Dr. Craigan Gray was fired from his job as Medicaid director Monday.

Gray, appointed to run the state Medicaid office in April 2009, oversaw the government’s $12 billion insurance program for the poor, elderly and disabled. Generally, the state pays about one-third of the Medicaid bill, and the federal government pays two-thirds.

The Medicaid program has been buffeted by a wave of bad news in the past week. After working to plug a $205 million hole in this year’s Medicaid budget, legislators learned last week the hole will be $75 million bigger than anticipated.

Al Delia, acting Secretary of the state Department of Health and Human Services, was calling legislators Tuesday about changes in the Medicaid office. Delia could not be reached Tuesday, but his office sent out a statement about a Medicaid office reorganization that barely mentioned Gray, who made $270,000 a year.

Michael Watson, DHHS chief deputy secretary, is Gray’s replacement. The position will be “elevated to serve on the Secretary’s executive leadership team.” Watson’s salary will remain $160,000. With the changes, Watson will be part of Delia’s leadership team.

“Dr. Gray was replaced because the secretary reorganized management of that division and wanted to bring in someone with a different perspective and experience,” said Delia senior adviser Chrissy Pearson. “This was much bigger than simply saying goodbye to a single employee. This was an overhaul in how DHHS manages the state Medicaid office.”

In other changes:

Beth Melcher, assistant secretary for mental health, developmental disabilities, and substance abuse services development, will become chief deputy secretary. Her salary will be $141,797.

John Dervin, the secretary’s senior policy adviser since March, will move into a new position: chief of staff. Dervin was a policy adviser for health and human services for Gov. Bev Perdue. His salary will remain $84,000.

Rep. Nelson Dollar, a Cary Republican, said Gray did little to foster a strong working relationship with legislative leadership, and he hoped the next Medicaid director makes that a priority.

“We are hopeful that a new director will come in that will be able to work more closely with the General Assembly ... will foster a more productive working relationship so we can address a number of very serious issues in the program,” said Dollar, a chief budget writer.

Stability of the state budget depends on managing Medicaid effectively, he said.

The Medicaid program has seen its share of problems in the past week.

On Friday, a state administrative judge temporarily stopped the office from giving adult care homes a special designation that could force them to lose Medicaid money.

And a federal audit of Medicaid family planning reimbursements found the state’s pharmacy claims did not meet requirements and that three sterilization claims did not qualify for a 90 percent reimbursement because they were not backed with the proper consent forms.

The federal governments wants the state to refund $1.4 million for the pharmacy claims and $4,000 for the sterilizations.