(The Center Square) — As the North Carolina Department of Health and Human Services faces financial pressure caused by the budget impasse, Secretary Mandy Cohen told lawmakers Tuesday that the vetoed budget was not adequate to meet the agency’s needs.
Without the nonrecurring funds from the budget, the agency has faced problems with its management system and office’s relocation, Cohen told members of the Joint Legislative Oversight Committee. In November, the agency also postponed its Medicaid Managed Care Transition.
However, Cohen said the Republican-led conference budget is not the “right” budget for the agency because it cuts $42 million for staffing over the biennium. With North Carolina in state of emergency because of the coronavirus, a financial shortfall puts the state in more jeopardy, she said.
“Even without COVID-19, think about taking on the enormity of the managed care transition,” she said. “Just think about that kind of cut to the department. There was no scenario which I think we could have delivered on the expectations that you rightly have of our department.”
Department of Health and Human Services (DHHS) provides health, financial and food assistance to low-income families, children, the disabled and the elderly. It oversees the state’s Medicaid, Medicare, Food and Nutrition Services and other social services for the needy.
The Medicaid managed care transition from the existing fee-for-service system was scheduled to begin Feb. 1, but it was halted because of an ongoing budget standoff between Republican lawmakers and Democrat Gov. Roy Cooper.
With the managed care system, the state will base monthly payments per patient on health plan group rates.
The governor vetoed the state's $24 billion budget in late June. Even though DHHS can function without the fiscal budget, enabled by a continuing budget law, the budget included hundreds of millions of dollars in nonrecurring funds for the transformation process.
A bill authored by Republicans to allocate the funds for the Medicaid transformation also was vetoed by Cooper in August.
Sen. Ralph Hise, R-Madison, argued the $42 million cut from the budget was redirected for the managed care transition.
“So that there were no actual cuts in the first year and less cuts indicated in the second year,” he said, adding the cuts were eliminated in the second bill Republicans filed for the Medicaid transformation.
Updates to DHHS' management system, NC FAST, also have been stalled. NC FAST manages all of the agency’s records, transactions and processes.
Cohen said the recurring funds can be used for the system’s operations and maintenance, but not for new developments. As a result, the agency has lost 163 contractors and implemented a hiring freeze. The system now functions at a slower pace, Cohen said.
The budget impasse also threatens the agency’s 2025 relocation to a new building near the state capitol in Raleigh.
Yet, the agency has exceeded its budget over the past year, according to recent reports. Cohen said the process of waiting on pharmacy benefits forces the agency to front load portions of Medicaid expenses.