Federal regulators have rejected a plan from Gov. Pat McCrory’s administration to tax some managed-care Medicaid providers as a way to draw down more federal money for the state budget.
The result is a $60 million hole in the Medicaid budget that McCrory acknowledged Tuesday – and some angry state senators who included the maneuver in the spending plan they approved last week.
McCrory had proposed taxing the 10 managed-care organizations that provide behavioral health services to Medicaid recipients who are mentally ill or developmentally disabled. But last week, federal regulators denied the request by the state Department of Health and Human Services, just as they had in Pennsylvania late last month.
McCrory’s budget contained an “assessment,” as the tax is known, on the managed-care organizations that provide Medicaid services to the mentally ill and disabled. The assessment is a gambit to draw down more federal Medicaid dollars that would have worked like this:
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The state would collect $90 million in assessments from the managed-care organizations. The state would take $30 million of that money to draw down $60 million in matching federal funds. The state would then give $90 million back to the managed-care organizations and apply the resulting extra $60 million to the state budget.
In a May 29 letter, federal regulators said the tax had to be levied on all managed-care organizations to pass muster.
“It isn’t permissible to tax only the Behavioral Health Organizations that participate in the Medicaid program,” wrote Jackie Glaze, a federal Medicaid administrator.
Old proposal, recent answer
Senate budget writers were irritated that DHHS officials had been discussing the plan for two years but requested federal permission only in the past few days.
Sen. Ralph Hise, a Spruce Pine Republican, said that as recently as last week, DHHS officials told him that the federal Center for Medicare and Medicaid Services would approve the measure.
“My biggest frustration is that this has been a proposal from the department for two years now,” Hise said. “The conversation with the federal government doesn’t begin until the last minute, after the legislature gets involved.”
Two-thirds of the $13 billion spent annually on Medicaid in the state comes from federal taxpayers.
Management at DHHS has been much on the minds of lawmakers recently. The department has lost several high-level leaders and has granted controversial sole-source contracts for consultants. Secretary Aldona Wos has come under fire after computer problems led to slow payments to health care providers and delays in providing food stamps.
State Budget Director Art Pope said that rejection of the tax plan will result in a $59 million loss of revenue. Pope said his office “was relying on DHHS officials, and what the consultants had to say.”
Pope declined to identify the state officials or consultants, saying it was a matter for DHHS to discuss. DHHS officials did not make anyone available to answer questions.