding. This reduction represents the total funding paid for claims reprocessing. The Division of Mental Health, Development Disabilities and Substance Abuse Services will pay providers directly.

2. $50 million reduction in each of the two fiscal years for state-funded services provided through management entities.

3. $700,000 reduction in each of the two fiscal years by suspending, for two years, the Division of Public Health’s evaluation and accreditation of local health departments.

4. Combined $865,393 reduction over the two fiscal years by establishing a $50 copayment for non-emergency visits for families enrolled in Health Choice (the North Carolina free or reduced price comprehensive health care program for children).

5. Approximately $3.5 million reduction in each of the two fiscal years by purchasing durable medical equipment in bulk from a single source.

6. $25 million reduction in fiscal year 09-10 and a $30 million reduction in fiscal year 2010-2011 by enhancing utilization management of the Prescription Advantage List, increasing utilization of generic drugs in place of brand name drugs, and increasing rebate collections on generic drugs. The department may also implement a preferred drug list for all drug classes in the Medicaid program if sufficient savings are not realized.

7. Approximately $80,000 reduction in each of the two fiscal years by establishing an annual fee for hospice facilities.

8. $444,518 reduction in each of the two fiscal years by eliminating positions within the Division of Health Service Regulation.

9. $1,093,788 reduction by increasing licensing fees to health care facilities regulated by the division and reducing State appropriation in a similar amount.

10. $29,202 reduction in each of the two fiscal years by reducing state appropriations by the amount generated by the initial facility license fees for new facilities. Adult care homes, hospitals, home care, nursing homes and mental health facilities must pay a fee for initial facility license.

Additionally, the draft budget proposes to save $91 million by reducing reimbursements to doctors and hospitals that treat Medicaid patients, $49 million by cutting personal care services for the infirmed and $50 million in services to the mentally ill, substance abusers and the developmentally disabled.

The North Carolina House of Representatives will likely revise and modify this budget as it seeks to approve a budget by mid-June. A final budget, approved by both the House and the Senate, is expected to be presented to Governor Beverly Perdue by mid to late summer.

The complete list of proposed budget cuts can be found here.

[1] Scrutinized NC Health Program Would be Eliminated, Associated Press, May 28, 2009.